Credit Card Vs Forex: Everything You Need to Know

Credit cards have become a part of our daily lives, from shopping purchases to fuel transactions; we all love to use credit cards. And why not, as it offers plenty of benefits in the form of reward points/cashback. However, when traveling abroad, a credit card might be a good choice to carry along as it offers lounge access, reward points on international purchases, etc, but one thing that makes credit cards a bad choice is the forex markup charges that they carry.

The forex markup fee on credit cards makes international transactions more costly. Moreover, it will cost you a lot to withdraw cash with credit cards at international ATMs. The forex cards, on the other hand, offer zero forex fees and help you to save more on your international transactions.

The Forex cards are accepted globally, and you can make purchases in a number of currency options. These cards generally carry zero markup fee, and you can withdraw cash in foreign currency anytime internationally without any cost. However, unlike credit cards, forex cards do not offer lavish privileges. Therefore, it might be difficult for individuals to choose between credit cards and forex cards for international travel. To help you out, we are here with this article, where you will find a detailed comparison between Forex cards and Credit cards. So keep reading to know more.

Credit Cards Vs Forex Cards: Meaning

Credit cards are one of the best financial instruments that provide individuals with the ability to enjoy premium benefits. These cards are issued against a credit line and offer many great benefits. We all love to use credit cards for making transactions and enjoy saving in the form of reward points or cashback. Apart from the rewards on transactions, credit cards offer many other privileges like complimentary airport lounge access, fuel surcharge waiver, discount offers on dining or movies, and much more. When traveling abroad, credit cards offer many privileges which would assist you to make your travel comfortable.

The Forex Cards are prepaid Cards that can be loaded with foreign currencies in advance. The card allows you to store more than one currency, which can be used to make transactions in foreign countries. These cards carry zero foreign exchange markup fee and allow you to withdraw cash from international ATMs in foreign currency. Moreover, these cards carry no interest charges as they are prepaid instruments. Therefore, having a forex card when traveling abroad is a must.

Both credit cards and Forex cards offer great benefits to international travelers. But to make a choice one must consider the following points that will help you to differentiate between these two.

Forex Mark-up Fee

When you make transactions in a foreign currency with a credit card, you are charged a foreign exchange markup fee. These charges vary from card to card, depending on the card you carry (entry-level or Premium credit card). However, most credit cards charge a 3.5% foreign markup fee on all international transactions. Some premium credit cards carry a lower charge of around 2%, but still, it makes the transaction value go up, and costs you a lot when you use it for making international payments.

The Forex Cards, on the other hand, carry zero forex mark-up fee as the currency is already deposited in the card, provided that you use the same currency where it is applicable for example, using USD in the USA. If you have a currency for a transaction in a different currency, then the conversion charges would apply. Therefore, one should carry multi-currency forex cards that allow you to deposit multiple currencies.

Foreign Currency Rate Fluctuations

Making international payments with a credit card entails foreign exchange rate risk. As the Forex rates fluctuate every minute, the transaction value of the payments you make will depend on the current rates prevailing. These can be high or low as per the market conditions. Therefore, international purchases with credit cards are risky.

Traveling Privileges

When it comes to privileges in travel, credit cards have no match, as they offer world-class benefits, including complimentary access to airport lounges, 24/7 Concierge services, and complimentary membership to airline programs and hotels. Also, for every transaction you make with credit cards, you earn reward points, which you can redeem later for a number of choices. With travel credit cards, you can earn points in the form of Miles, which are redeemable for booking tickets and much more.

Forex Credit cards are designed to make international transactions smooth and low-cost. These cards generally lack such privileges as mentioned above.

Cash Withdrawals

When you withdraw cash using a credit card from ATMs, a cash advance fee of 3.5% is applicable on the amount withdrawn. These charges make the transaction cost go up and make credit cards a bad choice for withdrawing cash.

The forex credit cards also carry a charge on cash withdrawals, but these charges are generally lower and are fixed in terms of amount.

Issuance Fee

Credit cards are issued with a joining fee and also carry an annual charge, which has to be paid to keep the card running. These charges are generally around Rs. 1,000 and may go up depending on the card you have. Travel credit cards are generally premium cards that carry around Rs. 3,000 to Rs. 5,000 as a joining or renewal fee.

The Forex cards carry a very low issuance cost and have no annual charge. The issuance cost for the forex cards is just Rs. 100 to Rs. 500. There are a few forex cards that carry a slightly higher fee.

Bottom Line

You must have got an idea behind the concepts of credit cards and Forex cards. The choice between the two cards totally depends on you. If you just want a card that offers you slightly fewer travel privileges and minimal cost on international transactions, then having a forex card is a wise choice. However, if you are looking for a card offering great travel benefits, premium privileges, shopping and fuel benefits, and more, then you should go for a travel credit card.

In case you have any doubt related to forex or credit cards, let us know in the comment section above.