By letting you lock in exchange rates and having lower fees, forex cards can help you save money on your overseas trip
When travelling abroad, there are several ways one can carry money. While one can convert cash into the currency of the country, one can also use credit or debit cards. However, forex cards can be the best option as they can help travellers save money.
Currencies constantly fluctuate in value. When you exchange cash or use your regular card abroad, the exchange rate you get may not be the most favourable. Forex cards allow you to lock in an exchange rate when you load money onto the card beforehand. This way, you're protected from any unfavourable currency movements while travelling. Imagine loading your card with Euros when the rate is good, and even if it weakens later, you're still spending at the locked-in rate.
“The prepaid Forex cards have fixed foreign currency rates (ie. the purchase date), with no additional charge/rate fluctuations during transactions, unlike debit and credit cards that factor in the current date conversion rate,” says Deepesh Varma, executive vice president - foreign exchange, Thomas Cook (India).
Typically, Forex cards offer lower transaction fees than using a regular debit or credit card abroad. “Regular cards can charge foreign transaction fees, which is a percentage of each transaction. Additionally, some ATMs abroad charge fees for withdrawals using foreign cards, forex cards can help you avoid these as well,” says Avinash Godkhindi, MD & CEO, of Zaggle Prepaid Ocean Services.
Regular debit and credit cards often tack on a foreign transaction fee, typically a percentage (around one to three per cent) of each purchase you make abroad. This fee is charged by your issuing bank for processing the transaction in a different currency. Forex cards, however, usually have lower or even zero foreign transaction fees, letting you keep more of your travel money.
It is important to compare card fees like foreign transaction fees, reload fees, ATM withdrawal fees, exchange rates, etc.
“Don't load too much currency at once, especially if the exchange rate isn't ideal. Consider loading only what you expect to spend in a specific country to avoid locking yourself into a potentially unfavourable rate,” Godkhindi.
Also, while making a purchase, some merchants might offer dynamic currency conversion (DCC), which allows you to see the price in your home currency. “This convenience often comes with a worse exchange rate, so always decline DCC and choose to be charged in the local currency,” says Godkhindi.
So, get a Forex card and save more on your next trip abroad.