From Forex Mark-ups To Cash Withdrawal Fees: The Real Cost Of Using Credit Cards Abroad

Travelling overseas has become far more common, whether for work, education, medical needs, or leisure. Credit cards often feel like the easiest way to manage spending abroad. They are widely accepted and reduce the need to carry cash. However, many travellers are surprised by their final bills. These higher costs usually come not from excess spending but from charges that quietly add up in the background. Understanding how these costs work can help travellers stay in control of their budgets. 

Foreign currency mark-ups quietly raise costs

Most Indian credit cards charge a foreign currency mark-up on international transactions. This fee ranges between 2 per cent-3.5 per cent, plus GST, and applies to every overseas purchase. While it may seem minor in isolation, repeated transactions over a trip can significantly increase total spending. Since these charges are not always obvious at the time of payment, travellers often notice them only when the statement arrives.

Options such as the Federal Bank Scapia Credit Card, IDFC First Wow Credit Card, and Ixigo AU Credit Card currently levy zero foreign currency mark-up, making them suitable for frequent international travellers.

Dynamic currency conversion can work against you

At many international outlets, card users are offered the option to pay in Indian rupees instead of the local currency. Though it sounds convenient, this process, known as dynamic currency conversion, often uses less favourable exchange rates set by the merchant. Paying in the local currency usually results in lower overall costs, even after card network conversions. Choosing carefully at the point of sale can prevent avoidable losses. 

Cash withdrawals on credit cards are expensive

Withdrawing cash abroad using a credit card is among the costliest options available. These transactions attract withdrawal fees, higher interest rates, and immediate interest accrual, with no interest-free period. For travellers who need cash, debit cards or prepaid forex cards tend to be more economical and easier to manage. Relying on credit card cash advances can quickly strain travel budgets. 

For example, if you withdraw Rs 20,000 using your credit card, the bank first charges a 3 per cent fee, which comes to Rs 600. Next is interest, of around 3.5 per cent per month, which starts from the same day, adding roughly Rs 700 in a month. So, after 30 days, you owe about Rs 21,300, and the amount keeps rising until you clear the dues.

Exchange rate timing affects final bills

International card transactions are settled a few days after the purchase is made. During this period, currency rates can move, affecting the final amount charged. While fluctuations may occasionally work in the traveller’s favour, they often add uncertainty to expense planning. Over longer trips, these small differences can become noticeable. 

TCS changes help liquidity, not card charges

Budget 2026 reduced Tax Collected at Source (TCS) under the Liberalised Remittance Scheme (LRS) for foreign travel and overseas spending. This change improves cash flow by reducing upfront deductions on eligible payments. However, it does not remove card-related charges such as mark-ups or conversion fees. Travellers should see this as liquidity relief rather than a direct saving on card usage. 

Choosing cards with lower foreign mark-ups, informing banks before travelling, and monitoring spending during the trip can help limit surprises. A mix of payment options, such as credit cards for convenience and forex or debit cards for cash needs, often works best. By understanding how hidden charges work and planning payment methods in advance, travellers can enjoy their journeys without letting unseen costs undo their travel budgets.

(The author is Associate Analyst, Communications, BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)