Currency exchange fees are the amount that is charged by the forex service providers when you exchange one currency for another. When you plan to study abroad in a foreign country, currency exchange will be a primary factor which you need to consider. The conversion fee may have a huge impact on your overall budget, living expenses, tuition fees etc. Check all about it, how they work and how you can minimise it in this blog.
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What are Currency Exchange Fees?
Currency exchange fees, also known as forex fees or currency conversion fees, are charges levied by banks, financial institutions and currency exchange providers when you convert one currency into another. Currency exchange fees can vary depending on the method and provider you choose for your currency conversion needs.
Currency conversion fees also vary from bank to bank. If you check HSBC Forex rates, you may find it different from Canara Bank Forex charges. Always research and compare multiple banks and online service providers to get the lowest currency exchange fees.
Also Read: Planning to study in the USA? Check here all about the Bank of India Forex card
How do Currency Exchange Fees Work?
Currency exchange fees work by charging a percentage of the amount being converted or a flat fee for each transaction when you exchange one currency for another. The currency conversion fee can be charged in various forms like transaction fees, conversion spreads (the difference between the buy and sell rates), ATM withdrawal fees, foreign transaction fees on credit cards and forex cards etc. Banks, financial institutions and currency exchange providers determine these fees to cover the costs of the exchange process and to make a profit. Check some of the major types of currency exchange fees below.
Transaction Fees
Transaction fees are flat fees charged each time you exchange currency. Banks, forex brokers, and exchange kiosks apply these fees. For example, if you exchange INR for USD, the bank may charge a transaction fee of Rs. 200 per transaction or more based on the amount and other factors.
Conversion Spread
The conversion spread is the difference between the buy and sell rates of a currency pair. This spread is where currency exchange providers make a profit. For example, if the buying rate for USD is INR 74 and the selling rate is Rs. 76, the spread is INR 2.
ATM Withdrawal Fees
When you withdraw cash from an ATM in a foreign country using your international debit card issued in India, you may incur fees from both your home bank and the ATM operator. These fees can result in huge currency exchange fees if you make frequent withdrawals. Instead of using an international debit card, you can use a multi currency travel card which you can purchase from your home bank. It usually attracts less transaction fees.
How Currency Exchange Fees Impact International Students
It impacts international students by increasing their overall cost of living and negatively affecting their budget. Every time students convert their home currency into the local currency of the country where they are studying, they incur fees that can add up over time. The exchange fees can impact major expenses also like tuition fees, rent, and daily expenses. In order to save money and pay low fees, students can look for zero forex markup cards and use them for transactions at the point of sale (POS) and also withdraw cash from ATMs.
Currency Exchange Vs Dynamic Currency Conversion
Currency exchange involves converting one currency into another at the ongoing exchange rates. It is done usually through banks, forex brokers, or exchange kiosks. Dynamic Currency Conversion (DCC), on the other hand, allows you to make a purchase or ATM withdrawal in a foreign country using your home currency. In this process, the conversion is handled by the merchant or ATM operator at the point of sale. DCC offers the convenience of knowing the exact amount in your home currency but it often comes with higher fees and less favorable exchange rates compared to standard currency exchange methods.
Also Read: Travel cards are one of the most preferred ways to carry money abroad. Check here for some of the cheapest cards for international student
Tips to Minimise Currency Exchange Fees
Currency exchange rates fluctuate every moment based on the international market. If you are planning to study abroad, you must be informed about all the major factors associated with currency exchange like currency exchange fees, process, rates etc. Check some major factors and suggestions below so that you can minimise currency exchange fees.
Compare Exchange Rates
Before converting your currency, compare the exchange rates and fees offered by different providers. Banks, online forex platforms, and local exchange kiosks often have varying rates and fees. Choose the one that offers the lowest rates and fees.
Use Forex Cards
Multi-currency Forex cards are preloaded with a specific amount in foreign currency. They usually attract lower fees compared to using international debit or credit cards abroad. They also provide better exchange rates and allow you to withdraw cash in Foreign currency.
Avoid Airport Exchanges
Currency exchanges at airports usually have higher fees and less favourable rates. If possible, exchange currency in advance or use ATMs to withdraw cash. If there is an emergency and you are running out of time, then only you should prefer currency conversion at airports. This is because airport currency exchange rates are very high which will cost you a lot of extra charges.
Use Online Money Transfer Services
Services like TransferWise (now Wise), Revolut etc offer competitive exchange rates and lower fees for transferring money internationally. Some of the online merchants offer free currency charges up to a certain amount.
This was all about currency exchange fees. Staying informed about the exchange rates and other major factors related to Forex will ultimately help you to save money eventually. Check some FAQs based on currency exchange fees below:
FAQs
Currency exchange fees are charges levied by banks, financial institutions, and currency exchange providers when you convert one currency into another.
Currency exchange fees can be charged as a percentage of the amount being converted or as a flat fee for each transaction. These fees come in various forms, such as transaction fees, conversion spreads, ATM withdrawal fees etc.
Currency exchange fees increase the overall cost of living for international students by affecting their budget. Each time students convert their home currency into the local currency of the country where they are studying, they incur fees that can add up over time.
Currency exchange involves converting one currency into another at ongoing exchange rates, usually done through banks, forex brokers, or exchange kiosks. On the other hand, Dynamic Currency Conversion (DCC) allows for purchases or ATM withdrawals in a foreign country using your home currency.
To minimise currency exchange fees, students can compare exchange rates and fees, use multi-currency forex cards, avoid airport exchanges etc.
To learn 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 experience with studying abroad.
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