IDFC FIRST Bank on Friday announced that it will remove forex markup charges across its entire credit-card portfolio, allowing existing and new cardholders to make international transactions without paying a separate forex markup.
The change takes effect automatically for all credit-card customers, according to the bank’s September 18 announcement. Customers do not have to apply for a new card, upgrade an existing card or meet a minimum spending threshold to get the benefit.
The benefit applies to all international transactions, including online purchases, subscriptions, software payments and certain education and business expenses.
How much can you save?
Forex markup is an additional charge that card issuers levy when a transaction is made in a foreign currency. IDFC FIRST Bank’s published card charges have historically listed forex markups ranging from 1% to 3.5% depending on the card, with 3.5% applicable to several cards. GST is also applicable on fees and charges.
The bank’s announcement uses a 3.5% markup plus GST as an illustration.
For example, if you spend the equivalent of ₹1 lakh overseas on a card carrying a 3.5% forex markup, the markup would be ₹3,500. At 18% GST, the tax on the markup would be ₹630, taking the additional cost to ₹4,130.
With zero forex markup, this particular charge would not be levied, according to IDFC FIRST Bank’s announcement.
That means a customer spending ₹1 lakh on eligible international transactions could avoid up to ₹4,130 in forex-markup-related charges in this example.
The saving will, however, depend on the card and the applicable charges that would otherwise have been levied.
You don’t need to get a new card
One of the key aspects of the announcement is that customers do not have to switch to a premium credit card to get zero forex markup.
The bank said the benefit applies automatically to all existing and new credit-card customers, with no spending threshold or upgrade requirement.
For example, if you already hold an IDFC FIRST Bank credit card and are travelling to Singapore, you can use the existing card for eligible foreign-currency transactions rather than applying for another card specifically for lower forex charges.
What about reward points and cashback?
Customers will continue to receive Reward Points or cashback, wherever applicable, according to the features of their respective cards, the bank said.
This means zero forex markup does not replace the existing rewards structure.
For instance, if your particular card already offers reward points on eligible international transactions, those rewards will continue to apply according to the card’s terms, while the forex markup is removed.
Do you still need a forex card?
For customers who use forex cards primarily to avoid credit-card forex markups, the announcement could reduce the need for a separate card.
However, a forex card and a credit card are not identical products. Customers should compare factors such as exchange rates, ATM withdrawal charges, loading or conversion fees, acceptance, rewards and other applicable charges before deciding which payment method to use.
The zero-markup announcement specifically concerns the forex markup charged by IDFC FIRST Bank on its credit cards. Other charges associated with a transaction or service may still apply.
What should cardholders check?
Zero forex markup does not mean that every international transaction is completely free.
Before using the card overseas, customers should check:
- whether the transaction is actually processed as a foreign-currency transaction;
- the exchange rate being used for conversion;
- whether the merchant offers dynamic currency conversion;
- whether any ATM, cash withdrawal or other transaction-specific charges apply; and
- the reward or cashback terms applicable to their particular card.
IDFC FIRST Bank’s existing terms specify that foreign-currency transactions are converted into Indian rupees and that the conversion rate can depend on the card network’s applicable rate and the bank’s currency-conversion provisions. “At IDFC FIRST Bank, creating customer-friendly products is central to our philosophy. By eliminating forex markup charges across all our credit cards while continuing to offer Reward Points or Cashback as applicable, we are delivering a simple yet powerful benefit that makes international spending more rewarding for our customers. We believe this proposition will give customers the confidence to use their IDFC FIRST Bank Credit Cards for all their global spending,” said Shirish Bhandari, Head – Retail Liabilities, Credit Cards and Payments, IDFC FIRST Bank.
