Difference between Forex Cards and Credit cards

3 min read Dec 27, 2023

If you have upcoming international travel plans, you may be contemplating the best way to manage your foreign currency needs. Many assume it is sufficient to bring cash and a Credit Card when travelling overseas. However, using a domestic Credit Card abroad can be expensive.

In this blog, let us uncover how you can carry foreign currency and understand the differences between carrying cash and a Forex vs Credit card.

Using cash for international travel

Cash is a widely accepted payment method for various expenses, including small purchases, tips, and locations where card payments cannot be used. 

Pros

Using local currency incurs no additional fees, such as issuance or transaction charges, allowing you to spend the exact amount you intended. The only expense incurred is at the time of exchange which could be a conversion fee. 

Cons 

However, currency or cash is susceptible to theft or loss. And once it is stolen or lost, you cannot get it back. Handling large amounts of cash can be inconvenient and risky, as it may require extra precautions during travel. 

Understanding the usage of a Forex Card 

A Forex Card is a preloaded travel card provided by banks, offering the convenience of loading and using foreign currency for your international expenses. With a Forex Card, you can choose the currency of your preference and load it onto the card before your trip. This card proves invaluable for various purposes, such as shopping, dining, and cash withdrawals during your stay in the foreign country you plan to explore. 

Pros 

Forex Cards also offer enhanced security as PIN-protected, significantly reducing the theft risk. Moreover, these cards can be swiftly blocked to prevent unauthorised use in case of loss or theft.

Most Forex Card transactions come without transaction fees, making them a cost-effective choice for international spending.

Cons

Obtaining a Forex Card may involve initial costs such as issuance and reloading fees. While widely accepted, there may still be some locations where Forex Cards are less practical than Credit Cards, so it's essential to have alternative payment options available.

Reloading funds onto a Forex Card abroad can sometimes present challenges, as the process may be more complex than cash withdrawals or Credit Card payments.

Understanding the usage of a Credit Card 

Credit Cards enable individuals to access funds borrowed from a bank or financial institution for making purchases. By using a Credit Card, you enter into a credit arrangement with the bank, committing to repay the borrowed sum and interest over a specified period. 

Credit Cards often provide attractive perks like reward programs and cashback incentives designed to motivate customers to engage in spending activities.

Pros

Credit Cards offer the convenience of universal acceptance, making them a hassle-free payment method globally. Credit Cards are particularly well-suited for online shopping and reservations, simplifying digital transactions. They also serve as a financial safety net, offering access to emergency funds in unexpected situations.

Also Read: 6 benefits of using a Credit Card

Cons 

On the downside, Credit Cards often entail foreign transaction fees, which can increase the overall cost of using them for international expenditures. Your card's credit limit can act as a spending constraint, limiting your financial flexibility while abroad. Lastly, excessive Credit Card usage during your travels can lead to post-trip debt, necessitating responsible financial management to avoid potential financial burdens.

Let us look at the major differences between Credit Cards, Forex Cards and Cash:

Traveller's Cheque

A Traveller's Cheque is a pre-printed, fixed-amount check that can be used as a form of payment while travelling. These checks are issued by banks or financial institutions and are designed to provide a secure and convenient way for travellers to carry and access their funds while abroad. 

Here are the top reasons why a Forex Card is better than a Credit Card:

Forex Card Vs Credit Card: Know the differences

1. Protection against Forex rate fluctuations

Forex Cards lock in exchange rates when you load money, shielding you from future currency fluctuations. Credit Cards apply rates at the time of transaction, exposing you to unpredictable changes.

2. Lower ATM withdrawal costs

Credit Card cash withdrawals abroad can be expensive due to foreign transaction fees and cash advance fees, unlike Forex Cards.

3. No late payment charges

Forex Cards are prepaid and spare you from late fees and high-interest rates that Credit Cards impose for delayed payments.

4. No forex conversion charges

Credit Cards convert Indian currency to foreign currency with each transaction, incurring forex conversion fees. Forex Cards preload foreign currency, avoiding these fees, but may charge for currency reloading.

5. Available limit

The entire credit limit available on your Credit Card can be used, making it suitable for your purchases and even in case of any emergency. On the other hand, in the case of Forex Cards, the amount that is pre-loaded is all that is available. If you run out of the amount, you would have to load the amount again, which may take time and also pay and pay re-loading fees

Also Read: Benefits of using a Forex Card while studying abroad

Conclusion

In conclusion, the choice between a Credit Card vs Forex Card depends on your specific requirements and personal preferences. If you're a frequent traveller seeking a hassle-free and cost-efficient solution for international transactions, a Forex Card may be the perfect choice for you. If you prioritise the convenience of credit and are responsible with repayments, a Credit Card could be your preferred financial tool.

In the end, having a clear understanding of the unique features of Forex card vs a Credit Card empowers you to make well-informed financial decisions, ensuring that your international journeys are memorable and financially prudent. So, whether you're swiping a Credit Card or using a Forex Card, aim to make your financial journey as seamless as your travel adventures.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision