Credit cards: How low mark-up fee can help you save big? An explainer

If you are planning to go abroad and rely on a credit card for your day-to-day expenses – be mindful of the fact that each credit card levies a small fee for the transactions incurred in a foreign currency. This fee is also known as a forex conversion fee.

This is a fee levied by a bank for converting foreign exchange from one to another. The fee could range between 1-4 percent on each transaction.

Typically, your total expense could be exorbitant when you travel overseas. For instance, when your total spend via credit card is ₹10 lakh then 5 percent on this sum is ₹50,000.

Now imagine your forex conversion fee falls to 2.5 percent. All of a sudden, your expenditure in the form of forex conversion fee falls to ₹25,000. So the amount of forex conversion fee makes a big difference.

What is the forex conversion fee?

It is a fee charged for changing currency from one to another. This is also known as foreign transaction fee. For instance, ICICI Bank's credit card charges 3.5 percent markup fee + GST.

Do all banks charge the same conversion fee?

No, different banks and credit card companies have different rules pertaining to foreign exchange conversion. This could be anywhere between 0-5 percent per transaction.

Can there be no zero conversion fee?

There could be a one-off credit card which does not charge any forex conversion fee. For instance, RBL Bank has a zero conversion fee on World Safari Credit Card.

What difference would the zero conversion fee make?

Credit cards which do not charge any conversion fee can help you save a considerable amount of money. As mentioned above, a total transaction of ₹10 can lead to levy of ₹40,000 to 50,000 depending on the foreign conversion fee.

When the card does not charge anything in the form of this fee – you stand to save this money.

Which are the prominent credit cards and how much is their conversion fee?

These are some of the prominent credit cards that levy a forex conversion fee.

>> HDFC Bank Regalia Credit Card charges 2 percent of forex conversion fee.

>> Axis Bank Magnus Credit Card levies 2 percent fee.

>> HSBC Visa Platinum Credit Card levies 3.5 percent conversion fee.

>> ICICI Bank Credit Cards, as highlighted above, charge a 3.5 percent conversion fee.

(Note: Using a credit card carries its own set of risks)