In a world where financial flexibility is paramount, the debate on Forex card vs credit card rages on! Reason? Because individuals seek the perfect travel companion for their monetary needs. Picture this- you’re about to embark on an adventure, whether it’s exploring exotic landscapes or conducting business abroad.
The burning question arises – should you opt for the tried-and-true credit card, laden with rewards and familiarity. Or should you entrust your funds to the specialized prowess of a Forex card, tailored for international currency exchanges? The decision between these financial powerhouses is a choice fraught with considerations, each offering a unique set of benefits.
Join us on a journey to unravel the intricacies of Forex card vs and credit card. Also, we will determine which one is better in between the two!
(A) Forex Card vs Credit Card: A Brief Overview
Let’s go through an overall comparison of Forex Card vs Credit Card-
|Aspects||Forex Card||Credit Card|
|Type||Prepaid Travel Card||Revolving Credit Line|
|Currency Conversion||Locked exchange rate at the time of loading||Real-time exchange rate at the time of transaction|
|Usage Fees||Typically lower foreign transaction fees||Higher transaction fees|
|Credit Limit||Limited to the amount loaded on the card||Based on your creditworthiness|
|Interest Charges||No Interest Charges because it’s prepaid||Interest charged on outstanding balance|
|ATM Withdrawals||Can be used to withdraw foreign currency||Can be used for cash advances, but incur high fees and interest|
|Billing Cycle||No billing cycle; you spend what’s loaded||Monthly billing cycle with minimum payments|
|Credit Score Impact||No impact on credit score||Can affect credit score positively or negatively|
|Application Process||Simpler and Quicker to obtain||Credit Check and Approval Process|
|Rewards and Perks||No rewards or cashback||Offer rewards, cashback, and benefits|
|Credit History Building||No contribution to credit history||Build and Improve credit history|
However, you must note that their specific terms and conditions may vary depending on the issuer and the card type. So it’s essential to read the fine print and compare offerings from different providers before making a decision.
(B) Is a Forex Card the same as a Credit Card?
No, a forex card is not the same as a credit card!
Both of them have different purposes. A forex card is a short form for foreign exchange card. It is primarily used for carrying and transacting foreign currencies while traveling abroad. Forex cards allow you to load multiple foreign currencies onto a single card, making it convenient for international travel expenses.
Whereas a credit card is a financial instrument that provides you with a line of credit from a bank. You can use a credit card to make purchases or withdraw cash, and you need to repay the borrowed amount along with interest if you don’t pay the full balance by the due date.
(C) What is a Forex Card?
Forex Cards are pre-funded payment cards designed for foreign currency usage in advance. They enable users to hold multiple foreign currencies and conduct transactions overseas. These cards boast a zero forex markup fee and facilitate cash withdrawals in foreign currency from international ATMs without interest charges, given their prepaid nature. Therefore, it is essential to possess a forex card when journeying abroad.
(C.1) Forex Card Benefits
|Advantages of Forex Card||Details|
|Convenient for travel||Accepted worldwide|
Can be used for various purposes
like shopping, dining, ATM withdrawals.
|Currency Exchange Rates||Competitive exchange rates|
Lock-in rates available before travel
|Security Control||Safer than carrying cash.|
Can be locked and monitored online.
Replaceable if lost or stolen.
|Multi-Currency Options||Can hold multiple currencies.|
Useful for travelers to multiple destinations.
|Budgeting and Tracking||Helps in managing travel expenses.|
Statements provide exchange details.
(C.2) Forex Card Drawbacks
|Disadvantages of Forex Card||Details|
|Limited Acceptance||Not all merchants accept Forex cards, |
especially in remote or less developed areas
|Fees and Charges||Initial Issuance Fee|
Currency Conversion Fees
ATM Withdrawal Fees
Inactivity fees for unused cards
|Limited Cash Access||May not be able for emergency cash needs.|
Limited access to physical cash in case of
technical issues or lost cards.
Some ATMs may not accept Forex cards.
|Exchange Rate Fluctuations||Exchange rates can vary and change |
over time, impacting the card’s value.
|Reload Restrictions||Some forex cards have limits on |
how much you can reload.
Kindly, note that the advantages and disadvantages of Forex cards can vary depending on the specific card issuer. Also, the terms and conditions associated with the card can fluctuate based on the source of issuance of the card. Hence, it is important to carefully review these terms before obtaining a Forex card for your travel needs.
(D) What is a Credit Card?
The credit cards represent a valuable financial tool that grants individuals access to premium perks. Banks issue credit cards on the basis of credit limit. Also, they offer a plethora of advantages. Many of us favor credit cards for transactions, benefiting from savings through reward points and cashback.
Beyond transaction rewards, credit cards extend additional privileges such as complimentary airport lounge access, fuel surcharge waivers, dining and movie discounts, and more. When traveling abroad, credit cards provide numerous conveniences to enhance your travel experience.
(D.1) Benefits of Credit Cards while traveling abroad
|Convenience||Credit cards are widely accepted worldwide, |
making payments and purchases easy
|Security||Credit cards offer fraud protection and |
can be replaced if lost or stolen.
|Exchange Rates||Credit card companies often offer |
competitive exchange rates.
|Rewards||Many credit cards offer travel rewards, cashback, |
or miles for international spending.
|Record Keeping||Credit card statements provide a detailed |
record of your expenses.
|Emergency Assistance||Credit card companies provide assistance in |
case of emergencies like medical or travel mishaps.
(D.2) Disadvantages of Credit cards in Foreign Land
|Foreign Transaction Fees||Many credit cards charge fees for currency |
conversion, which can add up
|Interest Charges||If you don’t pay your balance in full, you’ll |
accrue interest charges on your purchases.
|Limited Acceptance||Some places may not accept credit cards, |
especially in remote areas.
|Risk of Overspending||Credit cards can lead to overspending |
if not used responsibly.
|ATM Fees||Using credit cards for cash withdrawals |
may incur high fees.
|Currency Fluctuations||Exchange rates can fluctuate, affecting your |
Thus, you must choose a credit card with travel-friendly features. Also, be aware of any fees or terms associated with using it abroad.
(E) Detailed Comparison of Forex Card vs Credit Card
Both credit cards and Forex cards present compelling advantages for international travelers. To make an informed choice between the two, it’s crucial to consider the following factors that distinguish them.
(E.1) Forex Mark-up Fees
When engaging in foreign currency transactions using a credit card, you’ll encounter a forex mark-up fee. The exact fee varies depending on your specific credit card, whether it’s a standard or premium one. Typically, most credit cards impose a foreign markup fee of 3.5% on international transactions. Some premium credit cards may have a lower fee, approximately 2%, but it still increases the overall transaction cost for international payments.
In contrast, Forex Cards come with no forex mark-up fee because the card is preloaded with the desired currency, as long as you use the card in a country where that currency is the accepted form of payment, such as using USD in the USA. If you need to make a transaction in a different currency, conversion charges will apply.
Hence, it’s advisable to carry multi-currency forex cards that enable you to store multiple currencies in a single card. One such option is the State Bank Multi-Currency Foreign Travel Card, which allows you to hold various currencies on a single card.
(E.2) Foreign Currency Rate Fluctuations
When making international payments with a forex card, you will be protected from the Forex rate fluctuations. Because, the currency rates are locked at the time of currency loading. Consequently, when you make a payment in a foreign currency, the current exchange rates become irrelevant, and the rate at which you initially stored the currency on your card applies.
On the other hand, you’ll face Forex rate fluctuations in Credit Cards. These rates change frequently, impacting the final transaction amount you pay, depending on the prevailing market conditions. This volatility can result in high or low costs for international credit card purchases.
(E.3) Travel Benefits
In terms of travel perks, credit cards offer unmatched advantages, including complimentary access to airport lounges, 24/7 concierge services, and free membership in airline and hotel loyalty programs. Additionally, credit card transactions often earn you reward points that can be redeemed for various benefits, including travel credit cards that accumulate points in the form of miles, which are useful for booking tickets and more.
Forex cards are primarily designed for cost-effective international transactions. So, they generally lack the aforementioned privileges. However, there are a few forex credit cards that provide limited travel benefits, such as the Axis Bank Club Vistara Forex Card and MakeMyTrip HDFC Bank ForexPlus Card.
(E.4) Cash Withdrawals
Forex credit cards do charge fees on cash withdrawals, but these fees are generally lower and fixed in terms of amount. Conversely, when withdrawing cash from ATMs using a credit card, a cash advance fee of 3.5% is typically applied to the withdrawn amount, significantly increasing the overall transaction cost.
(E.5) Issuance Fees
Forex cards have minimal issuance costs and no annual fees. The issuance fee for forex cards is typically between Rs. 100 and Rs. 500, with some exceptions that may have slightly higher fees.
In contrast, Credit cards come with issuance fees and annual charges that must be paid to keep the card active. These fees usually range around Rs. 1,000 and may vary based on the card’s features. Travel credit cards, which often provide premium benefits, can have higher joining or renewal fees, ranging from Rs.3,000 to Rs.5,000.
The choice between credit cards and forex cards depends on your specific needs and preferences. If you seek a card with minimal travel perks and cost-effective international transactions, a forex card is a prudent choice. However, if you desire a card that offers extensive travel benefits, premium privileges, and rewards for shopping, fuel, and more, then a travel credit card would be more suitable.
Note: When it comes to credit cards, Axis bank’s credit card was recently in the news due to the newly made changes. We have thoroughly covered the new changes made in Axis bank credit cards. You can check it out for detailed information.
(F) Forex Card vs Credit Card: Charges Comparison
Now, its time to compare the charges of Forex Card vs Credit Card. Go through the table given below-
|Particulars||Forex Card||Credit Card|
|Forex Mark-Up Fee||Zero||1.5% to 5%|
|TCS (Tax Collected at Source)||Nil (up to Rs.7 Lakh)|
5% TCS for above Rs.7 Lakh
(Till Sep 30, 2023)
20% TCS for above Rs.7 Lakh
(Oct 1, 2023 onwards)
|Cash Withdrawal Charges||Depend on the Currency||2.5% of the withdrawn amount.|
|Finance Charges||Not Applicable||Applicable immediately on the |
So, which one do you find better in the battle of Forex Card vs Credit Card? Let’s look at the final judgment given in the next section.
(G) Final Words: Which one is better- Forex card or Credit Card?
When comparing Forex cards and credit cards, both options have their own benefits. A Forex card offers several advantages. Firstly, it is a safer option as you can block it if you lose it, and it also comes with insurance coverage. Additionally, Forex cards work like debit cards and allow you to load a specific amount before you travel abroad. Each swipe deducts the amount from the card, ensuring better control over your expenses.
On the other hand, credit cards are widely accepted worldwide. Credit card offers convenience and flexibility for making purchases. However, it’s important to consider transaction charges and interest rates associated with credit cards. While the prepaid travel Forex card offers lower transaction charges compared to credit cards, it might be a more cost-effective option for international travel.
Ultimately, the choice between a Forex card and a credit card depends on your specific travel needs and preferences!