Using credit-debit cards abroad will be expensive, banks increased overseas fees

Axis Bank and Kotak Mahindra Bank are increasing the Dynamic Currency Conversion Charge (DCC) on their credit and debit cards respectively. DCC applies when a customer uses a card to pay in rupees for a purchase abroad, allowing the foreign merchant to handle the conversion process instead of the card issuing bank. According to the changed terms and conditions of the bank, Axis Bank will increase the DCC fee on its credit cards from 1.5 percent to 3.5 percent from August 28, 2026. Kotak Mahindra Bank will increase the fees on debit-card transactions from 1 per cent + GST ​​to 3.5 per cent + GST ​​from August 1.

Axis Bank will increase the DCC markup on MyZone, Select, Privilege and Neo credit cards from 1.5 percent to 3.5 percent from August 28, 2026. The charge on Magnus and Magnus for Burgundy cards will increase from 1.5 percent to 2 percent, while Olympus cardholders will be charged 1.8 percent. Kotak Mahindra Bank will increase DCC fees on debit-card transactions from 1 per cent + GST ​​to 3.5 per cent + GST ​​from August 1. Before these two, ICICI Bank had increased the charge on all its debit cards from 1 percent to 3.5 percent + GST ​​on June 21.

Cost of cross-border processing

Banks have not publicly stated anything about the reasons for these changes. However, these increases bring DCC charges closer to the foreign-currency markup of about 3.5 percent charged on most standard cards. An official with knowledge of the matter said these changes could help issuing banks recover the costs of card-network and cross-border processing. Additionally, foreign travel, international e-commerce and the increasing number of payments made to digital merchants registered abroad may also generate higher fee income.

What is DCC and why is it chosen?

Experts say that when customers choose DCC, the transaction is processed in Indian rupees and the issuing bank does not get the traditional forex markup that it gets when payments are made in the merchant’s local currency. Due to increase in DCC charge, the financial situation becomes almost the same in both the payment options and the benefit of pricing before billing in rupees gets lost. This charge is separate from the foreign-currency markup that occurs when customers pay in the merchant’s local currency. Under DCC, the exchange rate is usually decided by the merchant or its payment processor. Apart from this rate, DCC fee of the issuing bank and GST may also be applicable.