How an Entrepreneur Can Manage Forex Needs Smartly
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Managing your own business is no small feat. From managing the day to day operations to working on the next growth strategy, all of it takes a lot out. You have already undergone the daunting task of setting up a business but managing finances the right way is now a top priority. If your business involves frequent travel abroad,here’s a quick guide to help you manage your Forex needs.
Go low on cash
You would have heard this before, but just to make sure you have got this right, we would like to break it down for you and explain why you need to budget your travel expenses. This will help you plan your expenses in advance. It is important to split your expenses and carry about 20 to 30 per cent of the amount in currency notes that can be used for paying taxi fares, tips and so on. While the remaining 70 to 80 per cent should be loaded on to your Forex card. Cash is the riskiest way to carry money while travelling abroad and loss of Forex at a foreign land will affect your spending and disrupt your travel plans.Besides this, using cards will help you easily track your expenses and hence ensure that you can track your expenses well.
Buy from an authentic source
Apart from banks and licenced money changers, some travel agents also, at times, arrange for forex. Therefore, it is imperative that you know the pros and cons of buying from various entities. Buying from banks involves locating which branch of your bank sells forex. All branches are not authorised to sell forex, especially the currency notes. On the other hand, buying forex from Money Changers with an online presence may get you doorstep service and better rates. Do a basic research before buying forex and alsomake sure you carry the invoice with you, especially if you will be carrying a large amount of foreign currency.Lastly, avoid the grey market at any cost.
Opt for Travel/Forex cards
Travel cards or Forex Cards are sold by most of the financial institutions that are into the money changing business and it is possible to pre-load these cards with multiple foreign currencies. Upon completing the KYC procedure, you may be charged a nominal amount of Rs 100-200 for issuing the card, while most provide the card free of cost. After the KYC procedure is completed you need to remit an amount (equivalent to the sum you want in foreign currency) to the Authorised Dealer selling the card.
With the help of these cards you can manage spends overseas and you also have the benefit of locking the rate for the fund loaded in the card and spend across point-of-sales terminals. Some cards have multiple wallets, which mean multiple currencies can be loaded on the card. The card has built in artificial intelligence which identifies the home currency of the POS Machine and throws out that currency first, which ensures that there isn’t any cross-currency conversion charge levied. If the home currency gets exhausted, the other currencies loaded on the wallet get converted to the home currency of the POS machine, however, that will involve cross currency conversion charges.You may also use the card to withdraw cash from any ATM and in case you use the card at the ATM you will be charged as per withdrawal from the issuing bank.
The added benefits of using a prepaid card are –
- It is safe and secure as most of them are chip & pin enabled
- In case of theft or loss of your prepaid travel card, you can have the card blocked and transfer the funds to your new replacement card. This replacement card is usually given as a backup along with your forex card kit
- You can top up the card whenever you run out of money
- Some cards even provide insurance service at no additional cost
Avoid the usage of debit/credit cards at ATMs abroad
Debit and credit cards let you access funds at ease when you are out of money, only if they are ‘International’ cards. However, when you use it outside the country the transaction happens in the foreign currency and currency conversion mark-up ranging up to 5 percent will we charged in addition to the transaction fee which could range from 1% to 2.5%. . Also, as with all credit card transactions, if you don't fully repay the amount within the stipulated time, you could be charged an interest rate of 18 per cent to 24 per cent. Therefore, it is advisable to use Debit/Credit cards only in case of emergencies like losing currency notes, forex travel cards balance getting exhausted while shopping or in the interim period before the card gets topped up. You should make majority of your transactions abroad with forex cards
This might sound a little cumbersome, but trust us, you just need to take note of a few things to make your travel hassle free. The right way of managing your forex needs is by choosing a mix of cash and cards that suit your travel plans. For frequent travellers they could opt for one regular travel card and have a credit card for emergencies, apart from carrying certain amount of currency in cash. If your trip involves going to multiple destinations it is important to note which currencies are accepted in those countries and load that currency on your card(if that currency option is available), for example in Europe not all countries transact in Euros. Re-check any restrictions that a country may have for foreign travellers.
Here’s to a profitable business travel!