RBI to issue RuPay forex cards soon. Here is how it can benefit you while travelling abroad

The Reserve Bank of India (RBI) will soon allow banks to issue RuPay Prepaid Forex cards for use at ATMs, PoS machines and online merchants abroad. The RBI governor said the launch is aligned with the vision to expand the reach and acceptance of RuPay cards globally.

“In order to expand payment options for Indians travelling abroad, it has been decided to allow issuance of RuPay Prepaid Forex cards by banks in India for use at ATMs, PoS machines and online merchants overseas. Further, RuPay Debit, Credit, and Prepaid Cards will be enabled for issuance in foreign jurisdictions, which can be used internationally, including in India. These measures will expand the reach and acceptance of RuPay cards globally. Necessary instructions will be issued separately,” according to the Statement on Developmental and Regulatory Policies, issued on Thursday. 

How forex cards work

Generally, when you opt for a prepaid forex card, you need to load these cards with one or multiple foreign currencies and use them interchangeably in different countries.

Charges: A prepaid forex card is typically loaded with funds upfront. You can load money online. Some firms may charge you a nominal fee, while many offer it free of cost. However, the exchange rate used to buy forex for the card is typically higher than the IBR as it covers the operating costs. So, you must check the margin the issuer charges for interbank exchange rates (IBR).

Benefits: Preloading a forex card locks in exchange rates and is one of the safest options to use abroad. Hence, they protect you from rate volatility and fluctuations. These cards also do not incur additional foreign exchange mark-up fees if you use the card within the same currency jurisdiction for which you have loaded the card.

Adhil Shetty, CEO of BankBazaar.com, said, “RuPay cards were designed to cater to the specific needs and preferences of Indian consumers. With the introduction of RuPay Prepaid Forex cards, payment options for Indians travelling abroad have further expanded.”

On the other hand, you must also keep in mind that you will have to pay 20 per cent TCS (tax collected at source) if you spend above Rs 7 lakh at 20 per cent from July 1. Moreover, these cards may charge you for ATM withdrawals and balance enquiries. So, you need to be careful while using a prepaid card abroad. Besides, these cards also have a daily withdrawal limit, so you need to align your spending accordingly.

Forex vs credit/debit card: Most credit or debit cards offered in India have international acceptance. These cards are generally issued via global networks such as Visa and Mastercard. Currently, you may also use all RuPay Global cards for International transactions. However, you can use such cards at Diners Club, Discover, JCB ATM, UnionPay and Pulse. While credit cards are convenient and widely accepted, they levy a forex mark-up and TCS at a rate of 20 per cent (applicable from July 1) on spends of more than Rs 7 lakh in foreign currency transactions, according to recent guidelines issued by the government. For example, there is the forex mark-up fee (charged on every foreign currency transaction) of 0-4 per cent that differs for each credit card provider. Although that may not sound like much, it can add up to quite a bit. Consider this: if you make a purchase of Rs 10,000 using your international credit card, it’s possible that you’ll have to pay an extra Rs 400 as a forex fee.

Hence, a forex card saves you from the high mark-up fees levied on international debit and credit cards.