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Overseas trip? Important money tips
Pankaj Anup Toppo, Outlook Money | February 22, 2008
Making a trip abroad? Don't know how and how much money you can carry or what to do with the unused money once you are back? We try to answer these and other related questions to save your time and, of course, money.
Before the trip
How much money can I carry? The maximum amount of foreign exchange that you can buy for your leisure/tourism purposes abroad for one or more trips is $10,000, or its equivalent, in one calendar year. The most convenient for you would be to keep $2,000, or its equivalent, in the form of currency and carry the rest either in the form of a traveller's cheque or a travel card. A travel card is a pre-paid card, into which you can put money in India to be used abroad.
At what rate? Foreign exchange, or forex, is available from banks, authorised dealers and moneychangers. The rates are determined by market forces and vary across dealers. These are quoted based on the prevailing inter-bank rates.
"Normally, the rate at which you would buy forex would be marginally more than the IBR rate," says Madhavan Menon, managing director, Thomas Cook [Get Quote] India.
The good part is you don't have to pay a service fee or encashment fee when you buy forex. Says Kanwar Vivek, general manager, ICICI Bank [Get Quote]: "In case of traveller cheques, authorised dealers may charge a commission. For travel cards, a one-time card activation charge may be levied."
What are travel cards? Travel cards come in handy if you want to make your trip hassle-free and convenient as far as managing money is concerned. These cards can be used abroad to withdraw cash in the local currency from over 1 million VISA ATMs. These are valid at over 14 million merchant establishments accepting VISA Flag Cards.
Scope. Some of the leading financial institutions that provide travel cards are HDFC Bank [Get Quote] (ForexPlus Card), ICICI Bank (ICICI Bank Travel Card) and State Bank of India [Get Quote] (SBI Vishwa Yatra Foreign Travel Card). The cards are valid for seven currencies: US dollar, euro, pound sterling, Swiss francs, Australian dollar, Canadian dollar and Japanese yen (the list varies across institutions). An exchange rate is applied if the card is used for any currency other than the base currency (with which the card is loaded). According to RBI, you can have a maximum of $10,000, or its equivalent, in your card in one calendar year. The minimum amount is, however, 200 units of any currency.
Benefits. These cards also give insurance benefits (varying across institutions). The covers range from personal accident, missing of connecting international flight during transit and loss of travel documents, to hijacking and delay in flight due to delay in receipt of checked baggage. The policy gets activated once you buy the card. The claim, however, is applicable only if the travel card is active on the accident date and has some balance left. The costs vary across institutions (see Costs of Convenience).
The paperwork. Buying forex also involves a bit of paperwork. You will need to furnish a copy of your passport and confirmed tickets. You also need to fill up Form A2 (stating the purpose of visit) and Basic Travel Quota Form, where you need to declare that you haven't exceeded the limit of $10,000, or its equivalent, in a calendar year. For a travel card, you will have to provide a copy of the PAN card or Form 60.
After the trip
Can you keep unused foreign exchange? The Reserve Bank of India allows an individual to retain up to $2,000, or its equivalent, indefinitely. Any amount over this should be encashed within 180 days of your return. In case of a travel sneed to get the balance refunded within a specified period. This, too, varies from company to company.
In case you fail to do so, the card would be suspended and you may face legal action. SBI does not levy any fee if you claim the card refund within 90 days of arrival, but charges Rs 110 (including service tax) if the claim is made after 90 days.
Selling at what rate? While selling forex, the rate offered is slightly lower than the prevailing inter-bank rates. Says Thomas Cook's Menon: "Authorised dealers are free to charge a service fee. However, due to competition most don't charge any. This depends on the dealer as well as the area (tourist spots). Airports always attract service charges."
However, the ministry of finance circular, dated 12 March 2007, meanwhile, states that service tax is not leviable on money changing as it does not fall under the category of foreign exchange broking. The RBI, meanwhile, is silent on this issue of levying service charges, and simply asks dealers to be transparent and reasonable.
Clearly, authorised dealers are not heeding the advice. In a recent incident, a customer encashed foreign exchange with Thomas Cook at Indira Gandhi Inter-national Airport, New Delhi, and was charged Rs 165 as encashment fees while exchanging 2,590 Thai bhat. Thomas Cook officials were not available for comments despite repeated attempts.
ICICI Bank's Vivek, meanwhile, admits that authorised dealers do levy a fee. "Authorised dealers generally charge a margin (2-3 per cent) on the prevailing inter-bank rate, or on the cost at which they would sell the currency," he says.
However, if you are using a travel card, you don't need to go to any dealer at all. You just need to visit your bank. The refund on a travel cards is made at the prevailing market rate. There could be a delay of a week or so in refund, if there are some unsettled transactions.
Way out: go to your bank. You can approach your own bank to encash unsused forex. Most banks do not charge a fee. While authorised dealers may refuse to encash smaller denominations, banks do not have a problem doing so. The exchange value gets deposited in your account with the bank. If you face any further problems with the bank, you can approach the banking ombudsman.