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Foreign Transaction Fee in India: What It Means for Credit and Debit Cards
By Jupiter Team · · 4 min read
A foreign transaction fee is a charge taken by a bank or card issuer when you pay in a foreign currency or when your transaction is processed by a foreign bank, even if you are in India. It is usually a percentage of the transaction value, often 1% to 3%.
Purpose: to cover currency conversion costs and cross-border processing.
‘Foreign Transaction Fee’ in some of Indian Languages
Let’s explain ‘Foreign Transaction Fee’ to kids
Imagine buying a chocolate bar in another country using your Indian card. Your bank adds a small extra charge because the price is in a different money type. That extra is the foreign transaction fee. You can avoid it by using special cards or apps that do not add this fee.
Understanding foreign transaction fees
What is a foreign transaction fee
A percentage charge on purchases made in a foreign currency or routed through a foreign acquirer. It is applied on top of the converted INR amount.
How is it calculated
At a high level:
Total charge in INR = (Foreign amount × exchange rate) × (1 + fee%) + any fixed fees or taxes.
Example
Your card converts 100 USD at ₹84.50. Issuer fee is 3%.
- Base amount: 100 × 84.50 = ₹8,450
- Fee: ₹8,450 × 0.03 = ₹253.50
- Total billed: ₹8,703.50 plus any applicable taxes on fees
Common rates in India
Typical ranges are 1% to 3% of the converted amount. Some products advertise 0% issuer markup for foreign purchases.
Why do banks charge foreign transaction fees
Currency conversion costs
Banks and networks maintain FX infrastructure and risk buffers. The fee helps cover these costs when converting from INR to another currency and back for settlement.
Cross-border processing
International transactions pass through additional checks and networks. The fee funds cross-border routing, compliance, fraud monitoring, and support.
Impact on your card transactions
Credit cards abroad
- Many credit cards add a percentage fee on each foreign purchase.
- Pre-authorisations at hotels or rentals can hold extra funds until release.
- If you opt for Dynamic Currency Conversion at the terminal, you may pay more. Always choose the local currency.
Debit cards abroad
- Debit cards often apply a similar percentage fee and may also charge for overseas ATM withdrawals.
- Funds leave your account immediately, so keep a buffer for rate changes and holds.
Hidden charges to watch out for
- Dynamic Currency Conversion at the merchant in INR
- Separate ATM fees for cash withdrawals overseas
- Taxes on fees where applicable
- Extra spreads if the transaction is routed through certain payment gateways
How to avoid or reduce foreign transaction fees
Zero-forex-markup credit cards
Cards that do not add the issuer’s FX markup on foreign purchases. This means that you pay closer to the network exchange rate.
Multi-currency cards
Prepaid or account-linked products that let you load and spend specific currencies. Useful if you know your travel currency in advance.
Digital wallets and payment apps
Some wallets route payments at competitive FX rates. Check their fee policy and make sure the merchant accepts that wallet.
Calculations for Foreign Transaction Fees
Quick formula
- Fee amount = Converted INR × fee%
- Effective rate paid = exchange rate × (1 + fee%)
Step-by-step checklist
- Confirm the day’s exchange rate shown by your bank or network.
- Multiply the foreign amount by that rate to get base INR.
- Multiply base INR by the fee percent to get the fee amount.
- Add any fixed or ATM fees and applicable taxes.
- Compare with a zero-markup option to see potential savings.
Comparison snapshot: credit vs debit for foreign purchases
FAQs about foreign transaction fees
What is a foreign transaction fee?
A fee charged by banks or card issuers when you make a purchase in a foreign currency or through a foreign bank. It is usually 1% to 3% of the transaction amount.
Can I avoid foreign transaction fees when using my credit card abroad?
Yes. Use zero-forex-markup cards, multi-currency cards, or compatible digital wallets that do not charge foreign fees.
How is a foreign transaction fee calculated?
Typically as a percentage of the purchase amount after currency conversion into INR.
Does using a debit card abroad attract foreign transaction fees?
Yes, most debit cards charge a fee for foreign transactions. Some banks offer international debit variants with reduced or zero fees.
What is the difference between foreign transaction fees and ATM withdrawal charges abroad?
Foreign transaction fees apply to purchases in foreign currency. ATM fees apply to cash withdrawals from foreign ATMs and can be charged by both your bank and the ATM owner.
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