Be smart when using forex
The way you buy foreign exchange (forex) and the form in which you carry it can reduce your currency conversion loss ratio. Find your best options here.
Heading for foreign lands this summer? Don’t let the importance of foreign exchange get lost in the hurry for your bookings and travel arrangements. Before you rush to convert your money, read our tips on getting the best foreign exchange deal.
Avoid relying on cash alone. Carry a combination of cash and card. Travel cards, international credit or debit cards can be used instead of just cash.
|Conversion at||Rate – INR to USD*|
|Local Travel Agent||61.32|
*As on April 17, 2014
Carry cash as not all payments – such as cab services, washroom services (yes you will have to pay here too in select countries) and errands – can be made via cards.
As per the foreign exchange norms rules you can’t carry foreign currency exceeding the equivalent of $10,000 per annum for travel purpose. Of this, a limited $2,000 can be purchased as currency notes per instance. The balance has to be exchanged via other methods such as traveller’s cheques and drafts. There is a limit of Rs5,000 on Indian currency being carried abroad, too.
Calculate the foreign exchange rate based on all the additional charges. Banks, for instance, charge a separate currency conversion charge (usually a flat rate) apart from the loss you incur as conversion of currency. So, if an agent is offering a dollar at Rs61.8 while the bank is charging Rs61.5, calculate the rate with respect to the additional Rs150-200 you will pay per transaction from the bank.
Avoid buying from unauthorized sources for a marginal discount of 10-20 paisa. There may be a threat of counterfeit notes. Insist on a receipt from the money changer and carry it during your travel.
Convert directly to the currency you require. Don’t buy US dollars in India and exchange them abroad as you would lose the conversion charges twice.
At the airport, if you realize you would fall short on the arranged Forex then exchange before you reach the immigration gates. Money changers beyond the immigration gates quote a rate higher than the ones outside because they are your last resort to change currency. Blame it on the higher rentals applicable to the money changing counters beyond the immigration gates.
If you are carrying US dollars or Euros then you could consider changing at the foreign location you are headed to.
Cards and Cheques
The benefit of purchasing a travel card is that you also get value added services such as concierge, car rental and fraud protection insurance.
Travel cards are available usually for six currencies. So, if you are travelling to Thailand, check whether the Baht is available, as usually US, Canadian, Australian and Singapore dollars are loaded apart from Japanese yen, Euro, Great Britain pounds and Swiss francs. If you are a frequent foreign traveller then you can opt for the card, which you need not convert.
When opting for a travel card, ask for ‘Emergency Cash’ service which helps in case you lose a card.
When you use your international credit or debit card, remember that only chip-based or EMV cards can be used abroad. Those with a magnetic strip or a black band at the back would not be of any use.
A cross-currency mark-up charge of 3.5% is levied on card transactions abroad.
While withdrawing cash from an international ATM, not just the Indian bank, but the international bank would slap a transaction fee per transaction. This ranges from Rs150-300 depending on the bank.
If your card issuer sends in a card replacement immediately after you return, don’t fret. It is just a precautionary step taken, to counter the incidence of fraud and card data theft happening in select countries.
Though traveller’s cheques are slightly cheaper than cash foreign exchange (a difference of 5-8 paisa), there is a threat of loss. So if you misplace your traveller’s cheque, you cannot claim back the damages, unlike with a card that can be blocked. The rate applicable for conversion on card as well as traveller’s cheques is the same.
Split the total foreign exchange amount among your family members to avoid hassle.
Once you return, exchange the foreign currency exceeding $2,000 as you aren’t permitted to hold more than this beyond 90 days (180 days for traveller’s cheques) as per the Foreign Exchange Management Act (FEMA).