Can You Use Credit Cards for International Transactions?

Carrying funds for international travel has become easier with credit cards because they are more convenient and secure. If you are someone who has to go on frequent international tours, you can consider availing an international credit card, as well. 

We will discuss some of the important points regarding whether credit cards can be used for international transactions in this blog. Read on to know. 

Which Credit Cards Be Used for International Transactions? 

According to a guideline of the Reserve Bank of India (RBI), credit cards are not internationally enabled by default. So, while planning an international trip, check whether your credit card is internationally enabled or not. If it is not, there is no need to worry because the procedure is quite simple. 

You can enable your credit card for international transactions, either through internet banking or via the card issuer’s app. An important point you need to know is that international transaction charges will be applicable if you use your credit card for international transactions. This includes a foreign currency markup fee, currency conversion charges and GST. 

Some special travel and premium credit cards carry lower overhead costs while others offer better rewards for international transactions. These are often called international credit cards and they are ideal for cardholders who often travel to foreign countries.

Features and Benefits of International Credit Cards  

If you are an individual who has to take frequent international trips, then you can consider availing an international credit card from your preferred bank. Listed below are its features and benefits: 

• International credit cards offer various reward points which can lower your spending limit. Even though you have to still pay international transaction charges, availing the maximum reward points will make up for the costs. 
• These credit cards also make it easier to withdraw cash at a foreign ATM or bank. 
• The benefits of international credit cards are not limited to international payments. You can use the credit card to avail attractive discounts at luxurious hotels and restaurants during your international trip. 
• You can avail reward points or discounts on your air tickets and avail complimentary airport lounge access. 

Certain banks have their specifications regarding income and credit score for approving these credit cards. Having a source of regular income indicates good repayment capacity and a high credit score acts as a reassurance to the bank. So, try to maintain a credit score of 750 or above.

Another important point is that with a rise in your income bracket, you will also benefit from increased credit card benefits. 

Charges Applicable on International Transactions 

If you use your credit card to make the following payments, international transaction charges will be applicable: 

• Online transactions made in foreign currencies
• Cash withdrawals made abroad using the credit card
• Using the credit card for retail transactions outside the Indian territory
• Transactions made with PoS machines linked to international accounts 
• All other transactions made in foreign currencies 

Please note that an extra 18% GST (regular) is applicable on every international transaction.

How Much Are International Transaction Charges? 

An international transaction charge is an amount the credit card issuer levies upon the credit card holder while the latter makes an international transaction. Any transaction made in a foreign currency or one that is processed through a foreign financial institution is an international transaction. 

Please note that international transaction charges may vary from one credit card issuer to another. While it generally stands at 1% for MasterCard or Visa credit cards, banks might levy extra charges upon customers. Usually, a foreign currency markup fee of around 3.5% is levied on international transactions. With GST, the charge amounts to around 4% of the transaction amount. But it can be more as well. 

Credit card issuers need to provide the details of international transaction charges on credit cards during the agreement. So, it is advisable to read every document accompanying it thoroughly. 

Prohibited International Transactions 

Under Indian law, you are not allowed to use credit cards for certain transactions. According to Foreign Exchange Management Act, 1999 (FEMA) and the rules issued thereunder, you are not allowed to use your international credit card to make certain payments. So, if you are an international credit card holder, you need to be aware of these prohibited international transactions: 

• You cannot use your international credit or debit card to purchase banned or proscribed magazines and lottery tickets.
• Participating in sweepstakes and paying for call-back services with an international credit card is strictly prohibited. The main reason behind this is that one cannot draw foreign exchange for such transactions. 
• Using your international credit or debit cards for gambling, betting and forex trading is also not allowed. 

Important Tips for Using Credit Cards Abroad 

If you are thinking about carrying a credit card for your international trip abroad, the following tips would be helpful: 

• Do not forget to enable international transactions before entering a foreign country. If your credit card account displays international purchases in a foreign locale, the bank may deem it to be suspicious activity. So, it is a good idea to inform the credit card issuer of your travel plans. 
• Carry a widely accepted credit card such as MasterCard or Visa card, or consider carrying multiple credit cards. It will enable you to avoid difficult situations such as the rejection of payments. 
• Carrying cash as a backup is also a good idea as it will help you pay in case of credit card payment rejections. Mobile wallets are a good option as well as it facilitates quick and easy payments. 

Final Word

Credit cards are a convenient and secure mode of payment which you can use for international and domestic transactions. All you have to do before you board the flight is to check whether the facility for international transactions is enabled or not. Although a widely-accepted credit card will let you enjoy your international vacation, it is a good idea to carry multiple cards, cash or a mobile wallet as a backup option. 

Frequently Asked Questions