If you’re using your Indian credit card abroad, it’s crucial to understand foreign currency mark-up fees to avoid surprises on your bill. Let’s break it down!
What is a foreign currency mark-up fee?
When you use your credit card for international transactions, banks charge a conversion mark-up fee (1.5–3.5% of the converted amount) plus 18% GST on the fee.
Here’s a step-by-step calculation:
Step 1: Convert the foreign currency into INR.
- Use the card network’s exchange rate (Visa, Mastercard, etc.).
- Example: $100 @ ₹83.50 = ₹8,350.
Step 2: Calculate the mark-up fee.
- Let’s assume a 3% mark-up fee.
- 3% of ₹8,350 = ₹250.50.
Step 3: Add 18% GST on the mark-up fee.
- GST on ₹250.50 = ₹45.09.
Step 4: Total fees = Mark-up fee + GST.
- ₹250.50 + ₹45.09 = ₹295.59.
Step 5: Add the fees to your transaction amount.
- ₹8,350 + ₹295.59 = ₹8,645.59.
Pro Tip: Minimize the fees!
1. Choose cards with low mark-up fees (e.g., SBI Elite).
2. Use no mark-up fee cards like Scapia or AU Bank Forex cards.
3. Always pay in the local currency instead of INR.
4. Consider prepaid forex cards—they often offer better rates and no mark-up fees.