Planning to study abroad and confused as to how best to pay for your fees and other expenses through Forex? Here are some Forex tips that will make your task easier. There are typically 4 steps in the process:
1. Application: A student narrows down on the universities of his choice and on an average applies to 5-6 of them. Some of the universities require an application fee and some of them do not. Where application fee is required, the payment is usually done through wire transfer.
2. Upon acceptance, some universities require you to pay an enrollment fee. Again, wire transfer is the preferred option here.
3. Once you receive an offer letter from your university of choice, it is time to apply for a VISA. After procurement of a VISA, you will be required to pay your Tuition Fee. Depending on the university, this fee can be paid in one go or a partial payment can be done before joining and the rest can be paid in person once you reach the university. If you are required to make an advance payment, wire transfer is the preferred option, and for in person payments, a Forex card is the best option.
4. Maintenance and living expenses. For your day to day expenses, a forex card is recommended, as it is cheaper than wire transfer and can be easily reloaded online.
Some universities still accept payment through Demand Drafts, but this is fast becoming an antiquated option.
The total amount of foreign exchange used by a student both in terms of forex cards and wire transfers, in a financial year must not exceed USD 250,000 for educational purposes. This amount usually includes forex costs for maintenance/living expenses as well as your tuition fee. However, in case your tuition fee exceeds this amount, you can justify it by furnishing your fee slip.
Difference between Wire Transfers and Forex Cards
Wire transfers or remittances are a popular method of transferring funds abroad, and use SWIFT platform for transfer (Society for Worldwide Interbank Financial Telecommunication). To remit money, you will need to have a sending bank account and a receiving bank account. There will be a prevailing Forex rate which will be frozen at the time of transfer, a sending fee levied by the sending bank and a Beneficiary fee or BEN charges levied by the receiving bank. So, for instance you are sending $10,000 abroad, you might be charged a sending fee of INR 250 to 2,500/- and BEN charges of $13-$15. Depending on your destination and your choice of sending bank, these charges vary.
Forex cards are prepaid cards onto which you load money in local currency which then gets converted into the foreign currency of choice at a fixed FX rate. Forex cards can be used to withdraw money from ATMs, swiped at terminals, and can also be used to make online transactions. Forex cards can be reloaded with fresh funds in case one runs out of forex. Depending on which bank you purchased from, some forex cards come with an issuance fee in the range of INR 100-350.
Here, it is worth noting that you cannot use a forex card issued in your sibling/relatvie/friend’s name for your own purpose. Forex is highly regulated and KYC compliant. Post demonetisation, Customs search at airports is increasingly stringent and has been tightened. If you do not have a valid proof of forex purchase, your entire forex amount is liable to be confiscated. This amount can be redeemed only upon submission of a proof of purchase.
Advantages of Forex card over Credit/Debit Card
Forex cards offer clear advantages when compared to Cash, Debit or Credit Cards. Here are some of them:
Issuance fee – There is NO Issuance fee for forex cards if purchased online. However, some banks may charge between INR 0-350. Most international debit cards have an issuance fee and it typically ranges between INR 0-500. For international credit cards the issuance fee is usually between INR 0-1500.
Withdrawal fee – For forex cards, $2 or its equivalent in other currency is charged per withdrawal at ATMs, whereas up to INR 500 is charged per withdrawal for international debit cards, and up to INR 1000 per withdrawal for credit cards.
Merchant service fee – Forex cards do not have any merchant fee, whereas for international debit card and credit cards, an additional 3.5 percent merchant service fee can be charged.
FX rates – For forex cards, exchange rates are frozen at time of loading, thereby having no possibility of rate fluctuations. Whereas for international debit and credit cards, it is not possible to freeze rates, and the highest rates for the day is applied for any transaction.
FX conversion charges – No additional conversion charges are applicable for forex cards, but for international debit and credit cards, a cross currency markup of 4-6 percent can be applied on every transaction.
Types of Forex cards
There are several cards from AXIS, ICICI, HDFC which are student friendly and geared towards making university payments easy and hassle free.
There are two types of Forex cards:
Multi-currency cards – Multi-currency cards allow you to load different currencies onto a single card. You can load up to 18 currencies on a single card, based on the vendor.
Single-currency cards – Single-currency cards are card loaded with single currency, and these can be a good option if travelling to a single country.
You can purchase cards from banks, online as well as offline vendors. Look out for ‘Free ATM Withdrawal’ offer on the cards, for without this facility you may end up spending $1.5 to $2 each time you withdraw.
You can purchase a forex card or do a wire transfer from:
2. Local Vendors
3. Online Sites
Banks usually cater to account holders and have a higher margin on rates and sending fee. Local vendors are a very convenient option, owing to proximity, but a chance of cash counterfeiting may be high and reloading forex may not be as easy. Online vendors are of two types – bidding engines or aggregators where you can compare offline vendors and bid for rates, and online portals where you can purchase forex completely online and upload documents online as well.
Online portals usually offer further discounts on existing dollar rates and offer easy reload options in case you run out of cash when are abroad. Moreover, most online portals offer all ATM withdrawals free, leading to higher savings.
Forex cards can be purchased directly from the banks offering them, through offline vendors and through online portals. Wire transfers typically done through Banks, but can also be routed through online & offline vendors which offer these services at much better rates.
Documents required for purchasing Forex
You will need to furnish a copy of your air ticket, education visa, passport (an I-20 form is also needed for American universities).
For remittance, you will be required to furnish an offer letter from the university, ID Proof Of Remitter, Passport, PAN Card, A2 Form (given by the service provider).If a parent is sending you money, they will need to submit proof of identity and proof of residence apart from a PAN card.
Ideally, forex can be purchased a month before you leave for the university. It is always good to keep an eye out on the rates in the market and also on the rates offered by different channels. A good strategy would be to have a mix of remittances and forex cards, which if purchased from an online vendor can lead to a saving of 5-7 percent over traditional banks.
The author is Ananth Reddy, founder & MD of BuyForexOnline.com, an online platform geared towards offering end to end Forex solutions for the Indian student wishing to study abroad.
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