Choosing Between Forex Cards and Credit Cards for Foreign Travel

Posted on: Sep 26, 2023 | | Written by:

Choosing Between Forex Cards and Credit Cards for Foreign Travel

Published on September 26, 2023. EST READ TIME: 3 minutes

Travelling to different countries and places can be quite liberating. Being amidst new experiences and cultures will not only give you an entirely different perspective but also help you grow. And irrespective of which country or place you want to travel to, you would need money for everything. When considering your financial preparations for travel, including travel insurance in your plans ensures that you have comprehensive coverage and can navigate any unexpected challenges that may arise during your travels. In addition to travel insurance, two other safe ways of carrying money while abroad are through credit cards or Forex cards. Before you decide which mode to choose for your next travel, here are details about both.

What is a Forex card?

A Forex card is one of the most preferred ways of carrying currency when you are travelling abroad. It is a prepaid card, where you can add a pre-determined amount of money. This frees you from carrying cash in either your currency or the currency of the country that you are travelling to. You can use the prepaid Forex card for all your transactions.

A Forex card is similar to a debit card, where you can use only the amount that you have loaded the card with. And forex cards are accepted worldwide, thus giving you a lot of flexibility when it comes to spending or even withdrawing funds from ATMs. In the forex card vs credit card discussion, a forex card offers a lot of flexibility.

What is a credit card?

A credit card is a financial product that is provided by banks, which allows their customers to borrow amounts up to a limit that is pre-approved. Customers can use the card to buy goods, products and services. Banks and financial institutions usually consider the income of an individual and their credit score to determine the credit limit.

As far as credit card vs forex card is concerned, if you have a credit card, you are merely borrowing funds from the bank. This is in contrast to a Forex card, where you spend your money.

Advantages of credit cards vs forex cards for foreign travel

Since they are two entirely different products, there is a considerable difference between a Forex card and a credit card. While looking difference between forex card and credit card, here are some of them which are in favour of forex cards.

1. Lower markups

Both Forex cards and credit cards charge their customers a markup fee, which is above the transaction fee that customers must usually pay. However, the markup rates on Forex cards are better than credit cards. And if you opt for a multi-currency forex card, the chances of you losing money due to transactions and markup further reduce.

2. Protection against volatility

The moment you load a Forex card with some money, the conversion rate is fixed and does not change for the remainder period. This ensures that your money does not suffer from any currency fluctuations.

3. ATM withdrawals

While you can swipe a card in a foreign country, you can only do so in so many places. You will eventually need cash to enjoy local experiences. This is where the need to withdraw from ATMs arises. And this is a major difference between Forex card and credit card. Forex cards are way cheaper to withdraw funds from as compared to credit cards.

4. Late payment charges

In the forex card vs credit card debate, late payment fees are another factor that goes in favour of forex cards. Since you preload the card with currency, you will never need to worry about late payment charges, which are applicable to credit cards.

Drawbacks of Forex cards vs credit card

A crucial part of the forex card vs credit card dilemma is to understand the pros and cons of both cards. Here are a few drawbacks of forex cards as compared to credit cards. And some of these can lead you to lean a bit towards credit card vs forex card.

1. TCS

The government has recently proposed a TCS of 20% on spending above INR. 7 lakhs for a financial year for forex cards. However, no such limits exist for credit cards as of now.

2. Fraudulent transactions

If there are any fraudulent transactions on your card, getting it reversed for Forex cards can be a bit of a pain and difficult. On the other hand, it is straightforward to file for a chargeback on credit cards.

3. Loss of interest

Unlike Forex cards, you do not deposit any money to credit cards. Thus, you do not have money lying around idle without earning you any interest.

4. Travel Insurance

A crucial part of travelling abroad involves travel insurance plans. While some countries mandate travel insurance, others hope you opt for one. This is where the debate of credit card vs forex card can lean towards credit cards. Several credit card companies offer complementary individual travel insurance.

Which one is better for foreign travel

The forex card vs credit card dilemma isn’t that big a confusion, once you consider all the pros and cons that they offer. In an ideal scenario, you can load most of your cash in a Forex card and use it for all your transactions abroad. And once you exhaust the amount, you can use a credit card as a backup mechanism.

Also, a Forex card can turn out to be the more affordable option if you do not travel frequently. However, for regular flyers, a credit card makes up for a more convenient experience and helps you rake up the rewards points as well.

Tips for using Forex cards and credit cards abroad

Here are a few useful tips that you must keep in mind before using either a credit card or a Forex card.

1. It is recommended that you have 30% cash and the remaining amount in a Forex card. It will ensure that your money is safe and that you have cash for places that do not accept cards.

2. Ensure that you enable international transactions on your credit card before leaving the country. It can be a bit difficult to do that later since banks usually require OTPs.

3. Avoid withdrawing funds from ATMs using a credit card, as the charges can be quite disheartening.

FAQs

1. What are the cash withdrawal charges for a credit card?

The rates are usually up to 2.5% of the amount that you have withdrawn or within the range of Rs. 300-500, whichever is higher.

2. Can I earn rewards points on Forex cards?

No. Only credit cards offer the ability to earn reward points on transactions.

Conclusion

Now that you are aware of the difference between Forex card and credit card, you can decide which side of the credit card vs Forex card debate you belong to. Both cards offer great value and can be used in conjunction for better effects. Apart from the currencies, it is recommended that you opt for international travel insurance, for a smoother experience, no hassles and essential protection.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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