You had been saving up for this wonderful trip to Europe and you finally made it! You spoilt yourself silly with more than an eyeful of Europe, some fine dining and went a bit overboard with your shopping as well!

You could afford some of the unplanned expenses thanks to your international credit card! You made sure you did the smart things and noted down the exchange rate too on the day you were making the transactions! You did some calculation of your own and determined with all the conversions that your credit card bill was likely to tally to around Rs. X.

After a jolly good time you arrive at home and begin the daily grind! Soon your credit card bill also arrives! What follows is shock! The bill amount is nowhere the nice round number you had in mind! It overshot it by nearly five to six per cent. In this article, we will find out how the amount on your credit card is calculated, so that you can take this into account to avoid unpleasant surprises.

Q Why do calculated value and amount on the credit card statement differ?
The two entities invol-ved in the transaction apply additional fees for a foreign credit card transaction resulting in an additional cost of 5 to 6 per cent for the end user. The first entity being the issuing bank and the second, network service providers like VISA.

Q Why is additional fee applied?
The primary reasons for additional fee is the additional cost involved with currency conversio.

Q Why type of charges are collected and how much?
There are basically three types of charges — foreign currency conversion fee, foreign transaction cha-rge and cash advance fee.
n Foreign currency conversion fee: Since you own an Indian credit card, your balance is automatically in Indian rupees. When you do a transaction overseas, say for 50 euro, you will be charged a foreign currency conversion fee as well. Visa and MasterCard automatically charge a 1-2% fee on foreign currency exchange and anything in excess of it is generally a small margin of profit for the bank.
n Foreign transaction charge: Irrespective of the currency and transaction amount, providers charge a foreign transaction charge of around 2.5 per cent of the transaction.
n Cash advance fee: If you are using your credit card overseas, cash withdrawal will increase the fees. You can be imposed an additional fee every time you withdraw cash overseas.

Q What about the currency coversion rate on the day of transaction?
The exchange rate that is applied to a transaction is the exchange rate as of the day of settlement, which is the day that VISA or MasterCard determines the settlement amount to be exchanged between the acquirer and the issuer. The settlement date is therefore typically different from the date of the actual transaction. So don't be surprised if the exchange rate you were using for calculation differs from what has actually been used, as your transaction might have been posted to VISA or MasterCard after one or two days by your merchant. The exchange rate is calculated one day in advance by Visa and MasterCard and is applicable throughout the day for every transaction at the same rate.

Q Where can we find information about these charges?
To avoid surprises in future, it is advisable to be equipped with the complete knowledge of char-ges which will be applied on your credit card transaction. The data of foreign currency conversion fee is available on VISA and MasterCard websites. Please refer it just before you travel as these rates keep on changing.
The data of foreign transaction charges and the cash advance fee is available with the issuing bank such as State Bank of India, ICICI Bank and you can call their customer care to find out the same before packing your bags. These charges are also dynamic and you might see them fluctuating at regular intervals.
(The author is CEO of BankBazaar.com)