Credit cards: How does low forex markup fee help you save money?

If you are a frequent traveller and often make payments in a foreign currency, then it is likely that you already hold a travel credit card. A travel card can help you make payment in foreign currency seamlessly while you are travelling overseas. However, banks typically charge a forex markup fee which needs to be paid over and above of this exchange rate.

For those who are unaware, a forex markup fee is an extra charge added to the exchange rate by banks, credit card companies, and other financial institutions when you make a transaction in a foreign currency. This is usually a small percentage — say 1 to 3 percent — added to the mid-market exchange rate to cover currency conversion costs and earn profit.

And when a credit card company levies a low forex markup fee, it can be seen as an effective way to save money while making international transactions or exchanging currency for travel.

Credit cards which have zero forex mark up fee:

1. HDFC Bank Regalia ForexPlus Credit Card

2. Axis Bank Burgundy Private Credit Card

3. Federal Bank Scapia Co-branded Credit Card

4. RBL World Safari Credit Card

5. ixigo AU Credit Card

6. Club Vistara IndusInd Bank Explorer Credit Card

A low mark up fee helps in the five following ways:

Lower transaction costs: Each time you exchange money, your bank or card provider charges a forex markup fee, which is a percentage added to the mid-market exchange rate. A lower markup means you pay closer to the actual exchange rate, reducing overall costs.

Better value for each transaction: Even a slight percentage reduction can mean substantial savings, especially for large transactions or frequent purchases in foreign currency.

For instance, a 1 percent markup compared to a 3 percent markup could save you ₹200 for every ₹10,000 spent.

Frequent travellers: If you're a frequent traveler, multiple small forex fees can add up quickly. So, a lower fees make a considerable difference over time, leaving more money for your needs rather than fees.

Currency fluctuations: Some credit card providers add higher markups to account for currency volatility. A low markup rate keeps your costs more predictable, even when exchange rates fluctuate.

For investments: With savings from low forex fees, you can reinvest in other travel or business expenses, or add to your savings, instead of losing extra funds to high fees.

It is noteworthy that several credit and travel cards now offer low or zero forex markup fees, thus making them good choices for frequent travellers who are looking to save money.