Is it Cost-effective to Use Credit Card to Send Money to India?
Planning to send money to India through a credit card? You need to know that it is easy but expensive to transfer money to India through credit cards on a regular basis.
Transfer fee and currency exchange rates impact remittances to a great extent. For instance, it is a quick and easy procedure to send money from credit card but if you are planning to do it on a regular basis, this mode can be quite expensive. In this article, we will be mentioning the basics of credit card money transfers and why it is expensive.
Ways to Send Money through Credit Card
There are several online money transfer agencies with the help of which you can transfer money to India from your credit card or a foreign bank account. It doesn’t take much time for the money to reach the beneficiary account, maybe a few hours or a couple of working days. Some banks and remittance service providers offer services through which you can use your credit card for funds transfer and the cash will be available at the pick-up location within few minutes.
Here’s what happens when you send money to India through a credit card:
When the fund is debited from your credit card for remittance to another country, the amount is not treated as credit charge but as a ‘cash advance’. Cash advance is mainly a service provided by credit card issuing companies, allowing cardholders to borrow or withdraw cash to a certain limit. This mean, when you use the card for transferring money overseas, you are not using the credit in your card but borrowing money from the credit card issuing company.
Cash advances are mainly short-term loans that need to be repaid within the revenue cycle. The only drawback is that you cannot take cash advances for the full amount of your credit limit. You will have to bear a high interest rate when you repay this advance amount. If you remit a large amount, your interest rate will also be high.
Why is it Expensive to Use a Credit Card?
Remittance through credit card is easy and quick; however, it can burn a hole in your pocket if you send large amounts overseas on a regular basis. There is a lot of hidden fee that you need to bear which many credit card users don’t even realize. For instance, they have to give away a huge fee for credit card processing in terms of international money transfers.
Credit card fees are high as the card issuing company charges merchants multiple fees when transactions are placed. They not only charge a fixed fee to have a merchant account but also charge fee for each transaction (2-2.5%). In some cases, credit card companies also charge an “inquiry fee” (25-30%) per transaction.
Due to this, money transfer companies that offer the facility of credit card transfers, end up paying a high premium to the card issuing company. Money transfer companies have their fees massively marked up. If they pay high fee for offering credit card service, they will pass the cost to customers at a certain markup, making remittance expensive.
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ABOUT THE AUTHOR
Blaine works for a remittance agency. He also writes blogs on how to send money to India and what are the different modes to transfer money to India.