What is forex markup on a credit card and how is it calculated?

Using a credit card abroad can be convenient for hotel bookings, shopping, dining and other international expenses. However, foreign currency transactions may attract a forex markup, which increases the final amount charged to your account. Understanding how this fee works can help you estimate the actual cost of overseas spending before you apply for forex card services or use a credit card internationally. What is forex markup? Forex markup is a fee that a card issuer may charge when you make a transaction in a foreign currency. It is generally calculated as a percentage of the converted transaction value. For example, if an overseas purchase converts to ₹50,000 and your card has a 2% forex markup, the markup would be ₹1,000 before applicable taxes. The actual amount charged can therefore be higher than the basic foreign currency conversion. How is forex markup calculated? The calculation can be understood using three basic components: Component Example Foreign transaction after conversion ₹50,000 Forex markup 2% Markup amount ₹1,000 Applicable goods and services tax (GST) may be charged on the markup. Therefore, the final cost can exceed the converted transaction amount plus the stated markup alone. The exact conversion rate used for a transaction can also depend on the card network and the terms applicable to the card. Why does forex markup matter? The impact becomes more noticeable when you make several international transactions. A traveller spending ₹2 lakh overseas on a credit card with a 3.5% forex markup could incur ₹7,000 in markup before applicable taxes. A card with a lower markup can therefore reduce the cost of repeated foreign currency spending. However, forex markup should not be considered in isolation. Annual fees, rewards, lounge access and other charges can also affect the overall value of a card. IDFC FIRST bank cards and forex markup For example, the Mayura and Ashva credit cards offer zero forex markup fee on international purchases. Along with this, you can enjoy airport lounge access, rewards and travel-related protection, making the overall package relevant when evaluating an international travel credit card. Credit card vs forex card A credit card and a forex card work differently. A forex card is generally prepaid and loaded with foreign currency before or during a trip. A credit card provides a credit facility and may offer additional benefits such as rewards, lounge access and insurance. If you apply for forex card services, compare the loading charges, supported currencies, conversion rates, ATM withdrawal fees and other applicable costs. The absence of a traditional forex markup does not necessarily mean that every related charge is zero. The Reserve Bank of India permits authorised entities to issue prepaid forex cards to residents travelling abroad, subject to applicable requirements. What should you check before travelling? Before using a card overseas, check: Forex markup percentage Applicable GST Foreign currency conversion method International ATM withdrawal charges Dynamic currency conversion charges Annual or joining fees Rewards and travel benefits When a merchant offers to charge your purchase directly in Indian rupees, compare the displayed conversion with the card's foreign currency conversion terms before accepting the transaction. It is generally recommended to pay in the local currency of the country you are visiting to avoid additional charges associated with Dynamic Currency Conversion (DCC). Conclusion Forex markup can add a noticeable cost to international spending, particularly when you make frequent or high-value purchases. Understanding the percentage, conversion method and applicable taxes helps you estimate the real cost of using a card overseas. Whether you use a credit card or apply for zero forex credit card, compare the complete fee structure rather than focusing on one advertised benefit. FAQs 1. What is forex markup on a credit card? It is a fee charged as a percentage of eligible foreign currency transactions. 2. Is GST charged on forex markup? Applicable taxes may be charged on the markup. Check the card's current schedule of charges. 3. Does zero forex markup mean overseas transactions are completely free? No. Other charges, such as foreign ATM fees or applicable taxes, may still apply. 4. Is a forex card better than a credit card for overseas spending? They serve different purposes. Compare conversion costs, fees, rewards and travel benefits based on how you intend to use the card. 5. How can I reduce forex charges? Choosing a card with a low or zero forex markup can reduce the cost of eligible foreign currency transactions. [UM1]We can prase it as 'Recently IDFC First Bank announced Zero Forex mark up fee on all its existing and new credit cards.' [UM3]Add a line after this that it is always advisable to pay in the local currency of the country you are traveling in to avoid any additional charges by the merchant or otherwise known as dynamic currency conversion(DCC) Moneycontrol journalists were not involved in the creation of the article.