Reward Maths and Choosing a Card
Forex markup and dynamic currency conversion on Indian credit cards: the real cost abroad
How foreign currency markup with 18% GST and dynamic currency conversion work on Indian credit cards, rupee payments to foreign merchants, LRS and TCS points, and worked rupee examples.
When you use an Indian credit card abroad, or pay an overseas website, the card network converts the amount to rupees and your issuer usually adds a foreign currency markup — often quoted between about 1% and 3.5% (illustrative) — plus 18% GST on that markup, so a 3.5% markup costs 4.13%. If a shop terminal or website offers to charge you in rupees instead of the local currency, that is dynamic currency conversion (DCC): the merchant's provider sets the exchange rate, which is often worse, and many issuers still apply the markup. The usual rule is to pay in the local currency and use a card with a low markup. Rates here are illustrative.
This guide belongs to the guide to choosing a cashback or reward card. It is general information, not financial advice.
How a foreign transaction is priced
- You pay, say, USD 100 at a shop abroad.
- The card network converts USD 100 to rupees at its rate on the processing date.
- Your issuer adds its markup percentage on the rupee amount.
- GST at 18% is charged on the markup.
- The statement shows the rupee amount, the markup and the GST, sometimes on separate lines.
| Item (illustrative) | Amount |
|---|---|
| Network converted amount | ₹8,500 |
| Markup at 3.5% | ₹297.50 |
| GST at 18% on markup | ₹53.55 |
| Total billed | ₹8,851.05 |
The network rate is set by the network, not your bank. Rates change daily, so the amount may differ slightly between the authorisation and the final posting.
Dynamic currency conversion (DCC)
At some shops, hotels, ATMs and websites you will be asked: "Pay in INR or in local currency?" Choosing INR means:
- The merchant's provider chooses the exchange rate and often adds its own margin.
- Your issuer may still charge the foreign transaction markup, because the merchant is abroad.
- You may pay twice for conversion.
Worked example (illustrative): a USD 100 bill. Network rate gives ₹8,500. A DCC offer quotes ₹8,840 (4% margin). With a 3.5% card markup + GST on top: ₹8,840 + ₹309.40 + ₹55.69 = ₹9,205.09, against ₹8,851.05 if you had paid in USD — about ₹354 more.
Always choose the local currency. If a terminal processes DCC without asking you, keep the receipt and ask your issuer about a dispute.
Rupee payments to foreign merchants
Paying an overseas website in rupees can still attract a "cross-border" markup, because the merchant is located outside India. Some issuers charge a lower cross-border fee on such transactions; check the MITC. Subscriptions to foreign apps and software are a common source of such charges.
Choosing a card for travel
| Factor | Why it matters |
|---|---|
| Markup percentage | The biggest single cost; 1% vs 3.5% is ₹2,950 on ₹1 lakh including GST |
| Rewards on foreign spends | Some cards earn more abroad; subtract the markup to get the net |
| Network acceptance abroad | Visa and Mastercard are widely accepted; RuPay depends on country partnerships |
| Lounge and travel insurance | Value them only if the conditions fit |
| International usage setting | Must be enabled on Indian cards for overseas use; switch it off when you return |
Net-off example (illustrative): ₹1,00,000 spent abroad. Card P: 3.5% markup, 2% rewards abroad → cost ₹4,130 − ₹2,000 = ₹2,130. Card Q: 1% markup, 0.5% rewards → ₹1,180 − ₹500 = ₹680. Card Q is cheaper by ₹1,450. Run your figures in the forex markup calculator.
LRS and TCS: what applies to cards
Overseas spending on an international credit card has, by the government's last official position (Ministry of Finance, 28 June 2023, after the May 2023 change to the FEMA current account rules was put on hold), been kept outside the Liberalised Remittance Scheme (LRS) count, so tax collected at source (TCS) on LRS remittances has not been applied to it. Debit cards, forex cards and remittances are inside LRS and can attract TCS above the annual threshold. Rules here have changed several times since 2023, and the Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 (TCS provisions were renumbered), so check the current position with your bank, the Income Tax Department or the RBI before large overseas payments.
Cash abroad
Withdrawing cash on a credit card abroad costs the cash advance fee, the markup, the ATM operator's fee and interest from day one, all with GST where applicable. Use it only in an emergency; see cash withdrawals on a credit card.
Mistakes to avoid
- Accepting "pay in INR" at a foreign terminal.
- Forgetting the markup on rupee payments to foreign websites.
- Not enabling international usage before travel, or leaving it enabled afterwards.
- Assuming the card's normal reward rate applies abroad; some cards exclude or cap foreign spends.
Frequently asked questions
Is GST charged on the whole foreign transaction?
No, only on the markup and other fees charged by the issuer.
Why is the final amount different from the first SMS?
The rupee amount can be recalculated when the merchant settles, at a later network rate.
Do refunds of foreign purchases return the markup?
The refund is converted at the rate on the refund date; the markup and GST may or may not be reversed. Check with your issuer.
Are foreign currency cards cheaper?
They can be for planned travel, but they fall within LRS. Compare their loading margins with your card's markup.
Sources
- Reserve Bank of India — Liberalised Remittance Scheme and card directions
- Income Tax Department — TCS rules
- CBIC GST portal — GST on card charges
- National Payments Corporation of India — RuPay international acceptance
