Smart Ways to Avoid Foreign Transaction Charges for Indians: A Country-Wise Guide

Uncategorized
Posted on | by pritesh

Traveling abroad or making international transactions can be exciting, but foreign transaction fees can quickly erode your budget. For Indian travelers, these fees—typically 1-3.5% per transaction—can add up, especially when combined with currency conversion markups or ATM withdrawal charges. Additionally, Tax Collected at Source (TCS) under India’s Liberalised Remittance Scheme (LRS) may apply to certain transactions. This guide provides detailed, country-specific strategies to minimize or avoid these charges, ensuring cost-efficient international travel and transactions for Indians.

Understanding Foreign Transaction Charges

Foreign transaction fees are charges imposed by banks, credit card issuers, or payment platforms when you make a purchase or withdrawal in a foreign currency or with a foreign merchant. These fees typically include:

  • Currency Conversion Fee: Usually 1-2%, covering the cost of converting INR to the foreign currency.
  • Issuer Fee: An additional 1-2% charged by the card issuer for processing international transactions.
  • ATM Withdrawal Fees: Fixed fees (e.g., $2-5 per withdrawal) plus a percentage (1-3%) for cash withdrawals abroad.
  • Dynamic Currency Conversion (DCC): An optional service where merchants convert the transaction to INR at the point of sale, often at unfavorable exchange rates.
  • Tax Collected at Source (TCS): Under India’s LRS, a 5-20% TCS may apply on remittances exceeding INR 7 lakh annually (adjustable against income tax liability when filing ITR).

By planning ahead and choosing the right financial tools, you can significantly reduce these costs. Below are general strategies followed by country-specific tips for popular destinations among Indian travelers.

General Strategies to Avoid Foreign Transaction Fees

  1. Choose Cards with No Foreign Transaction Fees
    Several Indian banks offer credit and debit cards that waive foreign transaction fees, ideal for international travel. Examples include:
    • Airtel Axis Bank Credit Card: No foreign transaction fees, rewards on international spends.
    • HDFC Regalia First Credit Card: Minimal or no foreign transaction fees, with travel perks like lounge access.
    • SBI Elite Credit Card: No foreign transaction fees, suitable for frequent travelers.
    • Niyo Global Card: A prepaid debit card with zero forex markup fees, offered in partnership with banks like DCB and Equitas.
      Action: Check the terms and conditions of your card for foreign transaction fees. Apply for a no-fee card well in advance, as processing can take 1-2 weeks.
  2. Use Multi-Currency Accounts or Cards
    Platforms like Wise and Revolut offer multi-currency accounts that allow you to hold and spend in local currencies, avoiding conversion fees. The Wise card, for instance, supports over 40 currencies, offers two free ATM withdrawals up to $350 AUD monthly, and uses the mid-market exchange rate with low fees (0.15-0.25% for remittances).
    Action: Open a Wise or Revolut account before travel, preload it with the destination’s currency, and use it for payments or withdrawals.
  3. Avoid Dynamic Currency Conversion (DCC)
    When paying abroad, merchants may offer to charge you in INR instead of the local currency. This often comes with a high markup (3-6%). Always choose to pay in the local currency to let your card provider handle the conversion at a better rate.
    Action: Politely decline DCC at point-of-sale terminals or ATMs.
  4. Minimize ATM Withdrawals
    ATM fees can include a fixed charge ($2-5) plus a percentage (1-3%). To reduce costs:
    • Withdraw larger amounts less frequently to spread fixed fees.
    • Use ATMs from your bank’s international partners (e.g., Axis Bank’s partnerships with Citibank in some countries).
    • Research ATMs that don’t charge foreign card fees in your destination.
      Action: Check your bank’s global ATM network and carry some local currency for small expenses.
  5. Exchange Currency Wisely
    Avoid airport or hotel exchange booths, which charge high markups (up to 10%). Exchange currency at your bank in India before departure or use a multi-currency card.
    Action: Compare exchange rates on platforms like XE.com and exchange when rates are favorable.
  6. Understand TCS Implications
    Under India’s LRS, TCS applies to foreign remittances exceeding INR 7 lakh annually (5% for education/medical, 20% for other purposes). This is not a fee but an advance tax, adjustable when filing your ITR. No TCS applies to foreign mutual fund investments or NRI repatriation from NRO to NRE accounts (up to $1 million).
    Action: Request a TCS certificate from your bank and adjust it against your tax liability when filing ITR.
  7. Notify Your Bank of Travel Plans
    Inform your bank about your travel to prevent card blocks due to suspicious international activity. This ensures seamless transactions.
    Action: Contact your bank via their app or customer service before departure.

Country-Wise Strategies for Popular Destinations

1. United States (USD)

  • Credit Card Usage: Use cards like SBI Elite or HDFC Regalia First, which waive foreign transaction fees. Capital One cards (available via international platforms) also have no fees. Avoid DCC when paying at stores or restaurants.
  • ATM Withdrawals: Look for ATMs from banks like Citibank, which partners with Indian banks like Axis for fee-free withdrawals. Withdraw larger sums to minimize fixed fees (e.g., $5 per withdrawal).
  • Multi-Currency Solutions: Load USD into a Wise or Revolut account for payments and withdrawals at mid-market rates.
  • Cash: Exchange INR to USD at your bank in India for better rates than US airport kiosks. Carry enough for small expenses (e.g., tips, taxis).
  • TCS Note: TCS applies to remittances over INR 7 lakh (20% for non-educational purposes). Use a Wise Business Account for business transactions to reduce fees.

2. United Kingdom (GBP)

  • Credit Card Usage: Use no-fee cards like Airtel Axis Bank Credit Card. Decline DCC at UK merchants to avoid 3-6% markups.
  • ATM Withdrawals: HSBC India customers can use HSBC UK ATMs for fee-free withdrawals. Check for Barclays or Lloyds ATMs, which may have lower fees for foreign cards.
  • Multi-Currency Cards: Preload GBP into a Wise or Niyo Global Card to avoid conversion fees.
  • Cash: Exchange INR to GBP at a reputable bank in India. Avoid Travelex booths at Heathrow, which have high markups.
  • TCS Note: Same as the US; ensure TCS compliance for remittances and claim refunds via ITR.

3. European Union (EUR)

  • Credit Card Usage: Cards like IndusInd Bank’s travel credit cards offer low or no foreign transaction fees and perks like lounge access. Always pay in EUR to avoid DCC.
  • ATM Withdrawals: Use ATMs from banks like Deutsche Bank or BNP Paribas, which may have partnerships with Indian banks. Withdraw larger amounts to reduce fixed fees.
  • Multi-Currency Solutions: Wise supports EUR payments with no markup. Preload EUR for seamless transactions in countries like France, Germany, or Italy.
  • Cash: Exchange INR to EUR at your bank or a trusted forex provider like Thomas Cook in India for better rates.
  • TCS Note: TCS applies similarly; use Wise for low-cost remittances.

4. Singapore (SGD)

  • Credit Card Usage: Use Niyo Global Card or SBI Elite for zero or low fees. Singapore merchants often offer DCC—always choose SGD.
  • ATM Withdrawals: DBS and UOB ATMs may charge lower fees for foreign cards. Check for Axis Bank’s partner ATMs. Withdraw larger sums to minimize fees.
  • Multi-Currency Solutions: Load SGD into a Wise account for contactless payments, widely accepted in Singapore’s digital economy.
  • Cash: Exchange INR to SGD at Indian banks or trusted forex providers. Avoid Changi Airport exchange booths.
  • UPI Option: NPCI’s cross-border UPI service allows payments in Singapore via apps like PhonePe or BHIM, avoiding card fees. Ensure your bank supports this.
  • TCS Note: TCS applies for remittances over INR 7 lakh; adjust via ITR.

5. United Arab Emirates (AED)

  • Credit Card Usage: Use no-fee cards like Airtel Axis or HDFC Regalia First. Decline DCC to pay in AED.
  • ATM Withdrawals: Emirates NBD or ADCB ATMs may offer lower fees for foreign cards. Check for partnerships with your Indian bank.
  • Multi-Currency Solutions: Preload AED into a Wise or Revolut account for seamless payments in Dubai or Abu Dhabi.
  • Cash: Exchange INR to AED at banks or Thomas Cook in India. Avoid airport exchanges in Dubai.
  • TCS Note: Same TCS rules apply; ensure compliance for larger transactions.

Additional Tips for Indian Travelers

  • Digital Wallets: Use digital wallets like Google Pay or Apple Pay linked to a no-fee card for contactless payments, especially in countries like Singapore or the UK where NFC payments are common.
  • Prepaid Travel Cards: Cards like Thomas Cook’s prepaid forex card allow you to lock in exchange rates and avoid dynamic fees. Load multiple currencies if traveling to multiple countries.
  • Monitor Exchange Rates: Use apps like XE or Wise to track real-time exchange rates and make larger transactions when rates are favorable.
  • Business Transactions: For freelancers or businesses, use platforms like Wise Business or Payoneer, which offer local account details in multiple currencies, reducing fees for inward remittances.
  • Check Card Terms: Review your card’s fee schedule for foreign transactions, ATM withdrawals, and cash advance fees. Some cards charge higher fees for ATM use abroad.
  • Safety Tips: Carry a mix of payment methods (card, cash, digital wallet) to avoid reliance on one option. Notify your bank of travel plans to prevent card blocks.

Conclusion

Avoiding foreign transaction charges requires strategic planning and the right financial tools. By choosing no-fee credit or debit cards, using multi-currency accounts like Wise, declining DCC, and minimizing ATM withdrawals, Indian travelers can save significantly. Country-specific strategies, such as leveraging UPI in Singapore or using partner ATMs in the US, further optimize costs. Additionally, understanding TCS rules ensures compliance and potential tax adjustments. Plan ahead, compare exchange rates, and select the right payment methods to make your international transactions cost-effective and hassle-free.

Sources: This guide references information from trusted sources like Wise, Forbes, and Indian banks’ official websites, verified as of June 2025. Always check the latest terms with your bank or service provider before traveling.