August 15, 2025 · 10 mins read
Santosh Kumar
When planning an international trip or making a purchase from a foreign e-commerce website, many Indian users of credit cards will notice an extra cost - Foreign Transaction Fees. These fees appear small and may be of little concern until you realise how much these costs can inflate the cost of your international purchases if you're not careful.
Travellers, online shoppers, and business owners who deal with foreign vendors all need to understand Foreign Transaction Fees on Indian Credit Cards to make more informed financial decisions and to avoid paying unnecessary costs.
This blog will outline how Foreign Transaction Fees work, how they are calculated, the cost of them on your spending, and how you may be able to avoid or reduce them.
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Foreign Transaction Fees are fees charged by Credit Card providers to cover additional costs when people make purchases in a foreign currency or through a foreign bank. These fees are generally passed on to the cardholder in respect of Foreign currency conversion and processing of International transactions. In India, Foreign Transaction Fees on Indian Credit Cards can be anything from 1% to 3.5%, depending on the type of card and card issuer, and it can be within this range.
For example: if you buy a product for US$100 [approximately ₹8300 as per exchange rate on time of writing (₹83 per 1 USD)], with a 3% Foreign Transaction Fee charge (approx. ₹249), and GST on Foreign Transaction Fee [Goods and Services Tax] (18% on fee) (making it approximately ₹293.94), these fees apply to all overseas transactions (based abroad), such as dining, shopping, or spending on a hotel, as well as, to online purchases from International merchants, or items bought on websites, which you are accessing from India.
Foreign Transaction Fees usually include two:
Currency Conversion Fee: Charged by payment networks (e.g., Visa, Mastercard, or American Express)for conversion of the amount for a transaction from the foreign currency to Indian Rupees (INR). They generally range from 1% to 3% of the amount of the transaction.
Issuer Fee: An extra charge imposed by the card issuing banks (can be HDFC, SBI, ICICI or Axis Bank) for the processing of international transactions. These fees usually range from 1% to 2% depending upon the issuer.
Take an example of purchase of say, €500 (which is approximately ₹45,000 at the rate of 1 EUR=90 INR) with a 2.5 % foreign transaction fee, then it would have triggered a foreign transaction fee of ₹1,125, consisting of both currency conversion and issuer fee.
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Knowing how Foreign Transaction Fees on Indian Credit cards are calculated can enable cardholders to predict how much these costs may be on each transaction. In general, the following process occurs when a transaction is settled in a foreign currency:
Conversion to INR: When the merchant's bank processes the transaction in the local currency, the payment network (Visa, Mastercard, etc) converts that amount to INR on the settlement date. The exchange rate used may be different from the exchange rate used on the date of the transaction. The process is slightly more complicated if the transaction is not made in USD. In this case, the amount will first be converted into USD and then to INR, which usually has its conversion charge involved.
Application of Fees: After the amount is converted to INR, the payment network adds a currency conversion fee (e.g., 1%), and the card issuer adds its fee (e.g., 1% to 2%). The Foreign Transaction Fee is generally a combined percentage (1% to 3.5%) of the converted amount.
Application of GST: An additional 18% Goods and Services Tax (GST) is added to the total charged Foreign Transaction Fee in India.
Banks and card issuers maintain Foreign Transaction Fees hold merit as a means of recovering the incurred cost of processing an international transaction that includes:
Currency Conversion Costs: Foreign currency exchange to INR will be their operational costs to the networks as part of the Exchange Costs in addition to their other fees based upon inherent exchange rate fluctuations.
Intermediary Fees: paid parties in the transactions; for many transactions, including the merchant's accounts, payment networks account, and also the subsequent issuing bank accounts for valuations and risk, etc., may involve payment to more than one party for a cut.
Risk Management: Issuers identify variations of risk related to international transactions, such as fraud or chargebacks, and resort to the imposition of a fee to cover that risk.
Administrative Costs: direct costs for processing cross-border payments require some financing in most cases, such as all compliance with local and international regulations and minor international administration expenses.
The occurrence of Foreign Transaction Fees may appear small, but can easily culminate for the frequent traveller and businesses alike that engage in transactions consistently. For example, spending ₹1,00,000 in another country with a Foreign Transaction Fee of 3.5% can be charged as an additional ₹3,500 plus an additional ₹630 in GST, or a total additional charge of ₹4,130.
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Foreign Transaction Fees on Indian Credit Cards can pose significant costs to various types of cardholders:
For consumers who travel internationally a few times a year, Foreign Transaction Fees can add up fast, especially for large ticket purchases like hotel stays or luxury shopping. For example, a card member who spends ₹5,00,000 during an international trip with a Foreign Transaction Fee of 3% will pay an additional ₹15,000 in fees, plus ₹2,700 (18% GST), which is ₹17,700 in additional cost.
Even if consumers in India shop online, if the international e-commerce sites (e.g. Amazon US, AliExpress, etc.) merchant is processing the payments in a foreign currency, the purchase will incur Foreign Transaction Fees. For example, a ₹10,000 purchase would cost ₹10,000 plus ₹300 (3% FTF) plus ₹54 (GST), for a total of ₹10,354.
For businesses that involve import/export or working with foreign vendors, the Foreign Transaction Fees will cut into the profit margins of the transactions. For instance, a company that makes ₹10,00,000 in international payments will pay the cost of the transaction - ₹10,00,000, plus ₹30,000 in fees (3%), plus ₹5,400 (GST), totalling ₹35,400.
Foreign Transaction Fees do apply to the cash advance made from a credit card when withdrawing money from an ATM while travelling. The cash advance charges are typically between 2.5% and 3%, and the immediate interest which is charged on the remaining cash will be at the typical credit card interest rate, e.g. 30% - 45% per annum; therefore, the fees and cash withdrawals will be expensive.
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Luckily, you have different options to avoid or limit Foreign Transaction Fees using Indian Credit Cards:
Many Indian banks offer credit cards with either low or no Foreign Transaction Fees, especially premium and travel cards. Here are some examples:
Axis Bank Burgundy Private Credit Card: If you travel frequently and want a no-forex markup credit card, this is a good option.
The card also has unlimited lounge access and other benefits.
IDFC First Wow Credit Card: This is an excellent card; it has zero forex markup and no joining fees for students or those with no income proof.
A fixed deposit of ₹20,000 is required.
RBL Bank World Safari Credit Card: Zero forex markup and many travel benefits, including a ₹10,000 gift voucher redemption for ₹7.5 lakh spend.
HDFC Regalia Gold Credit Card: This has a forex markup charge of 2% which is lower than the acceptable threshold of 3.5%. If you earn reward points on international spend and still plan to use this card, this may be a better option for you.
IndusInd Bank Legend Credit Card: 1.8% is for forex markup and is easily the cheapest option to make international payments.
Make sure you compare underwriting fees, reward points, and eligibility terms before you apply - this will help you find the credit card that is right for your spending habits.
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In addition to Foreign Transaction Fees on Indian Credit Cards, cardholders should be cognizant of additional charges:
Cash Advance Fees: Withdrawing cash from international ATMs incurs cash advance fees, which can incur between 2.5% to 3%. When the cash is withdrawn, it also incurs interest (between 30% to 45% per annum) on that amount immediately.
ATM Withdrawal Fees: Your debit card may incur international ATM withdrawal fees (up to 4%) and a flat withdrawal fee (for example, HSBC currently charges ₹120 for withdrawals from non-HSBC ATMs).
On-the-Spot Finance Charges: Unpaid credit card balances or cash advances are charged interest at high rates. This will add to the costs of international purchases.
Tax Collection at Source (TCS): As of July 2023, a 20% TCS has been put in place for international expenditure over ₹7 lakh (any credit, debit or forex card), but if expenditure is below that amount, TCS is exonerated. You can deduct TCS as a payment against the income tax you have to pay.
It is critical when travelling overseas to pick a credit card that has low or no Foreign Transaction Fees. Things to consider when selecting a credit card:
The Forex Markup Fees: Choose a credit card with 0% - 2% markup (typically, banks like Axis Bank, Burgundy Private, IDFC First Wow, etc.)
The benefits and rewards: Some travel credit cards like the American Express Platinum Travel Credit Card offer accelerated rewards on foreign spend (e.g. 3 times points), which can counteract your travel card fees.
Lounge Access: If you plan on using international lounges, premium credit cards like ICICI Emerald or HDFC Diners Club Black provide unlimited international lounges, which ultimately adds value to your travel.
Annual fees: Always compare annual fees with benefits. For example, the IDFC First Wow has no joining fee, while the Axis Bank Burgundy Private is an invite-only card with extra perks.
Global Acceptance: If you'll be using the credit card globally, ensure it is accepted worldwide (Visa and Mastercard are more universally accepted compared with American Express)
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A foreign transaction fee is a charge imposed by the card issuer for purchases that are made in foreign currency or simply through a foreign bank-acquirer, ranging anywhere from 1 to 3.5% of the transaction amount plus 18% GST.
Use a card that has no forex markups or low markups (e.g., Axis Bank Burgundy Private), always pay in the local currency, or carry a prepaid forex card with you.
No. Some cards (e.g., the IDFC First Wow or RBL Bank World Safari) charge no forex markup, while others like HDFC Regalia Gold charge a lesser fee (like 2%). Always do your due diligence with your bank first.
Yes, works with purchases from international e-commerce sites or services billed in a foreign currency (for instance, Netflix US) if it is processed through a foreign bank.
TCS at 20% shall be collected on international transactions beyond Rs 7 lakh through credit or debit cards or forex cards with effect from July 2023. This tax would be adjustable against your income tax liability.
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