Ever wondered why the amount on your credit card statement is different from what you calculated using Google’s exchange rate?
That’s because an international transaction involves more than just a currency conversion. Between the payment network, your bank, forex markup, and GST, several steps determine the final amount you pay.
Here’s how it works.
TL;DR
- International transactions are first charged in the merchant’s local currency.
- Visa, Mastercard, American Express, or RuPay convert the amount to INR using their own exchange rate.
- Your bank then adds a forex markup fee (unless your card has 0% forex markup).
- GST (18%) is charged only on the forex markup, not the entire transaction.
- The final amount may differ slightly from Google’s exchange rate due to settlement timing and network rates.
- When paying abroad, always choose the local currency instead of INR to avoid Dynamic Currency Conversion (DCC).
Step 1: You Pay in the Merchant’s Local Currency
When you use your credit card abroad or make a purchase from an international website, the merchant charges your card in their local currency.
International transactions can be billed in many different currencies depending on where you’re shopping or travelling. Some of the most common ones include:
| Country/Region | Currency | Currency Code |
|---|---|---|
| United States | US Dollar | USD |
| United Kingdom | Pound Sterling | GBP |
| Eurozone | Euro | EUR |
| Japan | Japanese Yen | JPY |
| Singapore | Singapore Dollar | SGD |
| United Arab Emirates | UAE Dirham | AED |
| Australia | Australian Dollar | AUD |
| Canada | Canadian Dollar | CAD |
| Switzerland | Swiss Franc | CHF |
| Thailand | Thai Baht | THB |
If you’re travelling abroad and the payment terminal asks whether you’d like to pay in INR, decline it. Always choose the local currency to avoid Dynamic Currency Conversion (DCC), which usually results in a worse exchange rate.
Step 2: The Card Network Converts the Currency
Once the transaction is authorised, your card network (Visa, Mastercard, American Express, or RuPay) converts the amount into Indian Rupees.
The exchange rate is based on the network’s own daily conversion rates, which may differ slightly from the mid-market rate shown on Google. The exact rate also depends on when the transaction is settled, not necessarily when you make the purchase.
Check the Network Exchange Rate
Want to estimate how much an international transaction will cost before your bank adds its forex markup?
- Visa cards: Use the Visa Exchange Rate Calculator.
- Mastercard cards: Use the Mastercard Currency Converter.
These tools show the exchange rates used by the card networks. Remember that your bank may still add a forex markup and applicable GST, so the final billed amount can be slightly higher.
Step 3: Your Bank Applies a Forex Markup
After the amount is converted to INR, your card issuer adds a foreign currency markup fee.
This fee varies by card. Many entry-level credit cards charge around 3.5%, while premium travel cards may charge 2% or less. Some specialised travel credit cards even offer 0% forex markup.
Step 4: GST is Added
GST is not charged on the entire transaction amount.
Instead, it is charged only on the forex markup fee. Currently, GST is levied at 18% on the markup amount.
Example
Let’s say you spend USD 100 overseas.
- Visa exchange rate: ₹87/USD
- Converted amount: ₹8,700
- Forex markup (3.5%): ₹304.50
- GST on markup (18%): ₹54.81
Final amount billed: ₹9,059.31
One Important Thing: Avoid DCC
When paying abroad, you may be given the option to pay in INR instead of the local currency. This is called Dynamic Currency Conversion (DCC).
With DCC, the merchant or payment provider converts the transaction to INR using its own exchange rate, which can include a significant markup. You should generally decline DCC and pay in the local currency, allowing your card network to handle the conversion instead.
For a detailed explanation, including examples and how DCC works, read our guide on Dynamic Currency Conversion.
Rule of thumb: When abroad, choose USD, EUR, GBP, etc., not INR.
Why the Final Amount May Be Different
Even if you check the exchange rate before making a purchase, your billed amount may differ slightly because:
- Exchange rates fluctuate throughout the day.
- The transaction may settle a day or two after you make the purchase.
- Each card network has its own exchange rate.
- Your bank adds a forex markup.
- GST is applied to the markup.
Online Transactions Follow the Same Process
The same charging mechanism applies when paying for international services like:
- ChatGPT
- Netflix (if billed internationally)
- Google services
- Apple purchases
- Steam
- International hotel bookings
- Foreign e-commerce websites
As long as the payment is processed outside India or in a foreign currency, it is treated as an international transaction.
How to Save Money on International Transactions
- Always pay in the local currency instead of INR.
- Use a credit card with low or zero forex markup.
- Compare forex markup fees before choosing a travel card.
- Don’t rely solely on Google’s exchange rate to estimate your final bill.
Popular Cards for International spends
i) Zero Forex Markup Cards
These cards don’t charge a forex markup on eligible international transactions:
a) Federal Bank Scapia Credit Card
ii) Cards That Can Earn Positive Returns After Forex Markup
For cards that charge a forex markup, the actual cost is higher once 18% GST on the markup is included. The effective forex cost can then be compared against the rewards earned.
3.3% Base Rewards + 1% Cashback (up to ₹1,000 per statement cycle) via Global Value Program | Forex Markup: 2.36% (incl. GST)
b) HDFC Diners Club Black Credit Card / Diners Club Black Metal Credit Card –
3.3% Base Rewards + 1% Cashback (up to ₹1,000 per statement cycle) via Global Value Program | Forex Markup: 2.36% (incl. GST)
3% Base Rewards | Forex Markup: 1.18% (incl. GST)
3.75% Base Rewards | Forex Markup: 2.36% (incl. GST)
Frequently Asked Questions (FAQs)
How are international transactions converted to INR?
Your card network converts the foreign currency to INR, after which your bank adds the applicable forex markup and GST.
Why is my billed amount different from Google’s exchange rate?
Google shows the mid-market rate, while card networks use their own exchange rates, which may also vary based on the settlement date.
What is a forex markup fee?
It’s a fee charged by your bank on international transactions, usually as a percentage of the converted INR amount.
Is GST charged on the entire transaction?
No. GST is charged only on the forex markup fee.
Should I pay in INR or the local currency abroad?
Always choose the local currency to avoid Dynamic Currency Conversion (DCC), which is usually more expensive.
Do online international purchases follow the same process?
Yes. Purchases from international websites and subscriptions are charged in the same way.
Can I avoid forex markup?
Yes. Some travel-focused credit cards offer low or 0% forex markup.
When is the exchange rate applied?
The exchange rate used is typically the one applicable on the transaction’s settlement date, not necessarily the purchase date.
Final Thoughts
An international transaction isn’t just a simple currency conversion. The final amount on your statement depends on the card network’s exchange rate, your bank’s forex markup, GST on the markup, and the settlement date.
Understanding how these charges work can help you estimate your costs more accurately and avoid paying more than necessary, especially when travelling or shopping internationally.