Using a credit card for foreign transactions? 5 key things to know about fees, exchange rates and charges | Full list

Using a credit card abroad or for international online payments is convenient, but the final cost can be higher than the amount shown in the foreign currency.

Foreign currency markup fees, exchange rate fluctuations, and taxes, when combined, can increase the credit card bill.

Here are five things every cardholder should know about the charges before using a credit card overseas.

5 key things to know about foreign credit card transactions

1. Foreign currency markup fees

Credit card issuers in India generally charge a foreign currency markup fee on international transactions. Depending on the card, it can range from about 1% to 3.5% of the transaction value, with GST charged separately. Check your card’s schedule of charges before you transact.

2. Exchange rates determine the final amount

International transactions are converted into rupees at the card network’s exchange rate, subject to the issuer’s terms. Because rates change constantly, the rupee amount on your bill may differ from your estimate. When calculating the cost, include both the conversion rate and the fees.

3. Choose the transaction currency carefully

Overseas merchants may offer to charge you in rupees or in the local currency. This is called Dynamic Currency Conversion (DCC). Paying in rupees can mean an unfavourable exchange rate plus extra charges. Compare the two, and paying in the local currency is generally the better choice, as it avoids the merchant’s conversion rate. Some travel credit cards are designed for such spending, so compare their fees as well.

4. GST adds to fees

GST generally applies to taxable credit card fees, including the foreign currency markup. For example, a 3.5% markup plus 18% GST on that fee comes to an effective charge of about 4.13% of the transaction value. This excludes any other charges.

5. Check international usage settings and payment terms

Some cards need international transactions to be enabled separately. Review your card’s international usage settings, transaction limits and applicable fees before travelling or shopping on foreign websites. Also, pay your dues by the due date to avoid interest and late payment fees, which can add up quickly. See how minimum due and interest charges work if you tend to pay only part of the bill.

Compare charges before making international payments

Credit cards make overseas and everyday spending easy, but the costs are worth understanding. Compare foreign currency markup fees, check exchange rates and review your card’s terms before you buy.

If you make international payments often, a card with a lower markup fee can save you money over time. If you are unsure about the charges, ask your card issuer or a financial adviser.