How Indians lose money on cards and travel forex
Hidden Card & Forex Costs
How Indians Are Losing Money on Travel Cards and Forex in 2026: New Developments and Practical Insights
Traveling abroad remains a beloved activity for millions of Indians, offering cultural immersion, personal growth, and unforgettable experiences. However, in 2026, many travelers are discovering that their international payments—whether through travel cards or forex providers—are costing them more than they realize. Despite marketing claims of "zero markup" or low fees, hidden charges, strategic tactics by financial institutions, and groundbreaking technological innovations are reshaping the landscape. Understanding these changes is essential for travelers aiming to minimize losses and make smarter financial decisions abroad.
The Persistent Myth of 'Zero Forex Markup' and the Harsh Reality
For years, credit card issuers and fintech companies promoted "zero forex markup" credit cards as the ultimate solution for international travel expenses. These cards promised seamless, cost-free transactions, leading many to believe they were saving money. However, 2026 reveals a different picture.
Hidden Margins and Fees in 'No-Markup' Cards
Despite their marketing, many "zero forex markup" cards embed costs within the exchange rates:
- Exchange Rate Margins: While the rate displayed may seem mid-market, a 1-2% spread is often included in the rate used for transactions, eroding potential savings.
- Additional Charges:
- Activation fees (₹200-₹500)
- Annual fees (₹3,000-₹5,000+)
- Inactivity charges
- Limits on free ATM withdrawals
- ATM Withdrawal Costs: Cash withdrawals abroad can attract ₹250-₹500 per transaction, along with foreign ATM operator fees. For travelers needing multiple cash withdrawals, this can add up to over 4-5% of the withdrawal amount.
- Dynamic Currency Conversion (DCC): Merchants and ATMs frequently promote DCC, converting transactions into rupees at margins of 3-4%—a cost that typically favors the merchant over the traveler. Travelers are advised to pay in local currency and rely on their card’s exchange rate instead.
Key takeaway: The "zero forex" label is often a marketing gimmick. The true cost depends on understanding the actual exchange rate, all associated fees, and transaction costs.
How Banks and Card Providers Strategically Inflate Costs
Indian financial institutions employ various tactics to maximize revenue from international transactions:
- Markup and Margin Strategies: Most Indian cards, even premium ones like HDFC Regalia or ICICI Coral, add 2-3% markup on foreign transactions, often hidden within the exchange rate spread.
- Fee Structures:
- ATM withdrawals abroad: Multiple withdrawals can incur ₹250-₹500 per transaction, with additional foreign ATM operator fees, pushing effective costs to over 4-5% per withdrawal.
- Activation & inactivity fees: Many prepaid or travel cards impose activation charges or inactivity fees, which can accumulate if not managed carefully.
- Promotion of DCC: Merchants and ATMs often push DCC—converting transactions into rupees at margins of 3-4%. Travelers opting for DCC often pay significantly more than if they paid in the local currency.
Recent Trends in Card Economics
Recent reports, including articles in The Economic Times, highlight that major Indian banks are reducing reward perks—such as cashback, lounge access, and other benefits—making premium cards less attractive. This strategic shift emphasizes the importance of scrutinizing the actual costs and benefits of each card, especially during travel.
The New Payment Ecosystem: UPI Cross-Border Payments and CLOU
A groundbreaking development in 2026 is India’s strategic push to expand UPI-based cross-border payments and introduce Credit Lines on UPI (CLOU). These innovations aim to reduce dependence on traditional card networks and substantially lower transaction costs.
UPI Cross-Border Payments
- Policy & Expansion: The Reserve Bank of India (RBI) and government agencies are actively working to broaden UPI acceptance internationally, especially in countries with a significant Indian diaspora such as Singapore, the UAE, and Gulf nations.
- Implications for Travelers:
- Cost Savings: UPI transactions bypass forex markups and intermediary fees.
- Ease of Use: Travelers with UPI-enabled bank accounts can make direct payments abroad with minimal charges.
- Growing Acceptance: Several countries are integrating UPI into their payment infrastructure, making it a practical alternative to cards.
CLOU (Credit Lines on UPI)
- What is CLOU?: Launched as a pilot in India, CLOU allows small-ticket loans directly linked to UPI accounts, providing instant credit without physical cards.
- Advantages:
- Lower Costs: Reduced transaction fees compared to traditional credit cards.
- Convenience: No need for physical cards or infrastructure.
- Flexibility: Ideal for short-term expenses, emergencies, or small purchases.
- Future Outlook: As CLOU expands, it is poised to reshape small-ticket lending and international payments, making travel more affordable and transparent.
Fintech and Cross-Border Payment Innovations
Beyond UPI and CLOU, fintech firms are making significant investments in B2B cross-border payment platforms:
- Stripe, PayPal Ventures, and India's Xflow are developing solutions to streamline cross-border B2B transactions.
- These platforms aim to reduce costs, improve transparency, and speed up settlements, which could benefit consumers in the near future.
Impact for Consumers: As these solutions mature, forex conversion costs and transaction fees are expected to decline, offering Indian travelers more affordable options.
Policy Changes and Product Launches Reshaping the Landscape
In 2026, Indian banks are tightening reward programs—reducing cashback, lounge access, and other perks—making premium cards less attractive. Simultaneously, government initiatives and fintech innovations are driving a paradigm shift:
- Cost Reduction: Moving away from expensive forex markup cards.
- Enhanced Transparency: Digital infrastructure like UPI and CLOU provide clearer cost structures.
- Greater Convenience: Digital payments are faster, more secure, and often cheaper.
These shifts empower travelers with smarter, more affordable payment options abroad.
Practical Strategies for Smarter Travel Payments in 2026
Given the rapid changes, travelers should adopt these best practices:
- Choose Low- or No-Markup Cards: Opt for cards like SBI Card Elite, HDFC Regalia, or Axis Bank Flipkart Axis that offer more transparent exchange rates and lower fees.
- Avoid DCC: When paying abroad, pay in the local currency and disable DCC—these often come with unfavorable margins.
- Limit ATM Withdrawals: Plan expenses to minimize cash withdrawals, reducing multiple transaction fees.
- Leverage UPI: Use UPI-enabled bank accounts for cross-border payments where accepted, benefiting from lower costs.
- Pre-Travel Expense Simulation: Estimate costs—exchange rates, ATM needs, and fees—to select the most economical payment methods.
- Monitor Statements Regularly: Detect hidden fees or unusual charges early and dispute discrepancies.
Supporting Practical Guidance: Insights from CNBC TV18
An article titled "How to make the most of travel and forex cards" (CNBC TV18) emphasizes the importance of understanding your card’s reward structure and fees. Experts recommend matching your travel card rewards to your spending pattern, checking for hidden charges, and using local currency options whenever possible to maximize savings.
The Current Status and Future Implications
The international payment ecosystem for Indian travelers in 2026 is undergoing a significant transformation. While the myth of "zero forex markup" persists, the reality is that hidden margins and fees still exist—but are increasingly being challenged by innovative digital solutions.
Banks are reducing reward perks and tightening fee structures, but UPI cross-border payments and CLOU are emerging as cost-effective, transparent alternatives. As these technologies become mainstream, travelers who are well-informed and adaptive will benefit from lower costs, greater convenience, and enhanced transparency.
In essence, the future of international payments for Indians is heading toward a more consumer-centric, affordable, and technologically advanced landscape.
Final Words
Travelers in 2026 must remain vigilant. The marketing allure of "zero forex markup" cards can be misleading; understanding the full cost structure—including hidden spreads, DCC, and ATM fees—is crucial. Meanwhile, embracing innovations like UPI cross-border payments and CLOU can dramatically reduce expenses and improve transparency.
Smart planning, informed choices, and leveraging new digital payment options will ensure your travel funds go further, leaving you free to focus on making memories—rather than worrying about hidden charges.
Stay updated, compare options carefully, and adapt to the evolving payment landscape to enjoy worry-free travels in 2026 and beyond.