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Understanding Base Rate vs Charged Rate for International Transactions

Overview

When making international purchases, especially using Indian credit/debit cards, the final amount charged often exceeds the Google-listed currency conversion rate. For Merciglobal Cloud ERP customers and team members—including developers and sales professionals—this detailed guide clarifies the various markups and hidden charges involved in such transactions.

Example Scenario

  • Google / Market USD-INR Rate: ₹89.60
  • Final Bank Charged Rate: ₹96.34
  • Total Uplift: ₹6.74 (~7.5% higher)

Detailed Breakdown of Charges

1. Visa / Mastercard Network Markup

  • Description: Currency conversion rate set by Visa or Mastercard before the bank adds fees.
  • Rate Impact: Typically 0.5% to 1.5% higher than Google's rate.

  • Example:

  • Base: ₹89.60

  • After Network Markup (~1%): ₹90.50
  • Difference: +₹0.90

2. Bank Foreign Currency Markup (FCM)

  • Description: Charged by your Indian bank.

  • Typical Rates:

  • Standard cards: 3% to 3.5%

  • Premium cards: 2% to 2.5%

  • Example:

  • On ₹90.50, a 3.5% markup adds: +₹3.17

3. GST on Forex Markup

  • Description: 18% GST is applicable only on the markup amount.

  • Example:

  • On ₹3.17 markup, GST: +₹0.57

4. Cross-Border Fee / Merchant Surcharge

  • Description: Additional fee levied when a transaction involves a foreign merchant or is routed through an international payment processor.
  • Typical Charges: Ranges from 1% to 2% depending on the bank and the card network.

  • Example:

  • On ₹90.50, a 2% cross-border fee: +₹1.81

Summary: Most Likely Real-World Case

Component Amount (₹)
Base Rate 89.60
Network Markup +0.90
Bank Forex Markup (3.5%) +3.17
GST on Markup +0.57
Cross-Border Fee (2%) +1.81
Total 96.05

Remaining Difference (~₹0.29) May Be Due To:

  • Dynamic Currency Conversion (DCC)
  • Weekend / Settlement day spread

⚠️ Hidden Cost Alert: DCC (Dynamic Currency Conversion)

What is DCC?

  • If a merchant displays prices in INR instead of USD or processes payments via a non-US acquiring bank, an extra 4%–6% may be silently added.

Impact:

  • This can inflate a ₹94.24 rate to ₹96.34 or higher.

Final Justification for ₹96.34

Item Rate Impact (₹)
Normal Forex + GST ~4.60
Cross-Border Fee ~1.81
DCC / Weekend Spread ~0.93
Final Effective Rate 96.34 ✔️