Here are some of the cheapest ways of using foreign exchange abroad

Well-heeled indians planning their next international vacation have their task cut out. Flight booking? Check. Hotel booking? Check. Making an itinerary? Check. But what comes after could be the most crucial part of planning an international getaway—how to carry money abroad.

This might seem like a mundane detail but can significantly affect how much you end up spending on your trip. With fluctuating currency rates, transaction fees, and various payment methods—forex cards, credit or debit cards, UPI, or even cash—it’s easy to get overwhelmed. Each option comes with its own pros, cons, and hidden charges.

Whether you’re shopping in Paris, dining in Dubai or sightseeing in Singapore, how you carry and spend money can have a big impact on your budget.  

Forex Cards

A forex card is a prepaid travel card that lets you load foreign currency before your trip. It’s one of the most cost-effective ways of carrying money abroad as it locks in competitive exchange rates and protects you from currency fluctuations. These cards allow payments in the local currency of your destination, helping you plan and manage expenses better.

However, the rate offered is usually higher than the interbank rate (IBR), which is the real-time rate at which banks trade currencies with each other. Since IBR reflects movements in the open currency market, it’s crucial to check how much your bank or forex provider is charging above this.

Sudarshan Motwani, Founder and CEO, BookMyForex, a foreign exchange operator, says, “Our Global Forex Card, a USD-denominated card accepted in over 200 countries, is available at up to 2% below interbank rates—the same rates that you see on search engines. That makes it one of the most transparent and cheapest ways of carrying money abroad.” The card comes with no cross-currency fees, no ATM charges and no issuance or reloading fees.

These are available as single-currency or multicurrency cards. For frequent travellers visiting multiple countries, multicurrency cards are ideal. “If you use the card in a currency not loaded on it, you could incur a cross-currency charge of 2% to 5%, unless your card offers a zero forex markup,” says Adhil Shetty, CEO, BankBazaar.

Credit Cards

Credit cards are a preferred option for many travellers for its ease and perks—like lounge access or rewards points.

But most travellers overlook the hefty fees involved. “Suppose you spend `1,00,000 abroad on a credit card. You may end up paying 2–4% in foreign transaction fees, 1–3.5% in dynamic currency conversion fees, and another 2–3% as exchange rate markup. That’s up to `10,000 extra,” says Motwani.

In dynamic currency conversion, you’re offered the option to pay in INR instead of the local currency. It may seem convenient, but the merchant or acquiring bank sets the exchange rate, often with a markup.

However, some premium or travel-focused credit cards offer low or zero forex markup. But how beneficial are they? “Travellers should note that even with a reduced markup fee, the total forex markup cost could be significant, especially in case of high-value transactions. Moreover, some foreign merchants may also allow you to pay in INR, but this also entails dynamic conversion charges,” says Rohit Chhibbar, Chief Business Officer, Credit Cards, Paisabazaar, a lending aggregator.

Always pay in the local currency of the visiting country to avoid dynamic conversion charges.

Another point to remember is that zero-forex markup cards may still use static network rates set by card providers like Visa or Mastercard. These are typically updated once or twice a day and can be up to 1% higher than the real-time interbank rate.

Cash/ATM Withdrawal

Carrying some cash is necessary, depending on your destination. In countries like the US, cards are widely accepted. But in countries like Japan and Vietnam, you’ll need physical currency, especially at local shops or markets.

Avoid buying currency at airports due to high markups. Banks may also charge substantial premiums over IBR, therefore banks or online forex platforms offering real-time rates with low margins are better options.

ATM withdrawals abroad are convenient but expensive. Shetty argues that ATM transactions, especially withdrawals, attract steep charges. “For instance, Kotak Mahindra Bank charges $2 for cash withdrawals and $0.50 for balance enquiry transactions. IDFC First Bank charges $1.5 and $0.25 for ATM withdrawals and balance enquiry transactions, respectively. ICICI Bank charges `125 per withdrawal. Moreover, most Indian banks charge a foreign transaction fee ranging from 2.5% to 3.5% on the withdrawn amount,” says Shetty.

“Say you withdraw an equivalent of `50,000 from a foreign ATM. You could pay an ATM fee of `125, a foreign transaction fee of 2.5% (`1,250), and a mark-up of 3.5% (`1,750). That’s a total of `3,125—over 6% of the withdrawal amount,” he adds.

If you use a credit card to withdraw cash, the costs increase sharply—2.5–3% withdrawal fee plus high interest from Day One, sometimes as much as 40% annually.

Even forex card ATM withdrawals can attract multiple charges like conversion markups and ATM usage fees.

UPI transactions

Unified Payments Interface (UPI) might have transformed digital payments in India, but its global use is still limited.

“UPI’s global use is in the early stages. It’s accepted in a handful of countries like Singapore, UAE, Bhutan, Nepal, France, Mauritius and Sri Lanka. Even then, it can be used only at select merchants,” says Motwani.

Chhibbar adds that the traveller must enable ‘UPI International’ if he plans to use UPI in a foreign country.

The payment is deducted in INR, and your bank applies a conversion rate. There could be additional charges depending on the transaction amount and the currency involved.

Until UPI is more widely accepted, consider it a useful backup for small expenses rather than a primary mode of payment.

The Best of the Lot

Before you travel, estimate how much money you’ll need. A forex card is one of the safest and most convenient ways to carry foreign exchange. It lets you load currency at a fixed rate before departure and use it like a debit card. It generally offers better value than cash exchange and works at most retail outlets and ATMs.

Credit and debit cards may come with hidden charges, so opt for those with zero or low forex markup and read the fine print. Carry cash also for minor expenses but avoid carrying too much.

When buying forex, the rate you get can make a noticeable difference to your travel budget.

Compare rates from different sources—banks, online platforms, and licenced money changers. Even a small variation in rates can lead to big savings if you’re exchanging a large sum.

Understanding how the rate is calculated is important. With forex cards, the rate is locked in at the time of loading.

For debit or credit cards, the rate applied is usually the card network’s (Visa/Mastercard) static rate. Some merchants may offer to charge in INR instead of local currency via dynamic currency conversion, which often results in a poor exchange rate.

To sum up, understanding how forex rates are applied across different payment methods—whether you’re swiping a card, using UPI, or withdrawing cash—can help you avoid hidden costs. Don’t accept the first rate you’re offered. Compare options, understand the rate mechanism, and choose wisely to save money on your trip. 

@teena_kaushal