If foreign trips have you worried about miscellaneous exchange costs, there is a way out of the labyrinth. In fact, you can easily save on a lot of expenditure simply by planning and keeping informed. As the appetite for international travel among Indians has reached new heights, these tips have become more relevant than ever.
In the first nine months of the fiscal year 2022-23, it is estimated that Indians spent about USD 10 billion on overseas trips. The Reserve Bank of India has revealed data that further emphasises this trend, showing that Indians spent a noteworthy USD 1,137 million on travel in December 2022 alone. Travel expenses accounted for 51 per cent of international spending in FY23, a substantial increase from 35 per cent in FY22. With the Tax Collected at Source (TCS) rate for international spending soaring to 20 per cent soon in October, it is more important than ever to make the most of your travel funds to mitigate increases in vacation costs.
Here are some practical tips to make the most out of your money while travelling abroad.
Choose the Right Transaction Provider
Choosing your provider wisely when making international payments, as costs, convenience, and speed can vary. Traditional providers like banks often levy foreign transaction fees, using inflated exchange rates rather than the mid-market exchange rate, the rate you see on Google/Reuters.
For international transactions, instead of sticking to your domestic provider, you&rsquore often better off using a provider specialising in cross-border payments as they offer more affordable, faster, and more convenient services and better exchange rates.
Compare Exchange Rates and Conversion Fees
Before exchanging your money, compare exchange rates and conversion fees. It&rsquos important to note that the exchange rate used for foreign currency conversion is often not the mid-market rate found on Google or Reuters, which is generally more favourable. Instead, a markup or margin is often added to the rate, meaning people pay more than expected for international payments. This results in a hidden fee often not transparently disclosed when making the transaction. The best way to avoid this is to select providers that display all costs upfront and use the mid-market rate to convert your money. You can check provider rates against the live mid-market exchange rate on Google or Reuters to ensure no markup is added. You can also use tools to monitor exchange rates and set rate alerts to get the most out of your currency exchange.
Sidestep Multiple Withdrawals and Airport Exchanges
Frequent ATM withdrawals can quickly rack up hefty fees, draining your funds. Minimise these fees by planning and estimating your cash needs. It might be more cost-effective to make larger ATM withdrawals, such as withdrawing &euro200 once with a &euro3 fee, rather than withdrawing &euro50 four times with a &euro3 fee per withdrawal.
Additionally, avoid exchanging money at airports as they often offer less favourable rates due to high demand and limited competition. Instead, plan to exchange your money at reputable money exchangers in the city where you&rsquore more likely to get better rates.
Be Mindful of Dynamic Currency Conversion (DCC)
DCC is a service that allows cardholders to pay in their home currency while travelling abroad. It may seem convenient, but accepting DCC can come with exorbitant fees, as the exchange rate will be much worse than that used by your bank or card provider. The golden rule is to decline DCC and always pay in the local currency of your travel destination.
Plan Ahead, Plan Wise
Plan well in advance and account for all the macro and micro spends that you can think of to meticulously plan your budget. Often, it&rsquos advised to make arrangements even for finer details like internet data connectivity before you arrive, where you can consider purchasing an e-SIM or an international SIM to save on roaming charges.
The author is the Country Manager for Wise in India.
Cover Photo Credits Shutterstock
