Using credit and debit cards abroad to become costlier; banks hike overseas fees..

Axis Bank and Kotak Mahindra Bank are raising Dynamic Currency Conversion (DCC) charges on their credit and debit cards, respectively. DCC applies when a customer uses their card to pay in rupees for purchases made abroad, allowing the foreign merchant—rather than the card-issuing bank—to handle the currency conversion process. Under the revised terms and conditions, Axis Bank will increase the DCC fee on its credit cards from 1.5% to 3.5%, effective August 28, 2026. Kotak Mahindra Bank will raise the fee on debit card transactions from 1% plus GST to 3.5% plus GST, starting August 1.

From August 28, 2026, Axis Bank will increase the DCC markup from 1.5% to 3.5% on its MyZone, Select, Privilege, and Neo credit cards. The charge on Magnus and Magnus for Burgundy cards will rise from 1.5% to 2%, while Olympus cardholders will be charged 1.8%. Kotak Mahindra Bank will increase the DCC fee on debit card transactions from 1% plus GST to 3.5% plus GST, effective August 1. Before these moves, ICICI Bank had already raised the charge on all its debit cards from 1% to 3.5% plus GST on June 21.

**Cost of Cross-Border Processing**
The banks have not publicly disclosed the reasons for these changes. However, these hikes bring DCC charges closer to the foreign-currency markup of approximately 3.5% typically applied to standard cards. An official familiar with the matter stated that these changes could help issuing banks recover costs associated with card networks and cross-border processing. Additionally, the rising volume of foreign travel, international e-commerce, and payments to digitally registered merchants abroad could lead to higher fee-based income. 

What is DCC, and why is it chosen?
Experts note that when customers opt for DCC, the transaction is processed in Indian Rupees, preventing the issuing bank from earning the traditional forex markup it would otherwise receive on payments made in the merchant's local currency. The imposition of DCC charges effectively equalizes the financial outcome of both payment options, negating the pricing advantage that billing in Rupees would otherwise offer. This charge is distinct from the foreign currency markup applied when customers pay in the merchant's local currency. Under DCC, the exchange rate is typically determined by the merchant or their payment processor; in addition to this rate, the issuing bank's DCC fee and GST may also apply.

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