Before you leave home, there is a set process to follow, involving these four steps:
1. Application: A student narrows it down tothe universities of his choice and on average applies to five or six of them. Some of the universities require an application fee and some don’t. Where application fee is required, the payment is usually done through wire transfer.
2. Upon acceptance, some universities require you to pay an enrolment fee. Again wire transfer is the preferred option here.
3. Once you receive an offer letter from your university of choice, now is the time to apply for a visa. After procurement of a visa, you will be required to pay your tuition fees. Depending on the university, this fee can be paid in one go or a partial payment can be done before joining and the rest once you reach the university and make the payment in person. 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. This is why it’s good to get in-depth knowledge about forex before embarking on this new chapter of your life.
How much forex can I carry?
The total amount of foreign exchange utilised by a student both in terms of forex cards and wire transfers, in a financial year, must not exceed $250,000. This amount usually includes forex costs, 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.
What is the 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 ₹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, make online transactions, and can be swiped at terminals. They can be reloaded with fresh funds in case one runs out. Depending on which bank you purchased from, some forex cards come with an issuance fee in the range of ₹100 - ₹350.
My sister is studying abroad. Can I use her card?
No. Forex is highly regulated and KYC compliant. Post demonetisation, Customs searches at airports are increasingly stringent. If you don’t 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.
Why can’t I use credit/debit cards instead of a forex card?
Forex cards offer clear advantages 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 an amount less than ₹350. Most international debit cards have an issuance fee and it is typically less than ₹500. For international credit cards the issuance fee is usually less than ₹1,500.
Withdrawal fee - For forex cards, $2 or its equivalent in the other currency is charged per withdrawal at ATMs, whereas up to ₹500 is charged per withdrawal for international debit cards, and up to ₹1,000 per withdrawal for credit cards.
Merchant service fee - Forex cards don’t have any merchant fees, whereas for international debit card and credit cards, an additional 3.5% merchant service fee can be charged.
FX rates - For forex cards, exchange rates are frozen at the time of loading, so there is no possibility of rate fluctuations. For international debit and credit cards, it is not possible to freeze rates, and the highest rates for the day are applied to 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% can be applied to every transaction.
Is there any specific forex card I need to carry with me?
There are several cards from AXIS, ICICI, HDFC which are student-friendly and geared towards making university payment easy and hassle-free.
There are two types of forex cards:
Multi-currency cards - These 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 - These cards are loaded with a single currency; 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.
Where can I send a wire transfer/purchase a forex card from?
1. Banks, 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 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 and offline vendors which offer these services at much better rates.
What documents do I need to purchase a forex card?
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 your university, ID proof of remitter, passport, PAN card, and an 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.
When should I buy a forex card?
Ideally a month before you leave. 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% over traditional banks.
The writer is Founder and M.D. of BuyForexOnline.com. ananth@buyforexonline.com
