By Deepesh Varma
Studying abroad offers an unparalleled opportunity for personal growth, cultural exploration, and academic advancement. As students prepare to embark on this life-altering journey, it’s crucial to get equipped with essential knowledge about foreign exchange, or forex. Effectively managing expenses, careful budgeting and planning are essential as students would be dealing with foreign currencies.
As an Indian student pursuing education overseas, one has to convert rupees into the currency of the study destination. Exchange rates reflect the relative worth of one currency in comparison to another, and they play a significant role in determining the funds one will have during their stay.
Here are some of the guidelines that can help students navigate the intricacies of currency exchange, minimize costs, and maximise their financial well-being.
Application and college fees
The preferred method for payment route, including for advance payments of college fees is wire transfer. It can be done through any RBI-authorised service in India. Before proceeding, it is important to check with the forex company if it is authorised to facilitate such wire transfers and enquire about the specific medium they use for transfers. Mostly, swift transfers are the preferred medium. Students can also carry the fee amount on their forex prepaid cards in case they opt for in-person payment abroad.
GIC accounts
A Guaranteed Investment Certificate (GIC) serves as an investment option specifically designed for international students in Canada. Canadian banks provide this account, requiring students to deposit a set sum of money. The deposited amount serves as evidence of funds and is subsequently disbursed to the student on a monthly basis, accompanied by interest, to cover their educational and living expenses during their study abroad period. To deposit the funds, wire transfer via authorised services is the recommended method in this case.
Cash currency
Keep the cash forex to a minimum due to the associated risks of carrying it. Nowadays, there is an increased prevalence of card payments instead of cash in most student-oriented countries like the USA, UK, Canada and Australia. Students must also ensure to buy cash from trustworthy and reliable forex vendors to avoid the risk of counterfeit currency notes.
Counterfeiting is a prevalent strategy and it is essential to develop familiarity with the currencies to safeguard oneself against fraudulent activities. By examining features such as watermarks and borders, one can detect counterfeit money. It is advisable to opt for reputable and reliable foreign exchange services whenever engaging in currency transactions.
For maintenance and living expenses
For daily expenses, it is advisable to carry a Forex prepaid card while studying abroad with special schemes such as a free International Student Identity Card, free ATM withdrawal or complimentary lounge access. Cheaper than wire transfers, it is a cost-effective option and offers convenient online reloading or top-up options.
Try to obtain Forex prepaid cards from reputed services to ensure a proper reloading facility and guaranteed reliable customer service. Nowadays, the cards are available in multiple currencies, all consolidated into a single card, which can be beneficial for students with diverse currency requirements.
Forex prepaid cards Vs cash, debit, or credit cards
No extra charges
There is no issuance fee for Forex prepaid cards that can be bought easily in India. Such fees for international debit cards can vary but are typically limited to a maximum of Rs 500. For international credit cards, the issuance fee is usually within Rs 1,500. Some companies also give the facility of free ATM withdrawal with their Forex prepaid cards.
For international debit cards, the withdrawal fee can go up to Rs 500 per transaction, while credit cards may have a withdrawal fee of up to Rs 1,000 per transaction. Forex cards also do not have merchant fees, whereas, for international debit and credit cards, an additional 3.5% merchant service fee is charged.
Foreign exchange rates
Forex prepaid cards offer fixed exchange rates at the moment of loading, ensuring no chance of rate changes. On the other hand, international debit and credit cards do not provide the option to fix rates, resulting in transactions being subject to the prevailing highest rates of the day. No additional conversion charges are also applicable for Forex prepaid cards, whereas, for international debit and credit cards, a cross-currency markup of 4-6% is applied on every transaction.
As students prepare to study abroad, understanding foreign exchange is crucial for effective financial management. By keeping some guidelines in mind, students can navigate currency exchange intricacies and ensure their financial well-being. Careful planning and choosing well-known forex services can help students have a smooth study abroad experience.
(Author is Executive Vice President, Foreign Exchange, Thomas Cook (India) Limited)