Credit card alternatives for travel abroad

Once a remittance is made for an amount up to $2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme, the RBI said.

Published: 23rd May 2022 09:36 AM  |   Last Updated: 23rd May 2022 04:59 PM   |  A+A-

A photo of Debit and credit cards. (File Photo | Abraham Richard M)

Express News Service

BENGALURU:  With international travel gaining traction after two years, many countries are reviving tourism and are focused on attracting many visitors. Though Indians are excited about their travelling plans, a few of them are also concerned about the use of credit cards in other countries.

Recently, stand-up comedian Amit Tandon tweeted saying using Indian credit cards internationally has become so painful! Half the websites and apps don’t accept them, is there a better solution available? Many users have also commented that they had similar experiences while travelling to other countries. 

If you are travelling abroad, what are the best options available apart from cash or credit cards? Swapnil Bhaskar, Head of Strategy, Niyo says credit cards, except a few premium cards, are not a good option for international transactions because they charge a currency markup fee of 3-5%. Markup is a fee that banks charge for international transactions on top of the exchange.

“Also, they don’t provide real time currency conversion rates. The best option is to use zero forex markup debit cards,” he adds. Every business is assigned a four-digit number by the card networks (like Visa, Mastercard etc.) based on the goods or services offered by the business. 

Credit card issuers have to whitelist the merchant code for transactions to go through and this is completely controlled by the issuer’s policy. “If the issuer does not allow certain merchants/ websites, the customer experiences transaction failure,” explains Bhaskar.

According to the Reserve Bank of India (RBI), International credit cards can’t be used for purchase of prohibited items - lottery tickets and participation in sweepstakes, among others. Under the RBI’s Liberalised Remittance Scheme (LRS), all resident individuals are allowed to freely remit up to $2,50,000 per financial year for any permissible current or capital account transaction or a combination of both.

Once a remittance is made for an amount up to $2,50,000 during the financial year, a resident individual would not be eligible to make any further remittances under this scheme, the RBI said.

Transaction fee

Users can either use the bank app or website to enable foreign currency transactions before they travel, provided the bank allows the credit card to be used for non-INR payments, says Gaurav Chopra, CEO & Founder of IndiaLends. 

Secondly, travellers must be aware of the transaction fee charged by their card provider. Transaction fee can range from 2.5% - 3.5% for most credit cards. This is a charge levied by the bank to pay the merchant in foreign currency and charge the user in INR. 

“Finally, if your credit card does not permit foreign currency transactions, and if you’re trying to transact on a website that charges in foreign currency, the card will not work. Before travelling abroad, the traveller must check with their card provider if foreign currency transactions are permitted on the card, and if such payments are enabled,” Chopra says.

Explaining why credit cards are being declined, Prateek Patnaik, product manager at neobank Fi, says one of the reasons is that a merchant or site simply doesn’t accept one’s card network. “Alternatively, your credit card could be flagged for unusual or fraudulent activity.,” he says.

Before visiting other countries, it is better to call your bank and enquire about your credit card status. Other than credit cards, international travellers can use forex debit cards. A forex debit card is linked to one’s bank account that removes the need to load and reload it with money like an e-wallet. Additionally, you can use a forex debit card to transact in any currency as opposed to a single or a fixed set of currencies in a pure forex card. 

What you need to know

RBI says resident individuals are allowed to freely remit up to $2,50,000 per financial year. Transaction fee for credit cards can be 2.5% - 3.5%.

Travellers going to all countries are allowed to purchase foreign currency notes / coins up to $3000 per visit.

International Debit Cards (IDCs) can be used only for permissible current account transactions and the usage of IDCs should be within the LRS limit.

Prepaid travel cards can be easily loaded with INR and can be used for payments in most popular currencies.



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