Zero-forex card or rewards credit card: What's cheaper for your international holiday?

A credit card with zero forex markup might seem like the obvious choice for an international holiday. But some rewards credit cards, despite charging for foreign currency transactions, can offer enough reward points to offset those costs and potentially deliver better value. Also read: Beyond Diwali spending: Five money moves to get your finances ready for 2027 So, should travellers prioritise zero forex charges or credit card rewards? A comparison of seven credit cards shared by BankBazaar shows why the answer depends on the card, its fees and, importantly, how reward points are redeemed. Representative Image Zero Forex and Rewards Card How much does forex markup actually cost?

Most regular credit cards charge a forex markup of 1.5-3.5 percent, depending on the card. GST at 18 percent is levied on this fee. For instance, on international spending worth Rs 1 lakh, a card charging 3.5 percent forex markup would add Rs 3,500 as a fee and another Rs 630 as GST. That's Rs 4,130 in additional charges. Also read: Foreign holiday on a budget? How travel costs compare across 13 destinations A zero-forex card avoids this issuer markup on eligible transactions, although the card network's exchange rate and other applicable charges still matter. Adhil Shetty, CEO of BankBazaar, says, "A rewards card may still make sense if it has a lower markup, offers accelerated rewards on international spends, or helps the holder reach milestone benefits or an annual fee waiver."

The IDFC FIRST WOW! card is backed by a fixed deposit of at least Rs 20,000, despite having no joining or annual fee. When can rewards cards work out cheaper? Consider HSBC TravelOne. On Rs 1 lakh in eligible foreign currency spending, it earns 4,000 reward points. BankBazaar estimates these could be worth around Rs 8,481 if converted into Accor hotel loyalty points and fully redeemed at the assumed exchange rate. After deducting Rs 4,130 in forex markup and GST, the indicative reward value is Rs 4,351. However, this is not cashback. The traveller needs to use the points for eligible hotel stays, and the card also carries an annual fee.

HDFC Infinia offers another example. Its 5 reward points per Rs 150 spent can be worth around Rs 3,333 on eligible travel bookings. After Rs 2,360 in forex charges, the indicative value falls to Rs 973. Meanwhile, Scapia Federal and AU ixigo Visa offer zero forex markup but no reward points on international transactions. The IDFC FIRST Mayura combines zero markup with international spending rewards, but carries an annual fee of Rs 5,999 plus GST. However, these calculations do not include annual card fees. For someone applying for a new card primarily for one international trip, these fees could outweigh the rewards earned.

Existing cardholders, particularly those qualifying for fee waivers, may find the comparison more favourable. What about cash and ATM withdrawals? Vivek Bagree, Chief Business Officer, Co-Branded Cards, Niyo suggests, "One should keep around 10-20 percent of the estimated travel budget in local currency, depending on the destination. Cash is useful for transport, tips and smaller establishments, while cards can handle larger expenses." Travellers should also check international ATM charges. Debit card withdrawals may attract bank and local ATM operator fees, while many credit cards charge cash advance fees and interest.

Some cards offer different withdrawal terms, so checking the specific fee structure matters. Another point is dynamic currency conversion. When paying overseas, choosing Indian rupees instead of the local currency can result in a less favourable exchange rate. So, which card should you choose? For travellers who do not regularly use airline or hotel loyalty programmes, a zero-forex card with low fees can be a straightforward option. Those who already hold premium rewards cards and can redeem points at attractive values may find that the rewards compensate for forex charges. The deciding factor is not the advertised rewards rate alone, but the value a traveller can realistically redeem after accounting for forex charges, GST, annual fees and other costs.