Axis Bank will increase dynamic currency conversion (DCC) fees on credit cards to 3.5% from the current 1.5%, effective August 28, 2026, according to the bank's revised terms and conditions. Kotak Mahindra Bank will raise DCC fees on debit-card transactions to 3.5% plus goods and services tax (GST) from 1% plus GST, effective August 1. The DCC mechanism allows customers to pay in rupees for overseas purchases, with offshore merchants handling the conversion process instead of the card-issuing lender.
Under the new structure, Axis Bank will raise DCC markup on MyZone, Select, Privilege and Neo credit cards to 3.5% from 1.5%, effective August 28, 2026. The charge on Magnus and Magnus for Burgundy cards will increase to 2% from 1.5%, while Olympus cardholders will be charged 1.8%. Kotak Mahindra Bank will implement the 3.5% plus GST rate across all debit card categories, representing a significant increase from the previous 1% plus GST structure. This aligns Kotak's rates with most banks currently charging similar foreign currency transaction fees.
Axis Bank has implemented additional unfavorable changes beyond DCC fee increases, including raising late payment fees to a maximum of ₹1,300 and removing reward points on specific categories including gift cards, bridge fees, road fees, and toll payments. These adjustments effectively reduce the overall value proposition of Axis credit cards, with social media reactions reflecting growing frustration among cardholders who expected better service and rewards in return for annual fees and loyalty. The combined impact of elevated markup fees, potential foreign transaction fees, and reduced rewards can substantially increase the effective cost of using credit cards abroad.
The rate increases represent a broader industry trend, with ICICI Bank having already hiked DCC fees on its debit cards to the same 3.5% plus GST rate last month. Multiple reports suggest these hikes are partly attributed to increasing operational costs, regulatory requirements, and efforts to manage foreign exchange risks in a volatile global economy. Experts indicate these hikes help banks cover extra costs tied to global transactions while maintaining fairness between different payment types. The DCC system operates with merchants setting exchange rates and banks adding their own fees on top, making it essential for customers to compare rates before making overseas purchases.
As competition intensifies in India's banking sector, experts suggest that customers should carefully review their card benefits before traveling or making international purchases. Alternatives such as forex cards, multi-currency accounts, or cards from banks with lower or zero markup fees may offer better value. Some fintech solutions and travel-oriented cards are also emerging as competitive options that waive or minimize such charges. As banks like Axis and Kotak may need to reconsider aggressive fee hikes if they wish to retain their premium customer base in an era of greater choice and transparency.
