Forex prepaid cards provide a hedge against rupee swings

December rings in the Christmas bells as well as the holiday season. If you have planned a foreign holiday, you have to decide the mode of carrying foreign exchange. This depends on various factors such as duration of stay, mode of transport when in a foreign country, among other things. Carrying cash might be easiest for a traveller but it is risky too. Moreover, at a time when the rupee is touching newer lows every other day, it is better you opt for prepaid cards or travellers cheques. Firstly, it is a good substitute to cash for security reasons and these are good hedges against exchange rate fluctuations.

PREPAID CARDS

As the name suggests, these cards are issued by banks as well as forex dealers and are pre-loaded with funds. Just like a credit card, you can use this plastic across the globe at merchant outlets. These cards are available in various denominations such as the US dollar, euro, GB pound etc.

GOOD HEDGE AGAINST THE FALLING RUPEE

Unlike an international credit card, these prepaid cards are a good hedge against a falling rupee. For instance, if you swipe a credit card, you will be billed at the rate of exchange on the date of the purchase. On the other hand, in the case of a prepaid card, the value of the rupee will be as on the date you loaded your card, which would be much earlier than your journey date. So if the rupee continues to show a sharp fall, as it is doing currently, it is wise you opt for a forex prepaid card. Also the use of a credit card attracts a cross currency charge of up to 3.5%.

Travellers cheque is also a popular instrument among travellers. But a pre-paid card scores over travellers cheques as the latter cannot be encashed after merchant hours and acceptability is still an issue. Further, there is a fee on encashment.

Banks charge a one-time issuing charge of Rs 110-150 on a prepaid forex card. If you use the prepaid forex card for withdrawal, a charge of 1.25-2 units of the foreign currency is also levied. In case you are left with some balance on the card, you can get it encashed by filling a refund form once you return to India.