How to pay when travelling abroad

Sheldon Concessio is travelling to Luxemburg this June and spending two months there.

According to the Reserve Bank of India guidelines, one can carry $10,000 (around Rs. 2 lakh) cash on a foreign trip in one financial year.

But Concessio may need more money and wants to know the options available.

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Ravi Menon, head-foreign exchange, Cox & Kings, says the best way to travel is to carry a mixed bag of travellers' cheques, credit cards, debit cards and prepaid travel cards, besides some cash.

"You can use cards for almost all expenses such as shopping, eating out and hotel reservations. Yet, one should carry a little bit of cash to meet any emergency," he adds.

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Although it is mandatory to convert your money before leaving India, avoid doing it at airports.

"Exchange rates at airports have a 10 per cent mark-up," says Shyamal Saxena, general manager and head of retail banking, Standard Chartered Bank.

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Private money changers would offer a lower rate.

While on a foreign trip, using credit and debit cards are convenient, but these come at a cost.

If you use your debit card to withdraw at an ATM, the bank will levy a service charge of $3 or Rs. 148 on the transaction.

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Credit cards work out to be more expensive than a debit card. Each time you swipe your card, the swiped amount is converted, depending on the prevailing exchange rate.

But this conversion comes with a 2-3.5 per cent mark-up, besides a service tax of 10.3 per cent on the fee.

So, say you spend Rs. 1 lakh, the conversion fee would be Rs. 2,000-3,500.

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In addition, the service tax would be Rs. 206-360. The total expense = Rs. 1,02,206-1,03,860.

Besides, there is also a maximum limit to credit card usage and, in case you do not pay your bill, the normal penalty rates of additional 2.95 per cent a month will be charged on the balance payable.

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Menon advises checking out the card services and their usage fees before leaving the country.

Carrying more than one credit card can help. In case of theft, the credit card issuer needs to be contacted and informed to block its usage.

Withdrawal of cash through credit cards is a strict no-no, as this will double the damage.

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One, there will be an interest rate of three per cent. Second, there will be a conversion cost of 2-3.5 per cent, along with the service tax.

Third, there will be a flat fee of Rs 300. On the whole, you end up paying seven-eight per cent on your withdrawal.

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One can also opt for a forex or a pre-paid card which is not linked to your bank account.

It is available with most bigger banks such as Axis Bank, ICICI Bank, HDFC Bank, Standard Chartered Bank, etc.

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"Pre-paid cards offer a fixed exchange rate as prevalent on the date when one pre-loads the card and so, there are no forex conversion mark-ups," says Pratik Mazumder, head-marketing and strategic alliance, Yatra.com.

These cards are available in several major currencies and so, one saves on cross-currency charges.

These also come with an insurance cover to protect against misuse.

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However, there is a restriction on how much can one load the card for a maximum of $10,000 for luxury trips and $25,000 for business trips.

The cost of loading: Rs. 100-300.

These are easy and safe. Available in major currencies, travellers' cheques are fixed amount cheques.

While buying these, the customer has to sign each cheque, which should match the ones when he makes use of these.

Travellers' cheques can be replaced, if stolen, misplaced or lost.