International swipes are expensive

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Like this story, share it with millions of investors on M3

International swipes are expensive

Most of us will opt for some currency and of course there is the ever-handy credit card to for the bigger purchases. But there are hidden costs, says Shalini Amarnani.

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Have you planned out your vacation yet? Done your ticket and hotel booking, scouted the internet for tourist information, worked out your vacation time at work, done some pre-vacation shopping, all packed and set to go.... Oh yes, what about spending money for the souvenirs and more that you want to shop for? Most of us will opt for some currency and of course there is the ever-handy credit card to for the bigger purchases.

Your plastic is expensive

Stop right there!!! Your credit card company is making a killing off the money you spend on your foreign vacation, and you might not even know it. Let's see where your money goes.

In need of cash

Using your plastic to obtain foreign currency from ATMs is quick and simple, but it can be very expensive, particularly if you withdraw lots of small sums from cash machines abroad.
Debit Card: For withdrawing your own money from your debit card you lose a large amount of it. Says a senior official from ICICI Bank, "For international usage, the charges on a Debit Card ATM cash withdrawal - Currency Conversion charges of 3.5% of transaction amount, plus Flat fee of Rs. 118 (including Service Tax)"

Credit Card: If you think this is daylight robbery, the charges for using your credit card are worse. ATM cash withdrawal by your credit cards attracts a 2.5% of transaction amount subject to a minimum of Rs.300 plus a mark up of 3.5%.

Foreign Travel Card: Making a withdrawal through a Foreign Travel Card is somewhat more reassuring. The currency conversion charges would range between 0 -1.5% and cards issued by Visa and MasterCard are widely accepted. "Banks set their own rates of fees and interest so these will differ depending upon the bank and the type of card program. Generally, though, there are usually no additional fees to pay other than the ATM withdrawal fees", says Nitin Gupta, Country Head (India) MasterCard International.

Best usage tips

• Make single large withdrawals instead of several small ones.
• Check if the bank charges any additional ATM withdrawal fees. Says Chitra Pandeya, Head Retail Liabilities, HDFC Bank, "additional charges levied by the acquiring bank (Bank to which the ATM belongs) may also apply."
• Carry some buffer cash in case you are not able find an ATM in time or get hold of a bank with unfavourable rates.

Shopping your way around

Debit Card:  While buying with your debit card could attract a flat currency conversion cost of 3.5% of the amount spent. HDFC bank says no charges are levied as you are using your own money. The exchange rate is given by VISA/MasterCard. These are very competitive and best exchange rates in the world due to the volumes of transactions involved.

Credit Card:  Your credit card will also attract a currency conversion charge of 3.5% of the transaction. While using a credit card the interest component also comes into action. Your credit card company will start calculating a steep interest of 40% p.a. on all outstandings.

Foreign Travel Card:  The Foreign Travel Card seem to winning here with currency conversion cost being lower from nil - 1.5% flat charges.

Best usage tips

• The use of a foreign travel card makes best economic sense.
• Try not to leave balance in the card until you are a frequent traveller. If you have balance left you ill have to go back to the issuing bank, fill another form and wait to get refunded. Some banks will charge you for this refund too. So do finish empty it out.
• If travelling in Great Britain watch out for pin and chip system that is being introduced. Some merchants are refusing to accept the magnet stripe cards we use here so carry cash. "At the moment, banks are adopting the new technology and, for the initial few years, smart cards will continue to have the magnetic stripe that current credit and debit cards have on the back. This is because not all merchants will be ready to accept smart cards immediately. It will take some time to upgrade all existing point-of-sale terminals to the new smart card terminals. This is not a long-term drawback, as all terminals will eventually be converted", explains Nitin Gupta, Country Head (India), MasterCard International.