When I got my admission letter telling me I was selected for a summer exchange program at Cornell University, I was dancing with happiness. For an entire week, I couldn’t stop reading about Cornell and everything I would do there over the summer. That was when my dad pulled me aside and asked me how will I receive the funds when I am there?
I had been selected under a scholarship program at my university. So the accommodation and travel were taken care of. Yet, I knew I would require some money when I am there. My dad said he would make wire transfers twice a month and I would get the money.
The problem with wire transfers is that they take time, paperwork and are usually expensive. That was when my dad got to know about prepaid forex cards. Since I had some time on hand and I was curious about it, I searched more about forex cards.
Forex cards help you put a fixed amount of money in the card at a fixed exchange rate, as prevalent on the day of making the deposit with the bank. I understood the basic mechanism. Then, I started researching about it and was flooded with information.
A ton of this information can seem intimidating at first, especially if you don’t understand exchange rates. Here is everything you need to know for comparing exchange rates between banks and their offered forex cards:
I thought spot rates and future rates were just financial jargon that I would never have to deal with. But then, the bank’s website said that I would be getting the money as per the spot rate. I was a bit confused and thought I should read more.
In the simplest possible terms, taking away all the intricacies, spot rates are the current exchange rates available in the currency market and future rates are derivative contracts that reflect future fluctuations in the currency markets. Unless you are a financial wizard of sorts, you shouldn’t worry about future rates.
Once I was clear that banks offer spot exchange rates, I started looking at the various exchange rates offered by banks. Here’s the thing – there is a minute difference between the exchange rates offered by banks. This is because essentially all of them are a part of the same currency market – which is Indian Rupee versus the foreign currency you want. Hence, you don’t really have to worry about the exchange rates.
As I started reading more and more about forex cards, I got to know that I should focus more on the features on the forex card. Every bank has laid out different packages of forex cards.
For instance – some banks offer a multi-currency forex card. I got to know about the importance of this card when I went on a short trip to Hamburg, Germany from Cornell for a weekend. I was able to easily get Euros in my card, once my dad had deposited the cash with the bank in India.
Similar to this feature, you should ask the bank what is the procedure for adding additional money to the forex card. The bank my father had chosen for the forex card was very flexible and said that we were allowed to deposit the cash at any given point of time, even online. You should check with your bank about this feature before you buy the forex card.
Beyond this, the bank also offered a loyalty program that incentivized my shopping with the forex card. I got a ton of gadgets at a nice discount thanks to the loyalty program.
I also noticed that the transaction fees were not all that different between banks. Most banks were charging similar percentage fees on each transaction. The upper limit, since I was a student, in my forex card was capped at $250,000. For businessmen, there’s no upper limit. At the same time, I was told that I was not allowed to put more than ₹100,000 in one transaction in the forex card.
Exchange rates have become efficiently standard across banks. What you should look at are the features that the forex card offers and the transactional charges you will be paying for the same. Happy journey!