Prepaid forex cards: Gain all the way

Planning a leisure or business trip abroad and wondering how best you can carry funds? Of course there are international debit and credit cards or the conventional traveller's cheques but then, of late banks have also launched prepaid forex cards that are not just convenient but more cost effective too.

These cards are pre-loaded with funds and can be used across the globe at merchant outlets enabling the user access to money in the regional currency and are available in US Dollar, Euro and GB Pound denominated currencies. You can pick from ICICI Bank Travel Card, HDFC Bank's ForexPlus Card and SBI's Vishwa Yatra foreign travel card to name a few.
 
Armed with these, you would be able to withdraw cash in the currency of that country, check your balance or even go shopping across the globe and not worry about the cross currency charges that you would have otherwise incurred on an international credit card.

A key advantage of these cards is that exchange rate fluctuations may not affect you. This advantage steps in in a regime where the rupee depreciates to the foreign currency. For instance, suppose the rupee has been depreciating against the dollar. So while in one month, a dollar may cost Rs 44, in the next, it may cost Rs 45. But whether the rupee depreciates or appreciates you would not be paying any more. Of course, the difference of a rupee will count when you are making high value purchases such as electronics. The flipside, in a regime of appreciating rupee, this card will not prove profitable.

In case of an international credit card, you are billed at the rate of exchange prevailing on the date when you made the purchase on your card. However, in the case of a prepaid card, you would be spending at the rate as on the date you loaded your card, which would be much earlier than your journey date. 

Sachin Khandelwal, Head-Credit Cards, ICICI Bank, tells Moneycontrol, "Travellers cheques cannot be encashed after merchant hours and not all outlets accept travellers cheques. Besides there is a fee on encashment that works out to be expensive. In case of debit/credit cards there are huge cross currency charges when converted from rupees to the local currency. Comparatively, prepaid travel cards are safe and convenient." 

But then experts also warn that it does not make sense to use these cards while checking in for stay at hotels or to pay car rentals. Hotels usually take a pre-authorisation as a security amount when you check. In case you plan to move out before the stipulated four or five days your money could get blocked. Warns an SBI official, "Since it is a good amount of money that could get blocked releasing them can take time for instance atleast 15 to 20 days. Hence it makes better sense not to use these cards for such purposes."

Suitable to leisure as well as business travellers alike, these cards are easy to obtain and reload too. All you need to do is walk into one of the nearest banks, fill in the application form , submit form A2 (or any other forex documentation as mandated under FEMA) with a photocopy of your passport and submit the required funds. Once the funds get cleared the bank will get the card activated for use. 

But if you run out of balance while you are still abroad, reloading is a difficult task. You cannot reload from abroad. What you could do instead, is ask your family members back home to fill up the necessary forms for reload of your card. But in case your family is abroad and there's no one back home to do it for you things could get a bit difficult. In such situations you would need to intimate the bank in advance about the same and leave the necessary documentation with your trusted representatives.

In the age of e-banking, sadly, reloading the card cannot be done online either. This is because FEMA rules state that you would need to submit the necessary documents to the bank before you can get the card reloaded.

And if you find yourself left with a balance in your card after your return back to India, it's easy to encash. Fill up the refund form with the bank and the funds would be credited to you account.

So what are the factors you need to consider in case you plan to go for one? Says an SBI bank official, "Find out the network outlets where it can be used, the issuing cost, the time taken to issue, the charges on ATM cash withdrawal, balance enquiry, reload charges, other benefits such as whether an additional card is being offered, the cost of the same and the additional benefits that come along before you narrow down on one."

For instance HDFC charges Rs 150 on the USD card while ICICI Bank and SBI Bank charge Rs 110 and Rs 150 plus 12.24% of amount respectively. The reload charges in case of SBI, ICICI Bank and HDFC are Rs 100, Rs 55 and Rs 100 respectively. Additionally some of these cards also offer free personal accident insurance cover, loss of baggage and passport reconstruction insurance cover, a replacement card for use in case of emergencies - consider those factors too.

Adds Khandelwal, "Its a brilliant product to be used at all times, at all places. A smart thing to do would be to use the card in the country of origin, i.e use a USD Card in the US only and not in the UK. In case passenger is travelling to UK, a GBP card could also be purchased. This would save him from the cross currency charges, thus making the card very economical to use."

by Geeta Nair