As an international student, one of the first things you may encounter when making a US purchase is foreign transaction fees, which add up fast when you’re making multiple purchases.
Key Takeaways
- Use credit or debit cards that don't charge international fees to save money on everyday purchases.
- Setting up a local US account can help avoid fees on foreign transactions and make managing your finances easier.
- Always choose to pay in the local currency to avoid Dynamic Currency Conversion (DCC) or higher costs from unfavorable exchange rates.
International transaction fees can quickly add up and put a strain on your finances. By learning how to avoid these fees, you can save money and enjoy spending without worrying about hidden charges. This can make booking plane tickets or going out for dinner hassle-free. In this article, we'll share the best tips to help you avoid international transaction fees.
What are International Transaction Fees?
International transaction fees, also known as foreign transaction fees, are charges that your bank or credit card company applies when you make a purchase in a foreign currency or through a foreign bank. The fees normally range from 1% to 3% of the purchase amount and can add up quickly if you frequently use your card for transactions abroad.
These fees are mainly applicable in two scenarios:
- Physical Purchases Abroad: When you go to another country and use your credit or debit card to buy something (like food, clothes, or souvenirs), your card issuer charges a fee to convert your home currency into local currency.
- Online Purchases from Foreign Retailers: You might also encounter these fees when you shop online from international websites.
Choose Credit Cards with No Foreign Transaction Fees
Selecting a credit card that does not charge foreign transaction fees can significantly reduce costs for international students studying in the US. These fees can add up quickly, especially when you’re frequently using your card for daily expenses or online shopping with foreign retailers.
By choosing a card that waives these fees, you can save money and make your budget go further.
Many fintech companies, including Adro, offer credit cards specifically designed for internationals to help you avoid these extra costs. Not only can you sign up for Adro without having an SSN or ITIN, but the Adro no-fee credit card offers $0 international transaction fees as well.
Use a Debit Card with No International Fees
Using a debit card that does not charge international transaction fees is another effective way to save money while studying abroad. Many traditional banks and fintech companies now offer debit cards specifically designed for international use.
These cards allow you to withdraw cash from ATMs or make purchases without incurring extra fees for currency conversion or foreign transactions.
Open a US Bank Account
Opening a local bank account in the US can be a smart way for you to avoid international transaction fees. When you use your home country bank card in the US, you may face additional fees for currency conversion, foreign transactions, and ATM withdrawals. These fees can add up quickly and eat into your budget.
If you compare carefully and shop around, US accounts often come with features specifically designed for students, such as low or no monthly fees, minimum balance requirements, and the ability to link to digital payment systems. This makes them ideal if you only need a simple, cost-effective way to manage your finances while studying in the US.
Moreover, a local bank account can provide added convenience, such as easier payment of bills, direct deposits, and access to local banking services like mobile banking apps.
Stay Away From Dynamic Currency Conversion (DCC)
Dynamic Currency Conversion (DCC) is a service that allows you to pay for purchases in your home currency rather than the local currency when using your credit or debit card abroad. While it looks convenient, it often results in higher costs due to unfavorable exchange rates and additional fees charged by the service provider.
For example, when making a purchase or withdrawing cash from an ATM in the US, you might be asked if you want to be charged in your home currency or US dollars. Choosing your home currency is a good idea because it lets you see the exact amount you'll be charged. However, this "convenience" can come with a hidden cost.
The exchange rate applied by DCC is usually much less favorable, and additional fees can make your purchase more expensive than if you had chosen to pay in the local currency (USD).
So, to avoid these extra costs, remember to always pay in the local currency when given the option.
Plan Ahead for Currency Exchange
Currency exchange rates can vary significantly depending on where and how you exchange money, so it's important to choose the right method and timing.
- Avoid Currency Exchanges at Airports and Tourist Spots: These locations are convenient but often charge higher rates. Instead, use a local bank or a reputable exchange service to get more favorable rates.
- Use ATMs Wisely: ATMs generally offer better exchange rates than currency exchange counters, but they can still charge foreign transaction and withdrawal fees. To reduce costs, withdraw larger amounts less frequently to avoid multiple transaction fees.
- Monitor Exchange Rates: Be on the lookout for currency exchange rates and plan to exchange money when rates are more favorable. Some online tools and apps can help you track exchange rates and alert you when they reach a desired level.
Special Offers for Students
Many banks and financial institutions offer special banking packages tailored specifically for students. These student-specific banking offers are designed to make banking more affordable and convenient for those studying abroad, including international students in the US.
- Lower Fees and No Minimum Balance: Student accounts often come with reduced fees or no monthly maintenance fees, making them more budget-friendly. Additionally, they may waive the minimum balance requirement, allowing students to maintain their accounts without worrying about penalties if their funds run low.
- Extra Perks and Benefits: Some financial institutions provide additional perks, such as free or discounted access to digital banking tools, cashback rewards, or discounts at popular merchants.
- Flexible and Digital-Friendly Options: Many financial institutions also offer digital banking services as part of their student packages. These can include mobile apps, online banking, and being able to link accounts to digital wallets like Apple Pay or Google Pay, providing added convenience if you’re tech-savvy.
Monitor Accounts Regularly
Keeping a close eye on your bank and credit card accounts is crucial to avoid unexpected fees that can eat into your budget. Regularly monitoring your accounts helps you spot any unfamiliar charges, such as foreign transaction fees, ATM fees, or other service charges that may have been applied without your knowledge.
Make it a habit to review your bank and credit card statements regularly. This allows you to quickly identify any errors, unauthorized transactions, or unexpected fees. If you notice any unexpected fees or charges, reach out to your bank or card issuer right away. They can explain the charges and, in some cases, reverse them if they were charged incorrectly.
By following these guidelines, you can significantly minimize account fees while you study in the US. Remember that not all tips may apply to your situation, so review the items carefully and choose the ones that are most relevant to you.
