April 10, 2008


High transactions charges on foreign currency transactions

The thrill of spending money in other currency, especially US Dollar, with credit card was ephemeral as I stumbled upon what can only be termed as giant fine print fraud. My prior purchases in USD were limited to buying subscription of MIT Tech Review and Wired some 4 years back. As the amount involved was small I could only confirm the exchange rate to be almost close to the publicly available rate. (Asides. At my prior company, I had subscribed these magazines with company's US address. Suffix the name with PUNE and it be delivered at my desk after couple of weeks of actual delivery in US. All thanks to ultra-efficient internal courier service from Mountain View to Pune. Ah, one of the countless perks, I really miss.)

But, recently, when I did a transaction in USD of slightly bigger amount, I learnt hard way the meaning of fine print. Apparently, all the foreign currency transactions incur 3.5% additional charge on my ICICI bank credit card. Call to the bank revealed that the charges are from Visa, the card issuer. I checked out credit card from HDFC Bank, HSBC and Citi, but everybody is charging 3.5%. It is difficult to see if those charges are actually by Visa or these banks have formed a cartel on that. To top the agony, this is money attracts additional 12% service tax. So, in all, you end up paying almost 4% extra. I couldn't think of any good reason for this 3.5% ransom. The currency movement is one parameter which could impact the bank's earnings. But the currency movement is tracked in the third decimal place of INR. The exchange rate is generally quoted as 39.884 which means, even 0.1% movement is considered big. So, I have safely labeled this as daylight robbery without any firearms. Sob, sob.

If you know any other credit card whose charges are low (ideally 0%) for foreign currency transactions, please let me know.

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