Best card for international travel: If you’re planning an international trip, you may be unsure about whether to use a debit card or a credit card. Debit cards draw funds straight from your bank account, helping you stick to your budget, while credit cards give you an interest-free period for payments and can provide extra money if needed. Both types of cards come with fees, but credit card cash withdrawals can be expensive due to high fees and interest, so debit cards are a better choice for getting cash from ATMs. Credit cards are generally safer for international use, as any fraud is limited to your credit limit, whereas a compromised debit card could result in an immediate loss of funds.
Best card for international travel
Getting ready for a trip abroad involves booking flights, planning your schedule, and deciding where to shop and eat. But one of the most important things to figure out is how you’ll manage your money.
Choosing based on your spending needs: Debit Vs Credit card
When deciding between using a debit or credit card while abroad, it’s important to consider your spending needs. Using a debit card involves spending directly from your bank account, leading to immediate deductions and easier tracking of expenses. This is a good choice for those who want to stick to a budget. On the other hand, credit cards provide the benefit of extra funds during travel, along with an interest-free repayment period of 45-50 days. However, it’s essential to avoid overspending on credit cards for impulse purchases.
Fees to consider: Markup Fee, Forex charges and More
When using debit or credit cards abroad, various fees should be taken into account. One of the primary expenses is the markup fee, a percentage added to each transaction. Typically, both debit and credit cards have a dynamic currency markup fee of approximately 1%.
While there are zero-markup cards available, they usually apply to rates set by payment networks or partner banks rather than interbank rates. These network rates often include a 1% premium above interbank rates.
Moreover, when conducting transactions overseas, payments are typically made in foreign currency. The card issuer then converts the amount into your home currency, usually incurring a forex conversion fee of up to 3.5% for each transaction.
Withdrawing money from ATMs abroad, Debit Vs Credit card:
When it comes to withdrawing cash from ATMs overseas, using a credit card will result in various fees, such as a foreign currency transaction fee, a cash advance fee (up to 3.5%), and interest charges (up to 42% per year for revolving credit).
On the other hand, withdrawing cash with a debit card incurs a fixed withdrawal fee, typically ranging from Rs 125 to Rs 150 per transaction, which is significantly lower than the fees associated with credit card withdrawals. Therefore, if you require cash and have sufficient funds in your bank account, opting for a debit card is the more economical choice.
TCS on Debit and Credit cards:
Starting from October 1, 2023, a TCS of 20% is applicable on remittances exceeding Rs 7 lakh annually, with certain exemptions in place. Debit card expenditures below Rs 7 lakh per year do not attract TCS, and international credit cards are excluded from the Liberalised Remittance Scheme (LRS), thereby exempting credit card transactions from TCS. It’s crucial to understand that TCS is not an extra tax; it can be offset against your tax dues when filing your income tax return (ITR).
Protecting yourself from Fraud:
When using a credit card internationally, your bank account is not directly at risk, as any potential fraud is limited to the card’s credit limit. In the event of fraudulent activity, you can block your credit card and fall back on your debit card if needed.
On the contrary, if someone compromises your debit card, they could deplete your entire bank balance. Debit card fraudsters can duplicate your card and empty your savings, posing a greater risk in unfamiliar environments. The repercussions of debit card theft or misuse are more immediate and significant since it is directly connected to your bank account. Blocking your debit card during an emergency could also restrict access to your account funds.
Therefore, it is generally safer to use a credit card, particularly at smaller, local establishments, while traveling.
Things to notice: Best card for international travel
Before embarking on an international journey, thoroughly examine the fees and costs linked to using debit and credit cards. Evaluate the advantages of each card according to your spending habits, safety priorities, and overall financial needs. It is advisable to carry both cards to cater to various scenarios, including transaction restrictions or security issues. Proper preparation will enable you to handle your finances effectively and experience a hassle-free trip.
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