Credit Card vs Forex Card: Which is Better for Foreign Travel?

Posted on Tuesday, August 27th, 2024 | By IndusInd Bank

Planning an international trip can be exciting, but it also involves carefully considering how to handle your finances abroad. With credit cards and forex cards being the two most popular options, which one should you choose? Here is an in-depth comparison of credit cards versus forex cards to help you decide which is better suited for your upcoming foreign travel. 

How They Work

Forex cards function like prepaid debit cards. You load the card with foreign currency before your trip and then use it to withdraw cash or make purchases internationally. The amount spent is deducted from the card balance. Forex cards provide the benefit of locking-in exchange rates at the time of loading the card, protecting against currency fluctuations later.

Comparing forex cards vs credit cards, credit cards allow you to make transactions on credit against your credit limit. While using a credit card internationally, the transaction amount gets converted to your home currency based on the bank’s foreign exchange rate applicable. Your credit card provides a revolving credit facility without having to preload any amount.

Acceptance

One of the major attractions of credit cards vs forex card is their wide acceptance globally. Popular cards like Visa and MasterCard are accepted by millions of merchants and ATMs worldwide. Forex cards also enjoy good acceptance as they are affiliated with payment networks like Visa and MasterCard but may not be as widely accepted as credit cards.

Transaction Charges

Forex cards do not entail any additional charges or loading fees. You only pay the currency exchange rate at the time of loading the card. However, credit card transactions attract a markup fee of 1% to 3.5% on the transaction value charged by the bank. So, forex cards can offer significant savings on foreign currency transactions.

Exchange Rate Lock-in

One of the biggest benefits of forex cards is that you can lock-in the currency exchange rate at the time of loading the card. This protects you from any adverse exchange rate movements thereafter. Credit cards use dynamic conversion rates that keep fluctuating daily, exposing you to exchange rate risk.

Security Concerns

Forex cards offer greater security, as they are prepaid instruments without any link to your bank account. Even if your forex card gets stolen, your bank account remains protected. However, credit card loss or theft makes your savings vulnerable to fraud.

Credit cards provide better dispute resolution support because of additional checks, and verifications involved. Fraudulent transactions on credit cards can be reversed more easily.

Reloads

An exhausted forex card can be reloaded online by transferring money to the associated account. Credit cards offer better flexibility with no need for any reloads. Your credit limit gets replenished automatically upon repayment of dues.

Rewards and Offers

Most credit cards come loaded with features like rewards points, cashback, lounge access, and insurance. These perks enhance your overseas travel experience. Forex cards provide limited benefits in comparison.

Also Read: All You Need to Know About Travel Credit Cards

So, Which One is Better?

Forex cards are better suited for budget travellers looking to save on foreign transactions, ATM withdrawals, exchange rate fluctuations and avoid credit card debt. Frequent international travellers who understand credit card usage intricacies and do not need tight budgeting prefer the convenience and rewards of credit cards.

Using a credit card during international travel can offer the optimum mix of safety, savings, and convenience. The IndusInd Bank Legend Credit Card offers a discounted foreign currency mark-up fee of 1.8% along with a range of exciting travel offers and discounts. Besides this, you can also enjoy access to over 600 airport lounges across the world using the complimentary Priority Pass. The best part? You can apply for this credit card through a 100% digital process and get instant approval. Apply now!

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.