Credit forex

Investors can also transfer funds into their trading accounts from an existing bank account or send the funds through a wire transfer or online check.

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How Do You Fund a Forex Account, credit forex.

When choosing to perform a wire transfer, keep in mind that most banks will charge about $30 per wire, and there may be a delay of two to three days before the amount will show in the recipient’s account for the first transfer performed. Learning the ins and outs of investing in a market that contains foreign currencies can be a useful skill to develop in today’s hyper-connected world.

How do you fund a forex account?

The forex (FX) market is where currencies from around the world are traded. A foreign exchange account is typically what is used to trade and hold foreign currencies online. Using these accounts is easier than it has ever been in the past. Typically, you will just need to open a new account, deposit the amount of money you choose in your country’s currency, and then you are free to sell and buy currency pairs as you see fit.

Key takeaways

Forex accounts are used to hold and trade foreign currencies.

It is easier than ever for individuals to participate in forex trading, due to the development of margin accounts and electronic trading.

You can invest in forex with as little as $1,000.

The biggest difference between trading equities and trading on forex is the amount of leverage required.

Forex accounts can be funded by credit card, wire transfer, personal check, or bank check.

In the past, currency trading was limited to certain individuals and institutions. That's because the funds required to play were significantly higher than for any other investment instrument. However, with the development of electronic trading networks and margin accounts, requirements have changed. Although nearly 75% of forex trading is still done by large banks and financial institutions, individuals are now able to invest in forex with as little as $1,000—thanks in large part to the use of leverage. Despite these changes, making high returns on highly-leveraged currency trades can be difficult, and will require a good amount of patience and skill.

How forex trading works

By using a margin account, investors essentially borrow money from their brokers. Of course, margin accounts can also be used by investors to trade in equity securities. The main difference between trading equities and trading forex on margin is the degree of leverage that is provided.

For equity securities, brokers usually offer a 2:1 leverage to investors. On the other hand, forex traders are offered between 50:1 and 200:1 leverage. This means that traders need to deposit between $250 and $2,000 to trade positions of $50,000 to $100,000.

Learning the ins and outs of investing in a market that contains foreign currencies can be a useful skill to develop in today’s hyper-connected world.

How to fund a forex account

Forex traders are usually given several options when deciding how they will deposit funds into trading accounts. Credit card deposits have by far become the easiest way. Since the development of online payment services, digital credit card payouts have become increasingly efficient and secure. Investors can simply log in to their respective forex accounts, type in their credit card information and the funds will be posted in about one business day.

Investors can also transfer funds into their trading accounts from an existing bank account or send the funds through a wire transfer or online check. When choosing to perform a wire transfer, keep in mind that most banks will charge about $30 per wire, and there may be a delay of two to three days before the amount will show in the recipient’s account for the first transfer performed.

Traders are also usually able to write a personal check or a bank check directly to their forex brokers. The only problem with using these other methods is the amount of time that is needed to process the payments. For example, paper checks can be held for up to 10 business days (depending on the individual’s bank and the state) before being added to a trading account.

Credit card forex brokers

Credit cards are used by millions of people on a daily basis, and while this is a great tool that allows you to quickly get access to more money, it can also cause you a lot of trouble, especially if you don’t keep a close eye on your bank balance.
Credit cards are offered by just about every bank, so it is relatively easy to get one for you. However, if you are planning on getting a credit card, you should check your bank’s terms and conditions, and taxes that apply to your card. You also need to read the entire contract and see if there are any hidden fees or taxes that you don’t want.

Remember that most credit cards have a certain spending limit, and if you go over it, you’ll have to pay a higher interest rate. The good thing about credit cards is that they are easy to get and use. All you need to do to get a credit card is to visit a bank and browse their offers. Credit cards can be used just about everywhere – shops, gas stations, etc. Many people prefer using credit cards for online payments or for depositing money in different websites. Thousands of forex traders use a credit card to deposit funds into their accounts.

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How to fund forex account with credit card

Making a payment with a credit card is not particularly difficult. In fact, this is one of the simplest payment methods on the internet and millions of people use credit cards on a daily basis. Where forex trading is concerned, you will be hard-pressed to find a platform that does not support credit cards.

Often, you will see that forex platforms have made banking easy and accessible for the whole user base. While each website has its own peculiarities, all follow a similar model. To deposit with a credit card, you will have to find the payments page and select the credit card option from the list of supported service. From then on, the broker will require you to enter your credit card information. This includes the 16-digit number on the front, the expiration date of the card, your name as stated on it, and the CVC security code on the back of it.

Once this is done and you have also entered the sum you wish to deposit, you simply have to confirm the transaction. This will not take more than a few seconds and your money will be immediately available to you.

How to withdraw from forex account with credit card

When the time comes to withdraw your balance or a portion of it, you will find that the cashout process is not that different from depositing. Simply head over to the payments page and select the credit card option. Then, you will need to enter the appropriate information, if required, as well as, the amount that you wish to withdraw.

Once you put in your withdrawal request, it can take some time for the staff to review and confirm it. This can take one or two business days and when the confirmation is given from the staff, it will take several more business days for the transaction to clear. This can range between 1 and 5 working days, depending on your bank and country of residence. Something else to keep in mind is that you need to be verified before a withdrawal can be issued.

Benefits of using credit cards for forex trading

Using a credit card certainly comes with several benefits which are the primary reasons why people choose them in the first place. There are many advantages that come with credit cards, but for now, we will focus on the main ones and give a brief rundown of each.

When you use a credit card for forex transactions, you can always rely on smooth and convenient payments. Credit cards are able to process deposits in mere seconds and you can start trading immediately. When compared to more traditional payment solutions, such as bank transfers, which can take anywhere from hours to days to process, credit cards are obviously superior in this regard. Not only that, but credit card payments are often free, with little or no transaction fees being imposed. Few other transaction solutions can boast of this and this shows us why this banking method is preferred.

Another thing to take into account is that credit card payments are easy and convenient to pull off. All you have to do is enter the card information in the provided form and confirm the payment. Moreover, many websites will allow you to save this data for your next deposit, so you only need to do it once. Additionally, since everyone has a credit card, practically all forex platforms support credit cards in some capacity. You will never have to worry if your broker accepts cards since they all do in practice.

Disadvantage of using credit cards for forex trading

Of course, credit cards are not the end-all, be-all of online transactions. For all their advantages, credit cards are not perfect and have some drawbacks you should also take into consideration. For instance, withdrawals via credit card are quite slow and can take several business days to process, based on your country of residence and your bank. There are other services which allow for much faster cashout, namely ewallets, such as skrill or neteller. The slow processing times is something that you will have to get used to if you wish to use credit cards consistently.

Another negative aspect of credit cards is that you have to reveal their full information in order to make a transfer. While this data is protected with heavy encryption, it does leave a bad taste in some customers’ mouths. Much like the previous issue, this one can also be circumvented by using an alternative payment method. When it comes to protecting your money and identity on the internet, you should take no chances. Therefore, if you feel uncomfortable revealing your credit card information, you would best pick a different banking solution.

Fees and limits when using credit cards to trade forex

As far as fees are concerned, we cannot provide any concrete information. Credit cards are offered by every bank and each sets its own specific terms and fee structure. This is something that you will have to take up with your financial institution, as we have no way of knowing that. More often than not, however, credit card transactions are free by themselves. However, certain broker websites may charge commission on credit card payments and these cannot be avoided. If this bothers you the only way to get by it is to switch broker websites.

Additionally, transaction limits are also a point to consider. Much like the fees, these are not set in stone and are subject to the terms of both your bank and the forex trader. Credit cards have one peculiarity realized in the amount of credit that the bank is willing to extend to you. Going over that amount may incur fees if allowed at all. On the other hand, the forex platform may also limit your transactions, but these are usually flexible. Once you establish a status with the broker, the limits may be raised.

Credit card chargeback on forex account

Chargebacks to credit cards are an option when you are cheated in some way by a fraudulent platform. However, while a possibility, they should be used sparingly. If you have the opportunity to freely withdraw your balance, you should take that in lieu of a chargeback. Usually, chargebacks are a last resort and should only be used when you are cheated.

When you submit a chargeback request, the bank will take a look at the matter. However, it is not granted instantly. The platform has the right to dispute the chargeback and will present its arguments against it. The matter can take some time to resolve and is not a sure thing. Moreover, if you request a chargeback the forex trader may ban you from the platform. If the chargeback claim is legit, this should not bother you, but if you have no ground for it, it will prevent you from using an otherwise worthwhile trader.

Security when trading forex with credit cards

In the point about the disadvantages, we mentioned that you have to reveal the full extent of your credit card information. Naturally, you do not want to have this information going around the internet for all to see. Since the forex broker will have to store it somewhere, we need to be sure that it is kept safe and away from prying eyes. To this end, the forex platforms use high-end encryption software to protect your sensitive data. Typically, this security system comes in the form of 128- or 256-bit SSL encryption, the implementation of which has become standard practice across many different business types. What this means for you is that your important information will be encoded so that only authorized individuals may view it. Even in the event of a data leak, the encryption will make it unreadable to third parties and thus, keeping your money and identity protected.

Conclusion

When all is said and done, credit cards represent an easy way to get into forex trading. They offer great flexibility and you can use them just about anywhere. The drawbacks are few and most are negated in some way or another. If you do not want to deal with any other payment services, then this is the right payment method for you.

Forex boost credit goes to PTI govt, senate told

ISLAMABAD: federal minister for industries and production, hammad azhar friday credited the pakistan tehreek-e-insaf (PTI) government for increasing foreign exchange reserves to $ 20 billion, saying the federal government’s prudent policies helped stabilise the economy.

Speaking at the senate following the start of 306th session being presided over by chairman sadiq sanjrani, the minister said the state bank of pakistan (SBP) has foreign exchange reserves of $ 12 billion to $ 13 billion.

“it’s all become possible due to this governments effective and wise economic strategy—to increase exports and remittances.

The current account, he said, that used to show deficit in the past showed a surplus of $1.6 billion during the first five months of current financial year 2020-21. In the same period in the last fiscal year, a deficit of $ 1.7 billion was recorded, he said.

The present government is paying back $ 10 billion of debts annually, he said. “the current government has ensured record debt servicing,” he added.

Moreover, a written reply by finance minister abdul hafeez sheikh at senate question hour regarding foreign exchange reserves suggested that foreign exchange reserves were recorded at $ 14.48 billion in june 2019, $ 18.88 billion in june 2020, $ 19.39 billion in october 2020, $ 20.26 billion in november 2020 and $ 20.51 billion in december 2020.

Meanwhile, hammad azhar told the senate that key development projects worth $ 1.7 billion are underway in gwadar while construction of three special economic zones (sezs) under china pakistan economic corridor (CPEC) has been sped up.

Advisor to the prime minister on commerce and investment abdul razak dawood said in a written reply at question hour that federal government introduced an export package of rs 180 billion to facilitate the business community and arrest the declining trend in exports. During phase-I of the PM package, the exporters of gloves, footballs and other sports goods, leather garments, footwear, surgical and cutlery sectors were provided cash support at specific percentage of free on board (FOB) value of exports, he said. During phase-II, the package was extended with certain modifications by allowing 50 per cent of the incentive to all eligible sectors and the remaining 50 per cent of incentive was linked to at least 10 per cent enhancement in exports as compared to the corresponding period of the last year, he added. During phase III, the package was further extended for the next three years (2018-21) on the same terms and conditions as was approved in the second phase with the addition of more non-textile sectors—electric fans, transport equipment, auto part accessories, machinery including electric machinery, furniture, stationary, fruits and vegetables, meat and poultry, the advisor added.

The opposition staged a walkout from senate alleging that treasury benches failed to address its concerns regarding lieutenant general ® asim saleem bajwa, who, the opposition said, continued to work as chairman CPEC authority despite that CPEC authority ordinance 2019 lapsed last year.

“the CPEC authority ordinance 2019 was lapsed on may 31, 2020, (as confirmed by planning minister asad umar in his written reply). This means the CPEC authority has ceased to function. Then, in what capacity, has asim bajwa recently met the chinese ambassador?” said barrister javed abbasi from pakistan muslim league nawaz (PML-N).

Mushtaq ahmed from jamaat-e-islami (JI) said “an individual facing corruption allegations should not be at the helm of CPEC authority.”

Industries and production minister responded, “why does the opposition want to elevate a person involved in broadsheet and panama papers scandals as the prime minister of this country,” impliedly referring to nawaz sharif.

“the chinese ambassador meets opposition leaders and so many other people. What’s so unusual with his meeting anyone at the CPEC authority? There’s nothing wrong with that,” azhar said. The opposition termed this response as unsatisfactory and staged a walkout but rejoined the house proceedings later.

Advisor to PM on parliamentary affairs babar awan said “the entire pakistan is saying— how this firm broadsheet was hired during the tenure of general ® musharraf— how it was not allowed to work— how NRO one happened— how NRO two happened—the situation necessitates the urgency of a thorough probe into the matter.”

Pakistan people’s party (PPP) parliamentary leader in senate sherry rehman criticised the government for dissolving pakistan medical and dental council (PMDC), which she said, has become a cause of immense suffering for thousands of doctors.

Leader of the house in senate dr shahzad waseem responded, “they (PPP) should not forget that their record in health sector is not good at all. The situation in areas like thar and larkana is known to us. There is no vaccine even to treat dog bite in those areas. Let’s us not indulge in blame game and work together to improve health conditions in pakistan,” he said.

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Credit checking

What is credit checking in forex trading?

Credit checking, with regards to forex, looks into the financial health of counterparties in a currency transaction. This credit check ensures that both parties have the means necessary to cover their side of the transaction in a trade.

Credit checking can also refer to checking the credit of anyone, including one's self. Loans often require a credit check. 401k loans may not necessitate a credit check.

Key takeaways

Credit checking in the forex market refers to looking into the financial position of a counterparty.

Brokers may do credit checks on trading clients, while institutions may run credit checks on other institutions they engage in financial transactions with.

Credit checking may be required when first doing OTC transactions with another party.

Brokers typically credit check clients when they open an account, not prior to each transaction the client makes.

Understanding credit checking

A credit check in the foreign exchange (forex) market is much like the credit check a landlord makes on a potential tenant. The landlord is doing a background check to see if the prospective tenant can afford to make the regular rental payments on time.

Without the process of credit checking, one party in a forex transaction would have no assurances as to the creditworthiness of the other party involved. By engaging in credit checking before transactions take place, confidence is maintained that each party has enough credit to carry out and honor the deal.

Since the 2008 financial crisis, regulation across all markets has become more strict making credit checks a more arduous and lengthy task. In addition to checks, most firms have increased capital requirements for customers, which has acted as a form of a credit check, or safety net against trader's and firms that can't make good their side of the transaction.

In january 2015, when the swiss national bank (SNB) pulled the price floor between the euro and the swiss franc, the value of the franc rose by as much as 25 percent in a matter of minutes, which wiped out margin traders, and the losses were borne by the brokers. While credit checks could not have aided these losses, the increase in capital requirements has potentially reduced the magnitude of the losses should an event like this occur again.

When credit checking occurs

Retail traders may undergo credit checking when opening a forex account, or any type of trading account. The broker is verifying the financial viability of the trader, should that trader get into a position where the money in their account can't cover their outstanding losses, essentially creating a negative balance in the trader's account.

If the client is unable or unwilling to cover the loss, the broker may have to bear those losses and then decide if they wish to legally pursue the trader for funds to cover the losses. Credit checking helps determine if the client is likely able and willing to cover losses or negative balances.

Credit checking on retail clients, opening retail trading accounts, is typically done when the client opens the account, and not for each transaction.

Over the counter (OTC) transactions, typically between businesses or financial institutions, may do credit checking on a counterparty on an as-needed basis. For example, if two parties are about to engage in a large currency transaction, they may wish to verify each other's financial position via a credit check prior to engaging with each other.

Once parties are aware of each other's financial position they may not require credit checks each time they do a transaction, especially if it is under a certain dollar amount. If the transactions increase in size, or one party believes there has been a material change in the financial position of the other, credit checking may be required again.

Example of credit checking between institutions

Assume that two private companies want to engage in a currency swap. They are private, so their financial information may not be publicly disclosed and therefore a counterparty may not know how that company is doing.

Assume company A needs to swap £10 million for $12.5 million from company B. This implies a GBP/USD exchange rate of 1.25. The parties then agree on what interest rate is tied to each amount. They could both pay a fixed rate, both pay a floating rate, or one party could pay a variable interest rate while the other pays a fixed rate.

The specifics of the deal don't matter too much in terms of the credit check. What does matter is that each party feels the other side can cover their side of the transaction. Swaps are sometimes entered based on the expectation of future revenues or cash flows. Yet those revenues or cash flows may not always materialize. Therefore, company A will want reasonable assurance that company B can exchange the funds back and/or pay any differences in interest rates and exchange rates that may develop between when the swap is initiated and when it expires. Company B will want to see the same from company A.

A strong commercial credit score, as well as other financial information provided by each company, such as their cash position and possibly revenues and expenses, will help each party feel more comfortable with the transaction.

Forex spot rate

What is the forex spot rate?

The forex spot rate is the current exchange rate at which a currency pair can be bought or sold. It is the prevailing quote for any given currency pair from a forex broker. In forex currency trading it is the rate that most traders use when trading with an online retail forex broker.

Key takeaways

This rate is the regularly published continuous quote of exchange rates for all currency pairs.

The spot rate differs from the forward or swap rate.

The spot rate is not discounted for the delay in delivery which gets added to the overnight rollover credit.

Understanding the forex spot rate

The forex spot rate is the most commonly quoted price for currency pairs. It is the basis of the most frequent transaction in the forex market, an individual forex trade. This rate is much more widely published than rates for forward exchange contracts or forex swaps. The spot forex rate differs from the forward rate in that it prices the value of currencies compared to foreign currencies today, rather than at some time in the future.

The global forex spot market has a daily turnover of more than $5 trillion, which makes it bigger in nominal terms than both the equity and bond market. Rates are established in continuous, real-time published quotes by the small group of large banks that trade the interbank rate. From there, rates are published by forex brokers around the world.

Spot rates do not take into account forex contract delivery. Forex contract delivery is oblique to most retail forex traders, but brokers manage the use of currency futures contracts which underpin their trading operations. The brokers have to roll those contracts each month or week and they pass the costs on to their customers.

In this way, forex dealers incur costs managing their risk while providing liquidity to their customers. Most often they use the bid-ask dealing spread and a lower rollover credit (or higher rollover debit depending on the currency pair you hold and whether you are long or short) to offset those costs.

Delivery of forex contracts

The standard delivery time for a forex spot rate is T+2 days. Should a counterparty wish to delay delivery, they will have to take out a forward contract. Most of the time it is the forex dealers that have to manage this. For example, if a EUR/USD trade is executed at 1.1550, this will be the rate at which the currencies are exchanged on the spot date. However, if european interest rates are lower than they are in the U.S., this rate will be adjusted higher to account for this difference. So if either a dealer or their counterparty wishes to own EUR and short USD for a period of time it will cost them more than the spot rate. It should be noted that spot rate delivery times are not standard and may vary for some pairs.

Although the forex spot rate calls for delivery within two days, this rarely occurs in the trading community. Retail traders that hold a position for longer than two days will have their trades "reset" by the broker, i.E., closed and reopened at the same price, just prior to the two-day deadline. However, when these currencies are rolled there will be a premium or discount attached in the form of an increased rollover fee. The size of this fee depends on the difference in interest rates, via the short-term FX swap.

Because the spot rate is the rate of delivery with no adjustment for interest rate differential, it is the rate quoted in the retail market. The retail forex market is dominated by travelers who wish to buy and sell foreign currency whether it through their bank or a currency exchange.

Forward rates

Unlike a spot contract, a forward contract, or futures contract, involves an agreement of contract terms on the current date with the delivery and payment at a specified future date. Contrary to a spot rate, a forward rate is used to quote a financial transaction that takes place on a future date and is the settlement price of a forward contract. However, depending on the security being traded, the forward rate can be calculated using the spot rate. Forward rates are calculated from the spot rate and are adjusted for the cost of carry to determine the future interest rate that equates the total return of a longer-term investment with a strategy of rolling over a shorter-term investment.

Calculating profits and losses of your currency trades

Currency trading offers a challenging and profitable opportunity for well-educated investors. However, it is also a risky market, and traders must always remain alert to their positions—after all, the success or failure is measured in terms of the profits and losses (P&L) on their trades.

It is important for traders to have a clear understanding of their P&L because it directly affects the margin balance they have in their trading account. If prices move against you, your margin balance reduces, and you will have less money available for trading.

Realized and unrealized profit and loss

All your foreign exchange trades will be marked to market in real-time. The mark-to-market calculation shows the unrealized P&L in your trades. The term "unrealized," here, means that the trades are still open and can be closed by you any time.

The mark-to-market value is the value at which you can close your trade at that moment. If you have a long position, the mark-to-market calculation typically is the price at which you can sell. In the case of a short position, it is the price at which you can buy to close the position.

Until a position is closed, the P&L will remain unrealized. The profit or loss is realized (realized P&L) when you close out a trade position. In case of a profit, the margin balance is increased, and in case of a loss, it is decreased.

The total margin balance in your account will always be equal to the sum of the initial margin deposit, realized P&L and unrealized P&L. Since the unrealized P&L is marked to market, it keeps fluctuating, as the prices of your investments change constantly. Due to this, the margin balance also keeps changing constantly.

Calculating profit and loss

The actual calculation of profit and loss in a position is quite straightforward. To calculate the P&L of a position, what you need is the position size and the number of pips the price has moved. The actual profit or loss will be equal to the position size multiplied by the pip movement.

Assume that you have a 100,000 GBP/USD position currently trading at 1.3147. If the prices move from GBP/USD 1.3147 to 1.3162, then they jumped 15 pips. For a 100,000 GBP/USD position, the 15-pips movement equates to $150 (100,000 x .0015).

To determine if it's a profit or loss, we need to know whether we were long or short for each trade.

Long position: in the case of a long position, if the prices move up, it will be a profit, and if the prices move down it will be a loss. In our earlier example, if the position is long GBP/USD, then it would be a $150 profit. Alternatively, if the prices had moved down from GBP/USD 1.3147 to 1.3127, then it will be a $200 loss (100,000 x -0.0020).

Short position: in the case of a short position, if the prices move up, it will be a loss, and if the prices move down it will be a profit. In the same example, if we had a short GBP/USD position and the prices moved up by 15 pips, it would be a loss of $150. If the prices moved down by 20 pips, it would be a $200 profit.

The following table summarizes the calculation of P&L:

100,000 GBP/USD	long position	short position
prices up 15 pips	profit $150	loss $150
prices down 20 pips	loss $200	profit $200

Another aspect of the P&L is the currency in which it is denominated. In our example, the P&L was denominated in dollars. However, this may not always be the case.

In our example, the GBP/USD is quoted in terms of the number of USD per GBP. GBP is the base currency and USD is the quote currency. At a rate of GBP/USD 1.3147, it costs USD 1.3147 to buy one GBP. So, if the price fluctuates, it will be a change in the dollar value. For a standard lot, each pip will be worth $10, and the profit and loss will be in USD. As a general rule, the P&L will be denominated in the quote currency, so if it's not in USD, you will have to convert it into USD for margin calculations.

Consider you have a 100,000 short position on USD/CHF. In this case, your P&L will be denominated in swiss francs. The current rate is roughly 0.9970. For a standard lot, each pip will be worth CHF 10. If the price has moved down by 10 pips to 0.9960, it will be a profit of CHF 100. To convert this P&L into USD, you will have to divide the P&L by the USD/CHF rate, i.E., CHF 100 ÷ 0.9960, which will be $100.4016.

Once we have the P&L values, these can easily be used to calculate the margin balance available in the trading account. Margin calculations are typically in USD.

The bottom line

You will not have to perform these calculations manually, because all brokerage accounts automatically calculate the P&L for all your trades. However, it is important that you understand these calculations, as you will have to calculate your P&L and margin requirements while structuring your trade—even before you actually enter the trade.

Depending on how much leverage your trading account offers, you can calculate the margin required to hold a position. For example, if you have a leverage of 100:1, you will require a margin of $1,000 to open a standard lot position of 100,000 USD/CHF. Having a clear understanding of how much money is at stake in each trade will help you manage your risk effectively.

CREDIT FOREX LIMITED

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Forex card vs. Debit card – which one is better?

Travelling abroad with a lot of cash in your wallet is no longer considered safe, as it is inconvenient for travelers. Getting a prepaid travel card or a forex card from a bank is a much safer and cheaper option when travelling abroad. Forex cards are globally accepted means of carrying foreign currency while travelling abroad. Prepaid forex travel cards are pin protected and are fully replaceable in case they are stolen or lost.

Prepaid travel cards issued by bank to travelers are not subjected to availability, unlike a traveler’s cheque for traveling overseas; they can be loaded and reloaded with any amount of foreign currency at any time. Forex travel cards are accepted at almost all foreign establishments like hotels, restaurants, malls, and stores, etc. Without any extra charge. But what is a forex card, and how does it benefit the travelers while traveling abroad?

What is a forex card?

As the name hints ( forex = foreign exchange ), a forex card is a kind of prepaid card in which travelers can load money in any currency of their choice while traveling abroad. It is globally accepted and can be used just like a debit or a credit card; travelers can either pay for their expenses by swiping this prepaid travel card or withdraw cash in foreign currency at any bank ATM. Even a few years back, a traveler’s cheque used to hold this position of confidence and safety for carrying foreign currencies, but with prepaid travel cards coming into the mainstream, traveler’s cheque is on the verge of becoming obsolete.

Types of forex cards

Forex cards are broadly classified into two categories:

Single currency card– this card, as the name hints, can be loaded only with a particular foreign currency. A single currency card has limited use, and travelers need to pay high cross-currency charges to their bank, if they use it in other currency than what has been loaded.

Multi-currency card – this multi-currency card can be preloaded with multiple foreign currencies, therefore are suitable for travelers who plan to visit various foreign countries. Travelers can also shuffle funds or cash from one currency to another whenever they need it via a prepaid option provided by the bank, if they visit multiple countries with different currencies.

Then, there is also a contactless prepaid travel card available that allows the users to make payments for their purchases at any retail outlet accepting prepaid travel cards only by waving or tapping the card at the payment terminal. In this COVID scenario, this would have been very helpful for travelers, but alas, the ongoing pandemic has snatched away the liberty to move around freely in different countries.

Important things to consider before using a forex card

Before you start using a prepaid travel card issued by your bank, there are certain important aspects (rights reserved) that you should know about how these prepaid travel cards work and why they are better than carrying cash or using credit or debit cards. A prepaid travel card works exactly in the same way as a debit or a credit card. To avail the card, you can apply for the same in your bank, and once the bank approves your application, you would receive the prepaid travel card with a confidential pin. It is always recommended to change your pin once you receive it from the bank (bank’s accounting credit debit is mostly confusing for an individual). Using internet banking, you can load the card with the desired amount of foreign currency, and you are ready to move.

When you are abroad and want to pay for something, just swipe the prepaid travel card at the point of sale just as you do for a debit or credit card transaction. As soon as the money is deducted, you will receive an SMS and email notification from your bank about the transaction and the remaining balance. But for this, you need to sync your mobile number with your bank account. With a prepaid travel card in your wallet, you can get the best deals for shopping without any limits.

However, before applying for a forex travel card in any bank or money exchangers, it is crucial for travelers to do proper research about the features and various benefits of forex cards offered by different banks. Ensure you are not duped with unnecessary charges as some exchangers or banks and may charge hidden fees. Another important thing to remember is that travelers should always buy their prepaid travel cards well in advance before they start their journey abroad, as it may sometimes take 2 to 3 working days to process the foreign currency loading in their prepaid travel cards.

Forex card vs. Debit / credit cards:

Advantages of carrying forex cards over having a debit or a credit card:

1) extra transaction fees can be waived

A forex travel card is usually available at better rates than a traveler’s cheques or cards. With a prepaid forex card in your wallet, you don’t need to pay the extra 2% or 5% transaction fees to the bank that are charged on any international credit or debit cards.

2) no currency conversion charge required; only flat foreign ATM withdrawal fee

When you travel overseas with a debit card in your pocket, you need to pay some extra transaction charges to your bank when you withdraw cash using the debit card from any international atms. Apart from the flat ATM withdrawal fee, users are charged with an additional fee of 1% to 3% from the bank for the cash withdrawal along with the currency conversion rates. On the contrary, withdrawing cash using a forex card will only apply the flat withdrawal, and no extra currency conversion charges. As the card is already preloaded with your preferred foreign currency, you will get that currency only when you withdraw cash from any international atms. You don’t need to stand in long queues in money exchangers or a bank to convert your currency.

This also holds true when travelers swipe their prepaid travel card overseas for shopping or paying cash in a restaurant; there is no extra charge present as the cash being transacted is already in the country’s local currency that is preloaded into your forex card. On the contrary, when using a debit or a credit card overseas for transactions, the bank will apply dynamic currency conversion fees. The bill amount in foreign is the first currency converted to your currency and then charged from your bank’s debit credit card. All these markups, along with the high exchange rate, shoot up the transaction costs when one uses a debit or a credit card abroad.

3) forex card transactions are independent of the fluctuations in the forex market

As the prepaid forex travel cards issued by a bank or exchanger have their exchange rates locked in advance and the forex (foreign exchange) is loaded at a fixed exchange rate on your forex card, they are not susceptible to variable currency rates as in the case of debit or credit cards. Once the rates are locked, the currency’s value in your forex card is not affected by the fluctuations in the volatile forex market.

On the contrary, in the case of a debit or a credit card, the currency exchange rates are not locked in advance, and therefore, they are never in favor of the customers. This unevenness in the exchange rate further escalates when one is traveling abroad for a short time. The value of their local currency is going in a downtrend against most major currencies where he is moving.

4) configurable spending limits

In a forex travel card, the funds are loaded in advance after the bank approves your card application, and also, there are no overdraft facilities available in prepaid travel cards. Therefore, travelers should always be cautious while spending money, so they don’t run short of money while moving in an unknown country.

It helps them to control their temptation to overspend, which is also good for them. While on the contrary, credit cards enabled by the bank, come with an overdraft facility that lets travelers spend more funds than they have in their bank accounts at any given moment.

Disadvantages of carrying a forex card over debit or credit cards:

1) takes time to load money in a forex card

Prepaid forex travel cards may take up to two to three working days to load funds in them once the bank approves your application for a forex travel card or reloading. Therefore, travelers may face problems when they are out of money while they are in other countries. However, this does not happen if you carry a debit or a credit card issued by a bank with you while traveling. Funds are instantly available whenever you require them. Besides, credit cards can also help you lend some extra cash if you need money urgently.

2) some places only accept credit cards

Though forex cards are globally accepted everywhere, some hotels and lounges allow customers only if they possess a valid credit card. This is because if any customers willingly did not pay the hotel bill, the hotel would be able to claim the customer’s unpaid billing amount using his/her credit card details without pre-authorization. On the other hand, a prepaid travel card will not provide this kind of facility. Therefore, these are sometimes not allowed abroad, where hoteliers prefer credit cards.

Final verdict

Therefore, going through the pros and cons of forex cards vs. Other modes of payments, it is induced that you need all of them in proper proportions. The best way to carry money overseas is to have a mixture of travel fund options. For example, you can keep 60% of total expenditure in a forex travel card, and the balance 40% in cash, debit/credit cards as backup.

Faqs

Is a forex card better than a debit card?

Both forex cards and debit cards have their own pros and cons. For example, swiping a forex card abroad to obtain cash does not require any extra transaction fee but swiping a debit card. But then, loading foreign currency into a prepaid travel card is time-consuming. Therefore, it is better to carry funds both in a prepaid travel card, cash, and debit card.

Can a forex card be used as a credit card?

Yes, a forex card operates in the same way as a credit card, and customers can use a forex card for making payments abroad. However, the only difference lies in the fact that there are no overdraft facilities in a prepaid travel card as there are in a credit card.

So, let's see, what we have: forex traders are usually given several options when deciding how to deposit funds into trading accounts, from credit cards to wire transfers. At credit forex