What are the forex markup fees?
Forex markup fees, also called foreign transaction fees, are a percentage based fee charged on every purchase made in a foreign currency or through an international bank. A forex markup fee covers the costs charged by banks and card networks (Visa/Mastercard) when changing currencies from other foreign units into your home currency.
How do forex markup and DCC differ?
From time to time, Dynamic Currency Conversion (or DCC) might offer you the choice to pay in your resident home currency. This option seems convenient when converting to your local currency at the terminal point of sale however, in general:
- There is typically a DCC markup of 1-3 percent on top of the bank/network fees.
- DCC is always more expensive because the issuer banks typically have a favourable exchange rate.
Tip: In order to avoid avoidable markup, always decline DCC and pay in local currency.
Who bears the cost?
This surcharge will quietly inflate your bill. Your total could increase (even by a little) if you choose a local currency option, even if offered by the merchant. It is up to you as the cardholder to make an effort to check the statement, and assess all the costs.
(Source: PaisaBazaar)
(Note: Please visit the bank’s official website to learn more about the fees & charges of the credit card of your choice)
Smart ways to minimize forex fees
- Choose cards with zero forex: Certain premium programs offer 0% forex markup on flat fees saving you as much as 3.5% on each purchase.
- Avoid DCC opportunities: Allow your own supplier to take care of the conversion and do your payment in the local currency.
- Check any fees that may apply: Check the fees on your bill against the credit card’s terms.
- Look at the prepaid forex cards for cash: While there may be fees for ATM withdrawals, they also “lock” currency rates.
Is using a credit card abroad worthwhile?
Although there is a markup applied, credit cards are still handy when:
In conclusion, although forex markup costs seem negligible per transaction, they do add up quickly, especially when traveling or shopping online where USD subscriptions are available. You can also select a minimal markup card, decline DCC, and use prepaid FX cards when necessary if you know your total costs.
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