Hidden cost of travel: Visa fees, card markups, optional tours and tips that can add 25-40% to budget; here's how to plan for them
Many travelers fail to account for hidden costs while planning international journeys, often only considering major expenses. These overlooked charges can hike trip costs by 25-40%, creating budget overruns. It's vital to include local transport, ...
When Siddhartha Kapoor and his wife decided to holiday in Thailand in March this year, they budgeted a seemingly adequate Rs.2 lakh for the eight-day trip. Kapoor was meticulous in listing not just the visible, headline costs like airfare and hotel stay, but also expenses like inter-island ferry rides and food. Yet, somehow, their budget ended up ballooning to Rs.3 lakh, a 50% rise, by the end of the trip. “I grossly underestimated the spending on food and excursions, and forgot to include cab fare for local travel,” says the 28-year-old lawyer from Delhi.
It’s a miscalculation most travellers make while vacationing abroad, whether they plan a do-it-yourself (DIY) trip or take a package tour. Focused on higher costs, they either forget or ignore the smaller expenses that they believe will somehow be taken care of. These hidden costs sneak up unawares and add up to a substantial amount, upsetting the household budget and souring the holiday vibe.
“Most Indians budget for flight and hotel, and treat everything else as small change, but on an international trip, the ‘small change’ is where the budget breaks. Eating out, currency conversion, and paying tourist prices for things locals get for a fraction can easily add 25-40% to what you planned,” says Dharamveer Singh Chouhan, Co-founder, Zostel and Zo World, and Group CEO, Zo world.
Local transport, sightseeing and attraction tickets, visa fees, travel insurance, porterage, city taxes, other destination-specific charges, hotel security deposits, SIM charges or international roaming, airline seat selection charges, and mandatory tips in certain countries are among the costs that are often overlooked at the planning stage.
“There is nothing inherently wrong with spending more than the initial estimate because travellers may consciously choose better rooms, special experiences or additional activities. The issue is when these costs come as a surprise,” says Renuka Natu, Founder, Africa with Renuka, an Africa travel specialist. “The industry needs to move towards greater transparency around the ‘real holiday cost’, separating the essential cost of the trip from optional indulgences and variable expenses,” she adds. This allows travellers to budget realistically and enjoy the holiday without feeling they have lost control of their spending. If you, too, want tighter control over your travel spending, here are the expenses you should consider while planning your foreign trip.
Annabel, 36, Anita Dsouza, 62, Mumbai
Card cost comparison:Credit card vs zero forex credit card vs forex card
If you spend Rs.2 lakh abroad, here are the charges you will pay depending on the card used.
Source: Websites. Charges are indicative and may vary with issuers. Card issuance fee invites GST. *Foreign banks and non-bank ATMs may charge an additional surcharge for ATM transactions.
Siddhartha & Shivani Kapoor, 28, & 27, Delhi
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What a package tour can actually cost
By paying for exclusions, you could add 20-25% to the trip cost.
Transfer (Montmartre district in Paris, Versailles Palace)
What you pay from your pocket
Food, water: Rs.12,000 + 3,000
Visa fee & charges: Rs.12,500
Optional sightseeing & entrance fee: Rs.7,500
Additional local transport: Rs.2,000-3,000
Tips: Rs.2,000-3,000
Tourist taxes: Rs.3,000-4,000
Travel insurance: Rs.1,000-1,500
TCS: Rs.3,952*
Total Rs.48,952
Actual package cost
Rs.1,97,624 + Rs.48,952 = Rs.2,46,576
Source: Travel site. Other costs are indicative and may vary. *TCS can be claimed as refund.
CONSIDER ALL-IN COSTS
Airfare: Beyond the advertised airfare, several ancillary costs can inflate your budget, especially for a family. In addition to the airport charges and platform booking fee, seat selection and excess baggage fee can substantially increase the total fare. For instance, IndiGo’s excess baggage fee can surge to over Rs.1 lakh for specific destinations and higher weights. You could also face a surprise surge in fares due to currency fluctuations between the time you planned the vacation and estimated a budget, and when you actually bought the tickets.
For Annabel Dsouza, the Iran-US conflict saw her airfare jump by Rs.1 lakh. For the long-planned trip to the United Kingdom (UK) with her 62-year-old mother, Anita, she had to shift from Emirates to Air India in May June this year. “I had planned a Rs.4 lakh trip, and it suddenly shot up to over Rs.5 lakh, upsetting my budget. In fact, I had to borrow from family at the last minute to make up for the gap,” says the 36-year-old from Mumbai.
Card costs: Your spending choice (regular credit card, zero forex credit card, forex card, cash) is important because the associated fees and charges are among the sneakiest add-ons to a travel budget. “On Rs.2 lakh of overseas spending, a traveller can incur additional costs of 4-5% or more, depending on the card and how it is used. For example, a conventional credit card with a 3.5% forex markup would add Rs.7,000, with 18% GST on the markup adding another Rs.1,260, taking the additional cost to Rs.8,260, or 4.13%, before considering the exchange rate used for conversion,” says Gagan Malhotra, COO, BookMyForex.com.
“Travellers should look beyond the headline exchange rate and account for currency conversion margins, card or ATM charges, and exchange-rate fluctuations,” says Abraham Alapatt, President & Group Head, Marketing, Service Quality, Value-Added Services & Innovation, Thomas Cook (India) & SOTC Travel.
While forex cards are preloaded with one or multiple currencies, the exchange rate is fixed at the time of loading and is not affected by currency fluctuations during the entire usage period. A markup (rate charged for foreign currency conversion), which is typically 2-3.5% for forex cards, happens only if a transaction is conducted in a currency other than the one loaded on the card. Most credit cards have a 3-3.5% markup (plus 18% GST) on every transaction, which is why they cost more than forex cards. However, if you have a zero forex credit card, it can be the most cost-effective choice; you can also earn reward points and air miles. To be sure, regular credit cards also earn you points. “I typically use the Scapia card, which has a zero forex markup,” says Kapoor.
Dynamic currency conversion is another hidden fee most people aren’t aware of. When you use the card abroad at a merchant outlet, you can choose to pay in local (the country you’re in) or home (India) currency, and DCC converts the payment to your home currency. “While this may seem convenient because the amount is immediately visible in rupees, the conversion is done at the exchange rate set by the merchant or ATM’s DCC provider, which may include an additional markup or fee. This can make the transaction more expensive than paying in the local currency,” says Malhotra.
ATM cash withdrawals using any card can be expensive. “If you use HDFC Bank’s Regalia ForexPlus Card for an overseas ATM withdrawal, the bank will charge $4 for every transaction,” says Ajay Awtaney, Founder of Indian credit card platform, LiveFromALounge.com. This is in addition to 18% GST and ATM operator fee. “There are also non-bank ATM machines which debit their own fee for every transaction,” says Awtaney.
Visa & insurance: While travel insurance may not be a huge cost, it is important to get one to avoid incurring large sums in case of a medical emergency, trip cancellation, lost luggage, delays, etc, which can send your travel budget haywire.
Visa fees, on the other hand, can set you back by a few thousand rupees for destinations like Europe, the UK, the US, Australia and New Zealand, especially if you’re travelling as a family (see table). Don’t forget the ancillary visa costs, such as the service centre fees, and documentation, picture and photocopying costs.
Local transport: Airport transfers, local cabs, and inter-city travel costs are typically ignored by travellers, but these can hike the total cost sharply. “My local transport cost jumped by Rs.5,000 because I had forgotten to include cabs for getting around the island,” says Kapoor, who had accounted for inter-island ferry costs in Thailand. “I had allocated Rs.10,000 for local travel, but the cost still shot up,” says Dsouza.
Public transport is the most affordable option for commuting, and overnight trains, as opposed to internal flights, are a good choice for inter-city travel, especially with discounts you get for booking in advance. Buying weekly or day passes can save a lot compared to single-ride tickets in countries like Japan, Thailand, Singapore, and Germany. Many cities also offer tourist travel cards, such as the JR Pass in Japan, which provide unlimited travel for a fixed price.
Food & drinks: This category probably sees the most budget breaches, as bottled water is a necessity in most countries and food clock and passes the Statue of Liberty, a good substitute for the paid cruises. In Melbourne, trams are free within the city centre’s Free Tram Zone. Also check for bundled offers or attraction passes provided by destination authorities, such as Singapore’s Sentosa Pass, which offers flexible access to multiple attractions across Sentosa Island. City passes offered by many cities globally also offer a range of sightseeing options.
Tax collected at source (TCS): Overseas tour packages attract 2% TCS, while other travel and forex purchases invite a 20% TCS above Rs.10 lakh under the Income Tax Act 206C, from 1 April this year. So if your tour package costs Rs.2 lakh, your tour operator will collect Rs.4,000 as TCS. Though this amount can be adjusted against the total income tax liability or claimed as a refund when filing tax returns, it is a cost you will incur while booking. So include it in your travel budget.
Currency fluctuations: Currency fluctuations can substantially change the final cost of an overseas holiday, particularly when you plan the trip months in advance. “As per applicable regulations, travellers can buy foreign currency up to 60 days before their travel, giving them a useful window to track exchange rates rather than buying forex at the last minute. They can use this period to monitor currency movements, set rate alerts and purchase or load forex when they find a favourable rate,” says Malhotra.
“Build some currency headroom into your savings target rather than assuming that today’s exchange rate will hold until the trip. The estimate can be reviewed periodically as the travel date approaches, and foreign currency purchases can be staggered,” says Ramesh Vishwanathan, CEO, Financial Planning Standards Board (FPSB) India.
Travel loans: According to Paisabazaar’s consumer insights report, ‘ How India Travels Using Holiday Loans Vol 2.0 ’, 27% of respondents actively took a personal loan to fund their vacation, up from 21% in 2023. This highlights the growing use of credit to fund discretionary spending. If you take a loan to fund your holiday, don’t forget to include the interest in the overall cost.
“Using a credit card is not necessarily a worry if the outstanding dues are paid by the due date. The problem arises when travellers revolve the balance, as interest and charges can substantially increase the effective cost of the holiday. Similarly, for personal or travel loans, one should consider the total repayment, interest, processing fees and EMI burden, rather than looking only at the loan amount,” says Vishwanathan.
Small leaks, bigger budget
Seemingly small, these expenses can inflate your overall trip cost.
Dynamic currency conversion charge
Foreign point-of-sale terminals, ATMs, and online checkouts often offer a choice of payment in home or local currency, and charge a premium for converting the foreign price to home currency. This is because the exchange rate and markup are set by the merchant's provider, not your own bank or card network. So if you are asked to pay in local or home currency, pick the former.
Seat selection, excess baggage
Excess baggage and seat selection fees can significantly raise your expenses, especially for a family of four. Air India, for instance, charges US$17-55 (Rs.1,600-5,300) per kg, while IndiGo charges can vary from Rs.2,600 to over Rs.1 lakh for different weights and destinations. Seat selection charges for international flights typically vary from Rs.200 10,000 per seat, depending on the seat and airline.
Food cost
While most hotels offer free breakfast, if you have lunch and dinner or order room service, your food expense can shoot up. If you’re eating at the airport while waiting for your flight, be ready to pay 2-5 times for the food because of higher operational charges.
Currency conversion
Converting currencies at airports can have a 5-15% markup, compared to authorised money changers with 2-5%. Online platforms can be the cheapest at 0-1.5%. The best option is to convert the currency to US dollars, Euro or British pound, and on reaching your destination, convert it to the local currency, as the charges for these currencies are the lowest.
Tipping
You can end up tipping 5-25% for cabs, porters, tour guides, restaurants, even buskers. While it’s not customary in countries like Japan, others like the US and Europe usually expect tipping.
Water, beverages
Bottled water, beverages and snacks can be very expensive, especially at tourist sites, hotels and airports compared to a supermarket. So if you pay 2 Euro for a water bottle and consume three in a day, it will cost 48 Euro, or around `5,200 for 24 bottles, on an eight-day trip.
Source: Embassy websites. Conversion rates may vary. Does not include service centre, agent or ancillary charges. *There is an additional $250 ‘integrity fee’ for non-immigrant visas.
PACKAGE EXCLUSIONS
If you take a package from a tour operator at the advertised headline price, you will in variably overshoot the budget due to package exclusions. These can include mandatory city or hotel taxes, sightseeing tickets, op tional excursions, airport transfers outside specific times, visa fees, meals other than breakfast, hotel or resort surcharges, and tipping, among others.
“The gap between the advertised and actual cost tends to be higher for holidays involving multiple destinations, expensive local transportation, or destinations where meals and sightseeing cost more each day. Travellers should, therefore, compare packages based on the overall inclusions and exclusions, rather than the headline price alone,” says Alapatt.
“For a 7-10-day overseas trip, the final spend can vary by 20-30% compared with the advertised package price,” says Bharatt Malik, Senior Business Head, Yatra Online. “Cruises can also have a significant gap between the advertised price and the actual cost due to daily gratuities, Wi-Fi charges and beverage packages. Wildlife safaris can also have a difference because of high national park fees, while self-drive trips can involve insurance costs over and above the rental,” says Malik.
Most group tour itineraries have ‘options’: visits to monuments, sightseeing, or experiences that cost extra. On Trafalgar’s 13-day Best of France tour (US$5,125, or about Rs.4.9 lakh, for May 2027), taking one optional experience on each day it is offered, adds Euro 766, or about Rs.83,000. That is roughly 17% over the tour price. On Globus’s 14-day Best of China & the Yangtze River (from US$5,412, or about Rs.5.2 lakh), which includes most meals, all three optionals can add US$228-375, or about Rs.22,000-36,000. That is 4-7% of the tour price.
“Budget an additional Rs.30,000-60,000 per person for a 7-10 day trip to cover meals, local transport and sightseeing beyond the base package,” suggests Kothari. Southeast Asia (Thailand, Bali, Vietnam, and the Philippines) have the smallest gap, typically 10-15% between the advertised and actual price, because on-ground costs are lower and more predictable.
“Meanwhile, Europe and premium all-inclusive packages consistently show the largest gap. Opting for an all-inclusive tour can add approximately 20% to the base price, and Europe’s higher on-ground costs amplify every exclusion,” says Kothari. The cheaper the advertised package, the more important it is to read what’s excluded, he notes.
MANAGE BUDGET OVERRUNS
If you dip into savings, compromise a financial goal, or take an expensive loan for a holiday, the financial impact will outlast the trip. “A holiday should be treated as a short-term financial goal, with the total cost, travel date, and a reasonable contingency defined upfront,” says Vishwanathan.
Buffer & contingency funds: Alapatt recommends 10-15% of the planned holiday budget as a contingency fund to account for budget overruns. “The buffer provides a cushion for unforeseen transport or meal expenses, changes in plans, currency fluctuations and other incidental costs that may arise during the trip,” he says.
However, the appropriate buffer depends on the destination, duration, itinerary, number of travellers and the individual’s financial circumstances. Treat this as a reserve, not extra spending money; include it in your overall savings target. You can also set aside a contingency fund for unforeseen events, such as medical emergencies, missed connections, luggage delays or issues, and unplanned local surcharges.
Daily discretionary limits: “Set aside a separate daily allowance for meals, local transportation and sightseeing if these are not in the package. The requirement varies by destination, but budgeting upfront for these essentials, rather than treating them as incidental expenses, gives a more realistic view of the total cost of the holiday,” says Alapatt.
“You can set a daily or trip-level discretionary spending limit before departure and tracking expenses through a simple Notes app, travel-budget app or dedicated card/account,” says Vishwanathan.
Plan for the extras and keep a buffer. And whatever you do, don’t go hungry.
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