Studying abroad is a dream for many Indian students. However, one of the major factors that is necessary to be considered is the currency exchange and the cost associated with it. While students often focus on tuition fees and living expenses, they might overlook the hidden costs of currency exchange. These costs can add up and negatively impact the overall. To understand what factors are required to understand while exchanging currency, continue reading further.
Table of contents
Exchange Rate Markups
When you exchange Indian Rupees (INR) for foreign currency, banks and currency exchange services apply a markup on the exchange rate. This means you often receive less foreign currency than the actual market rate.
For example, if the market rate is 1 INR = 0.012 USD, the service might offer 1 INR = 0.011 USD. Here, the difference in the exchange rate will be the profit for the service provider.
You should always compare the currency exchange rates across multiple providers and consider using online platforms or fintech services that offer competitive rates with minimal markup. You can also use a zero forex markup card to save money for currency exchange.
Also Read: Check here all the major differences between forex card and international debit card
Service Fees and Commissions
Currency exchange services charge a fee or commission for their service. This fee can be a flat rate or a percentage of the total amount exchanged. For small amounts, a flat fee might be negligible, but for larger sums, it will be very high. To avoid this kind of trouble, you can look for services that offer fee-free exchanges or minimal fees. Some online services and apps provide transparent fee structures, making it easier to calculate the total cost.
When transferring money internationally, there are often hidden charges involved. These can include intermediary bank fees, receiving bank fees, and currency conversion fees. These charges can decrease the amount received by your overseas account. Bank or intermediaries may deduct directly from the net amount being transferred. The best way to avoid these charges is to use a multi-currency forex card or MCTC. Also, you can use money transfer services that specialise in international student transfers and offer transparent, low-cost options.
ATM Withdrawal Fees
Using your Indian bank card to withdraw cash from ATMs abroad can attract high fees. These include foreign ATM fees, foreign transaction fees, and higher exchange rates. Instead of an international debit card, you can use a Forex card to withdraw money from an ATM.
You can also open a local bank account in the host country and transfer larger sums of money at once to avoid frequent withdrawal fees.
Dynamic Currency Conversion (DCC)
Transaction done through debit or credit cards or a Forex card may allow you to pay in INR instead of the local currency. This service is known as Dynamic Currency Conversion (DCC). This service usually comes with higher fees and poor exchange rates. Always pay in the local currency to avoid the extra costs associated with DCC.
Traveller’s Checks and Prepaid Forex Cards
Payment through traveller’s checks and prepaid Forex cards is one of the best ways to make payments abroad. They can also come with hidden fees. These might include issuance fees, reload fees, and inactivity fees. Always try to evaluate the total cost of using these instruments, including all potential fees, and compare them with other options like cash or direct bank transfers.
Also Read: Check here all the major differences between Forex Card and Credit Card for international students.
Exchange Rate Fluctuations
Exchange rates can fluctuate significantly which ultimately impacts the amount of money you receive when exchanging currency. Timing your currency exchange poorly can lead to substantial losses. Always monitor exchange rates and try to exchange currency when rates are favourable. Some services offer rate alerts to help you exchange at the best possible rate.
Being informed about the hidden costs of currency exchange is important for students planning to study abroad. By being aware of these costs and taking proactive steps to minimise them, students can manage their finances more effectively and ensure that their money goes further. Check some FAQs based on Hidden Costs in Currency Exchange below:
FAQs
Exchange rate markups occur when banks or currency exchange services offer a rate that is lower than the actual market rate. For example, if the market rate is 1 INR = 0.012 USD, the service might provide 1 INR = 0.011 USD.
Service fees and commissions are charges imposed by currency exchange services, either as a flat rate or a percentage of the total amount exchanged. For large sums, these fees can be high.
International money transfers can involve hidden charges such as intermediary bank fees, receiving bank fees, and currency conversion fees. These deductions can reduce the amount received in the overseas account.
Withdrawing cash from ATMs abroad using an Indian bank card can incur high fees like foreign ATM fees, foreign transaction fees, and higher exchange rates. To avoid these costs, students can use a Forex card for withdrawals or open a local bank account in the host country to transfer larger sums of money at once.
Dynamic Currency Conversion (DCC) allows transactions done through debit, credit, or Forex cards to be paid in INR instead of the local currency. This service involves higher fees and poor exchange rates.
To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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