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Tips for Managing Your Money When Studying Abroad

There are few academic experiences that are as exciting as a study abroad trip. When you’re living in another country, rather than just visiting, you can gain an entirely new appreciation for its people, history and culture.

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But, at the same time, living in a foreign country can pose some unique money management challenges at a time when you might just be getting used to living on your own .

Before You Go

Before your study abroad trip begins, you should contact your debit and credit card issuers to inform them of where and when you’ll be traveling. This prevents your accounts from being frozen when your cards are used overseas, which otherwise could appear to suggest suspicious or fraudulent activity.

You should also make a note of the accounts you have and the relevant telephone contact information. Thankfully, most debit and credit card issuers offer customers a number that they can call collect from outside of the United States. Keep these numbers available in case your cards are lost or stolen.

Finally, you should make sure that you have online access to all of your accounts and make note of all of your payment due dates. It may help to set email or text reminders of your payment due dates, and also be aware if your mobile phone provider will charge you for receiving texts in the country you’ll be living in. Alternatively, you can configure your accounts to automatically make payments.

Changing Currency

When it comes to using money in a foreign country, the first thing you probably think about is changing currency. And one of the first things that you’re likely to see when you arrive in a foreign country is a currency exchange business. Unfortunately, the least competitive exchange rates are typically found at airports and near major tourist sites. These fees can range up to 15 percent, according to travel expert Rick Steves.

Instead, you’re likely to find more favorable rates and lower fees when you exchange cash at a local bank. Finally, be extremely careful if a local resident offers to exchange your currency, as you could receive counterfeit bills or become the victim of other possible scams.

Using your debit card to obtain local currency is likely to offer you a more favorable exchange rate, and lower fees, compared to when you exchange your money in person. Just note that whenever you use a debit card to withdraw cash at an ATM, you should be careful to learn if your bank, or the ATM, will impose additional fees.

The most expensive way, by far, to access money overseas is by making a cash advance from your credit card, says Steves. When you do this, you’re not withdrawing money or making a purchase — you’re basically taking out a loan. Most credit cards will impose a much higher interest rate on cash advances, and this balance typically won’t have the grace period normally afforded to purchases. Most card issuers will also add significant cash advance fees. These fees are in addition to any foreign transaction fees imposed by the credit card issuer or other fees added by the ATM owner.

Making Purchases

There are many ways to make purchases in a foreign country, but some offer far better exchange rates and lower fees than others. For example, when you make a purchase with a credit card, you’ll be receiving some of the most favorable exchange rates available. However, many credit cards will also impose a foreign transaction fee, so it is smart to check with your credit card issuer before using a card abroad.

“A no-foreign-transaction-fee credit card is a must if you’re studying abroad. Living and traveling overseas is expensive enough without having to pay an extra 2 to 3 percent in foreign transaction fees for no reason,” says Matt Schulz, senior industry analyst at CreditCards.com. Debit cards can also offer you very competitive exchange rates, but most will have a foreign transaction fee of 1 to 3 percent of the purchase price.

When making a purchase, you might be asked if you would like to pay in your home currency, which is a service called dynamic currency conversion. This offer may sound attractive, but it will always result in a higher purchase price. Dynamic currency conversion will invariably impose high fees, a worse exchange rate or both. Schulz recommends, “If someone asks you if you want to pay in dollars rather than in the local currency, say no and then pay with your credit card.”

When using a credit card abroad you also can still earn cash back rewards and miles. By taking advantage of this benefit, and with responsible use of your credit card, you could help pay for some of your travel expenses.

Staying Safe When Using Credit Cards and ATMs

When you’re in a new and unfamiliar place, you’ll need to pay special attention when using credit and debit cards. To prevent all of your credit and debit cards from being lost or stolen, you shouldn’t carry them all with you, or leave them all in one place. When using an ATM, try to avoid machines in poorly lit or insecure areas. Instead, try to use a machine inside a bank or another place with a police presence.

While in-person use of credit cards has become more secure since the adoption of smart chip technology, you should still take time regularly to review your statements to look for unauthorized charges. Even when you’re traveling outside of the United States, your accounts are protected by U.S. laws that limit your liability to $50 if a fraudulent transaction is made to your credit card, and all major payment networks, including Discover, waive that amount by offering a $0 liability policy.

By learning the best ways to exchange currency and make purchases in another country, you can help get the most from your study abroad trip — and focus on all the adventures you’re having — without stressing out about your money.

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Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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