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  • Foreign Transaction Fee On Credit Cards

    Before reading through the list of foreign transaction fees that most major credit cards charge in India, it is important to understand what a foreign transaction fee is and how it works.

    What Is A Foreign Transaction Fee?

    A foreign transaction fee is an amount that credit card companies charge their customers whenever a transaction is made with a foreign currency or perhaps, passes via any foreign bank. To process a foreign transaction, the card issuer charges a percentage of the total transaction amount, which is usually 3% or more.

    The details about the foreign currency transaction fee are mentioned in the statement separately. Therefore, it is vital to read the guidelines and other charges involved with foreign transactions before applying for a credit card.

    How Much Is A Foreign Transaction Fee?

    Usually, MasterCard and Visa charge a foreign currency transaction fee of 1%. However, most credit card companies add an extra percentage on it, making the fee range from 1.5% to 3% or even more. Therefore, this fee differs from one credit card issuer to the other.

    It is mandatory for every credit card issuer to disclose or reveal the fees involved with the foreign transactions at the time of issuance. If the issuer fails to do so, a settlement has to be paid to the cardholder.

    However, this rule was applied earlier. Now, all this information is explained clearly in the credit card agreement. Therefore, it is crucial to read the entire credit card document carefully before applying. These essential details are also mentioned on the issuer’s official website.

    How Does The Foreign Transaction Fee Work?

    The foreign transaction fee is assessed by the credit card issuer and is typically in the form of a percentage, 3% being very common. However, this percentage can vary from one issuer to the other. While 3% as a foreign transaction fee may not seem much, keep in mind that this applies to each foreign transaction that you make with the card.

    Say, for example, you are someone who frequently travels abroad and shops the most on foreign websites, then cards with foreign transaction fees might not be the ones for you because paying those additional charges every time you make a foreign transaction with the card can actually turn out to be expensive when you calculate it for the entire year. In such cases, look for a card that doesn’t include them.

    Fortunately, not all cards charge on foreign transactions. There are a few that don’t impose this fee. However, such cards need to be researched.

    Pay Attention To The Currency Conversion Fee Too

    If you have taken trips to abroad, then you would know how expensive it is to exchange the cash for local currency. Be it international ATMs or airport kiosks, you will always end up paying some extra funds to receive the cash.

    However, what most of them are not aware of is that this concept applies to credit cards as well. Each time the credit card is swiped, you are being charged a fee for the currency conversion.

    Unlike a foreign transaction fee, a currency conversion fee is not charged by the issuer or the credit card company. In fact, it is assessed by the payment processor of the card. Both MasterCard and Visa charge 1% of the amount that is spent overseas. It depends on the country you are traveling in.

    Usually, the payment processor charges 1% to the issuer but they pass this fee to you. Now, this literally means that you will have to pay both foreign transaction fee and currency conversion fee each time a purchase is made with the card.

    The trickiest part of the currency conversion fee is that it doesn’t appear separately on the credit card statement. They are just included in the foreign transaction you have made. Moreover, there is no clarity on how much conversion fee the credit card company charges their customers.

    Customers usually compare the amount on their receipts with the ones that appear on the statements to know exactly how much the bank or the credit card company is charging.

    Currency Conversion Fee Of Major Credit Cards In India

    The Cross-Currency Markup is charged on each time a foreign transaction is made with the Indian credit card. Usually, credit card issuers in India charge 3% to 5% but this differs from one bank to the other.

    Also, this is applied to the “settlement date” and not on the “transaction date.” The currency conversion markup fee of few of the leading banks in India are as follows:

    • HDFC Bank – 3.5%
    • Axis Bank – 3.5%
    • Kotak Mahindra Bank – 2.5%

    Foreign Transaction Fee Of Major Credit Cards In India

    Two of the commonly accepted payment networks – MasterCard and Visa, act as the mediators between the merchant from which a foreign purchase is being made and the issuing bank (HDFC, SBI, Kotak Mahindra, Axis, etc.) Therefore, when you use a credit card outside India, both these payment networks charge 1% on the issuing bank and 2% if the payment network is different.

    Therefore, it is important to read the charges before making any kind of foreign payment through the credit card.

    FAQs on Foreign Transaction Fee On Credit Cards

    1. Will monetary instruments charge mark-up fee on international transactions?

      No, on cash transactions, Forex cards and traveller’s cheques, there is no mark-up fee.

    2. How do I find out how much I have been charged on a foreign transaction?

      You can find the rate under Foreign Currency Transactions fee of the handbook that would have been given to you by the bank.

    3. Is there a credit limit for international expenses?

      Credit card providers do not set an international spend limit. A few banks will allow you to set an international spend limit.

    4. Will finance charges be applicable if I do not pay the foreign transaction rate?

      If you do not pay the bill by the due date, then finance charges will be charged.

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