Forex Cards vs UPI: Which One To Choose While Travelling Abroad?

With international travelling becoming easier and more convenient, travellers are now spoilt with options when it comes to choosing payment methods for transactions abroad.

Forex cards have been a favourite option for years now, allowing users to pre-load foreign currencies and lock-in exchange rates. Meanwhile, India’s own home-grown digital payment interface, the Unified Payment Interface (UPI) has also made its foray abroad and is now a widely-used payment alternative in select countries where it is acceptable as it allows Indian travellers to make payments from their Indian bank accounts. The question that arises now is which one is less expensive and more convenient for the traveller?

What are Forex Cards

Forex cards are prepaid debit cards, and customers load foreign currency into these cards before moving out of the country. This avoids currency fluctuations since the exchange rate is locked at the time of loading. These cards are readily accepted by foreign ATMs, retail stores, and hotels, and therefore, are regarded as a convenient option.

They charge various fees. Issuing charge varies from Rs 500-1,000 and reloading costs Rs 75-100 per transaction, after a certain period. ATM withdrawal when abroad are charged at $2-4 per transaction, and there are also cross-currency mark-ups of about 3.5 per cent if spending is done on a currency other than the currency which was loaded in the card. Besides, inactivity fees can be levied if the card is not used for a very long time. Despite these charges, forex cards provide assurance, especially for long trips where pre-budgeting is essential.

Unified Payments Interface (UPI)

UPI transformed digital payments in India and is now gaining international momentum. Indian tourists can now make direct payments from their bank accounts through UPI in seven countries. 

However, UPI finds little application abroad. Unlike forex cards that can be used everywhere, UPI can only be used in select countries and largely at Indian payment network accepting merchants. Exchange rates are fluctuating, and thus the traveller cannot book a favourable rate ahead of travel. Even transaction charges may be levied by some banks depending on the destination country.

Says Jai Kumar, co-founder of TechFini: “UPI has changed Indian digital payments and is growing abroad through NPCI International. It is already launched in 10-plus countries, including Singapore, France, the UAE, and Nepal, and further partnerships are in the pipeline. But the adoption globally is hindered by inhibitions, i.e., merchant acceptance, as most merchants lack UPI infrastructure. As compared to very widely accepted credit cards, UPI requires local payment processor alliances. Legal impediments also arise due to the variation in financial law.”

He adds: “UPI gives secure real-time payments with no forex complication, and potential transparency with cheaper means than those that exist now. With the established home-grown roots and greater foreign presence, UPI is coming as a fundamental payment means for Indian worldwide tourists.”

Which One is Cheaper?

Forex cards provide a fixed exchange rate, hence they are ideal for individuals who do not want to handle exchange rate fluctuations. UPI transactions, however, are based on live exchange rates, which can be advantageous to a traveller if the currency value declines but can also raise the cost if rates rise.

If a tourist pays $1,000 outside the country on a forex card, the entire amount, including the exchange rate and charges, could be around Rs 85,000 (considering 1 dollar as Rs 85, along with extra charges). In UPI, the final amount is subject to the live exchange rate and potential bank charges, which can result in either a higher or lower amount.

The Indian government itself is proactively propelling UPI’s global expansion, hoping it will be an even stronger substitute for forex cards. It plans to improve the rate of acceptance abroad, especially on the most sought-after tourist travel routes. Nonetheless, until it becomes more common, forex cards are the safer choice and the better option for Indian tourists passing through several countries.

Says Pavan Kavad, managing director, Prithvi Exchange (India) Limited: “Forex cards often come with nil or minimal mark-up fees on transactions unlike international debit or credit cards which typically charge a 2-3.5 per cent foreign transaction fee. In comparison to credit cards, they also provide cheaper cash withdrawal fees at ATMs overseas. However while selecting a forex card things like reloading costs and cross-currency conversion fees should be taken into account.”

“For frequent travellers, forex cards remain a smart choice, especially when loaded at favourable exchange rates. However, individuals making sporadic international payments may need to weigh the cost of issuance and maintenance fees before opting for one over direct transactions,” he adds.

For now, the decision depends upon the choice of the destination of travel and one's own expenses. Forex cards provide financial safety, while UPI is a convenient option which is satisfactory in some places. Travellers need to think on both sides depending on their need and the payment infrastructure available at their destination country.