Forex card vs credit card vs UPI: Which works best for NRIs

Do you often travel between India and your current country of residence, and are naturally concerned about which one to use for daily expenses in India—an international credit card, a forex card, or rely solely on UPI? The question may not have a single definite answer, and optimal solutions can vary depending on personal use cases. 

This article discusses and analyses multiple options to help you make decisions tailored to your specific needs. 

Forex card: How it works & when to use it

Forex cards are pre-paid cards issued by banks and financial institutions. These cards are internationally accepted, and users can pre-load such cards with domestic currency. Once loaded, banks convert the money to the desired foreign currency at a lock-in exchange rate. Users can opt for multi-currency or single-currency forex cards. While travelling abroad, these cards can be used for regular purchases and also for withdrawing cash in foreign currency. 

Pros of forex cards

• Locked-in exchange rate - Card providers lock in the exchange rate for a pre-loaded sum of money and for a specific period. During that period, users are immune to any fluctuation in exchange rates. 

• Lower transaction costs - As an alternative to carrying hard cash and converting it to foreign currencies, forex cards are a lot cheaper in terms of transaction costs.  

• Zero hassles of conversion - it allows withdrawal of cash at ATMs and branches of partner banks in respective foreign countries. 

• Security and safety - You do not need to carry money in hard cash. It removes the risk of theft or other risks. Even if someone loses a forex card, it can be easily replaced after the submission of valid documents. Forex cards also come with benefits like travel insurance and protection against fraud.  

• Accepted across countries - Forex cards are accepted by major merchants across countries. 

Cons of forex cards 

• Additional fees - Other than transaction fees while using a forex card, users are also required to pay re-loading fees, issuance fees, ATM withdrawal fees and refund fees while withdrawing unused balance.   

• Cross-currency transaction fees - if you spend in a currency you didn’t preload, you pay extra conversion charges. 

• Practical usage limitations - For an NRI travelling to India, a forex card is not usable for domestic transactions. 

• Reload delays : Topping up can take 12- 24 hours, its not an instant process.

• Zero benefits of credit history - These cards are pre paid unlike credit cards

Best uses of forex cards - These cards are best suited for tourists and short stays in foreign countries.

International Credit Card: How it works & when to use it

International credit cards are regular domestic credit cards with pre-approved usage limits for international transactions. 

Most of these cards are affiliated with either VISA, MasterCard, American Express or Diners Club payment processing networks. 

Pros of international credit cards 

• Global acceptance - International credit cards accepted almost anywhere; much more widely than forex cards. 

• Emergency safety net - Credit cards with pre-approved international usage limits can be very useful during emergencies abroad. You are not limited by funds in your wallet or in your bank account. 

• Zero/low mark-up cards option - e.g. RBL World Safari, Scapia, some premium travel cards.

• Strong security and fraud protection - Credit cards supported by major payment processing networks are highly secure against fraudulent transactions. 

• Rewards and benefits - For frequent travellers, international credit cards can offer several advantages for accelerated reward points, air miles, premium lounge access and many more. Users with strong credit histories can also claim increased credit limits at better rates.   

Cons of international credit cards 

• Foreign transaction fees - International credit cards charge separate transaction fees for processing every foreign transaction. These are in addition to applicable mark-up (2 to 4%) on exchange rates.  

• High network exchange rate - Exchange rates charged by credit card processing networks (e.g., VISA, MasterCard) can be significantly higher for many currencies compared to rates offered by money exchangers and banks. 

• ATM withdrawal fees - Cash withdrawals cost extra processing charges along with cash advance fees. 

• Unexpected Blocks :- banks sometimes freeze cards on suspected fraud, which can be disruptive abroad.

Best uses of international credit cards- International credit cards are beneficial for frequent international travellers incurring high-value expenses while living abroad. 

UPI for NRIs: How it works and when to use it 

UPI or Unified Payment Interface is a mobile application-based real-time (instant) payment processing platform developed and maintained by National Payments Corporation of India (NPCI). NRIs can link their NRE and NRO accounts with UPI applications for making domestic transactions or peer-to-peer fund transfers. Banks (like IDFC FIRST) now even allow UPI with international mobile numbers in select countries (UAE, US, Singapore, UK, etc.), eliminating the need for an Indian SIM.

Pros of UPI 

• Real-time payment processing - This is particularly useful for NRIs living in different time zones. The 24/7 real-time processing makes payments in India a lot easier while living in a foreign country. 

• Low-cost financial transactions - UPI transactions are currently free of cost. There are discussions about the introduction of UPI payment processing fees in the near future. However, even then, it will be significantly cheaper than other payment options. 

• Convenience of use from mobile phones - Any smartphone or mobile phone with an active SIM connection is sufficient for making payments using UPI apps. You can make payments even when travelling. Many countries, such as the UAE, Singapore, and Sri Lanka, also accept UPI. 

• Strong security features -  NPCI payment processing mechanism uses two-factor authentication and encrypted messaging as standard. It makes the process heavily secure as per the global standard. 

• Widely accepted in India - UPI payments are widely accepted across small, medium and big merchants across India.  

Cons of UPI  

• Transaction limits - UPI applications allow strict per-day and per-transaction limits. For example, the daily transaction limit for regular UPI apps per user is Rs 1 lakh. The per-transaction limit is also Rs 1 lakh. So, high-value payments are difficult.  

• Transaction failure and refund issues - Users sometimes report debit failures. Remitters' accounts are debited, but receivers' accounts are not credited. Refund for failed transactions also takes time sometimes.  

• Susceptible to emerging scams - Though the UPI payment processing system is highly secure, fraudsters often devise new scamming practices to dupe people, especially the elderly population. The primary cause is digital illiteracy. It earns a bad reputation for UPI. 

Best uses of UPI - UPI applications are useful for NRIs making domestic payments from their NRE and NRO accounts while living abroad. It helps to avoid high transaction costs without compromising security and safety. 

Cost comparison: forex card, international credit card and UPI 

Each of these payment methods have advantages and disadvantages. So, the ultimate choice depends on the financial priorities of respective individuals. International credit cards are the best choice for frequent international travellers requiring regular transactions in foreign currencies. UPI is undoubtedly the best choice for domestic (in India) payments for NRIs, when connected with their NRE or NRO accounts. Forex cards can be a reliable alternative to carrying cash for tourists and occasional travellers.