When planning a trip, travellers typically focus on the exchange rate displayed on screens, comparing rates and monitoring daily fluctuations. However, the rate displayed is often not the actual rate applied when using a card, due to an additional charge known as the forex markup that is frequently overlooked.
Understanding the Forex Markup
The mid-market rate, which is the rate at which banks trade currencies, serves as a reference point. Most card issuers add a percentage to this rate, resulting in a markup that is often not explicitly stated as a separate fee on statements. As a result, many cardholders are unaware of this additional cost.
A single transaction abroad can involve multiple layers of costs, which are outlined in the table below.
- Reference rate for the currency pair
- Percentage added to the reference rate
- Cross-currency conversion charge
- Fee for converting payments between currencies
- Fee for cash withdrawals while abroad
By examining a card’s terms in relation to these layers, cardholders can gain a better understanding of the actual costs involved, which is more informative than simply comparing exchange rates.
The Impact of Markup on Travel Expenses
Overseas expenditure (in INR equivalent)
A family that spends ₹2,50,000 on accommodation, dining, and local transportation would incur an additional ₹8,750 solely due to the markup. This amount could cover a significant portion of the cost of a few nights’ stay, highlighting the importance of considering this charge in relation to the overall budget.
A Solution with a Single Currency
The Thomas Cook One Currency Card is a prepaid travel card denominated in US dollars. When a payment is made in a different currency, the required amount is converted from the dollar balance, with zero forex markup and zero cross-currency conversion charges on eligible transactions.
This structure offers a practical advantage for travellers visiting multiple countries, as they do not need to maintain separate currency wallets for each destination. Instead, a single balance can be used throughout the journey.
Reviewing the Card’s Terms
- Is the markup explicitly stated as zero, and does this apply to all transactions or only eligible ones?
- Are cross-currency conversion charges also waived, or only the markup?
- What fees are associated with ATM withdrawals, reloads, and card issuance?
- What is the validity period, and how can the card be reloaded?
- Is the loaded currency suitable for the destinations on the itinerary?
