Carrying cash when travelling abroad, whether for holiday, business or as a student, is always tricky: you never know how much is enough. Carrying too much cash can be unsafe, and having too little can put you in a bind. Having a credit or debit card is not the same as using them can inflate your overall travel bill—you can’t be sure about how much they charge and the currency conversion rate at the time of a transaction.

Another option is forex cards, which can be used for all electronic transactions and even ATM withdrawals. These are prepaid cards that enable you to transact in a local currency without the risk of currency rate fluctuation. Though single-currency forex cards have been around for quite some time now, over the past few years, most banks and travel companies have come up with multi-currency cards as well.

Though forex cards are convenient to use, understand the charges, advantages and disadvantages before using.

The charges

Banks or travel companies usually charge a flat fee for issuing a forex card and loading/unloading of foreign exchange on the card.

For instance, Axis Bank Ltd charges 300 plus GST to issue a single- or multi-currency forex card. “Then there is a mark-up on the exchange rate that the bank will charge when you load your card. Typically, this mark-up is in the 1-2% range. If you have reached the US and are swiping this dollar-denominated forex card, there is no charge as it is a dollar to dollar transaction," said Satheesh Krishnamurthy, senior vice-president, affluent business, Axis Bank.

Unlike an international credit or debit card, there is no further cross-currency charge that a bank will levy when you swipe a forex card at a merchant or withdraw cash from an ATM. There is a cross-currency charge, however, if you load the card with one currency but use it in another. For instance, if you have euros in the card but use it for US dollars.

Withdrawing cash from an ATM may also be chargeable. For instance, Axis Bank charges $2 (or the equivalent in other currencies) per withdrawal. RBL Bank has no charges on ATM withdrawals any number of times, said Surinder Chawla, head - geography branch and business banking, RBL Bank. A forex card by BookMyForex offers three free ATM withdrawals, said Nitin Motwani, co-founder and chief technology officer, BookMyForex, an online currency marketplace.

What works

Just like credit or debit cards, forex cards offer the convenience of not carrying cash. But the similarity ends there. When swiping a forex card, you know the exact conversion rate, unlike in other cards where this is dynamic. Of course, this can work to your advantage, or disadvantage, but just like cash, it can help you stick to your budget.

“The exchange rate gets fixed at the time of loading or before you are going for the trip. If someone uses a credit or debit card abroad, whether on a PoS (point of sale) machine or an ATM, the charges are very heavy," said Chawla.

It is up to the user to have a single-currency wallet or multiple currency wallets loaded on a single card. For instance, a person who needs to travel to the US as well as Europe can have US dollars and euros loaded on a single forex card. When it’s swiped in Europe, it will automatically deduct from the euro wallet. Similarly, in the US, the dollar wallet will be debited.

You can also use a single-currency wallet in a country with a different currency. In the same example, if the person has a single-currency wallet with euros, and if she uses the forex card in the US, she will be able to transact but will have to pay an additional cross-currency charge, which is at least 3% of the transaction amount. “A better option is to load the forex card with the required local currency with Indian currency. The higher the number of currency exchange or cross-currency transactions, the higher the cost to the consumer," Krishnamurthy said.

What doesn’t

Lack of security layer: While all debit or credit card transactions in India, including those at merchant outlets, use two-factor authentication, you are not asked to enter your PIN each time you swipe your card in many other countries.

So you need to be careful about where you are using your forex card. “The biggest drawback is that the magnetic strip of the card gets copied at some desolate ATM or some merchant, and you could be susceptible to fraud and your money could get swallowed by a fraudster," said Ravi Menon, head of foreign exchange, Cox & Kings Ltd.

Disputed transactions: Another problem area is disputed transactions like having your account debited but the merchant’s account not being credited. While there is an established process to deal with disputes and frauds, it may be time consuming. “In case of a dispute or fraud, the customer should call up the bank’s customer care and report it at the earliest to prevent any further misuse. In such cases, it takes up to 45 days for an investigation to be undertaken by the network service providers," Krishnamurthy said.

The resolution could take a considerable amount of time in some cases. “The process has to go through ATM networks and points of sale outside India. Many cases take 2-3 months to get resolved," said Menon.

It gets more complicated in cases of fraud as most banks demand an FIR to be lodged in the country where the fraud has taken place. “Lodging an FIR in a foreign country is a major task. What usually happens is that by the time you realise that a fraud has happened, you have most likely moved out of that country. It becomes difficult to explain all that to the legal team of the bank. Then it is up to the bank to consider the particular case," Menon said.

Using a forex card has its benefits, but if you end up in a dispute, or your card gets compromised, you are in for trouble. Keep your card-related information secure and be vigilant while swiping the card.

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