Studying abroad is a journey that brings exciting opportunities and new experiences. With education loans and study abroad scholarships it is not a dream anymore for a lot of students as they don’t cover all the expenses most of the time. However, you can also face unique financial challenges while you are planning for your studies in a different country.
One of the most critical aspects to consider is currency exchange and the exchange rate. Currency exchange risks can impact your budget and financial well-being during your time abroad. In this blog, we’ll explore what every study abroad student should know about navigating these risks and making informed financial decisions.
Table of contents
What is a Currency Exchange?
The exchange of currency of a country with the currency of another country at a particular exchange rate is what we call currency exchange. For example, if you are travelling to the USA from India you will have to exchange INR with USD at the ongoing exchange rate offered by the merchant. Exchange rates determine the value of one currency concerning another. They are dynamic and can fluctuate due to various factors like economic conditions and geopolitical events. When you study abroad, you’ll deal with the local currency of that country. This means converting your home currency into the local currency for daily expenses, tuition, and other costs. Let’s understand the risks and challenges associated with the currency exchange.
Also Read: How to Manage Money while Studying Abroad
Risk Involved with Currency Exchange
There are a lot of risks associated with currency exchange. You need to consider a lot of things like fluctuating exchange rates, trusted merchants and banks, hidden charges etc. Let’s understand some of the major risks arising while dealing with currency exchange:
Exchange Rate Volatility
Exchange rates can be highly volatile, which means the value of your money in another country can fluctuate significantly. These fluctuations can impact your budget and purchasing power. If you have currencies worth $100 today it’s not necessary that it will remain the same the very next day. It will keep changing as per the exchange rate on that particular day at a particular time. Hence it is necessary to understand the exchange rate volatility so that you can manage your finances accordingly.
A lot of students are confused about exchanging currency at home or abroad. Both have their own advantages and disadvantages. However, at any place currency exchange services will attract transaction fees and commissions that may not be transparent. These costs can add up over time. Also, you might not know whether the rate of the bank where you are exchanging currency is appropriate or not as every bank or union offers different exchange rates. Hence, you must always do proper research while dealing with such things.
Risk of Fraud or Scams
Let’s suppose you went with 1 lakh cash in Indian Rupee (INR) to the USA. Now, you will look for a bank or merchants with whom you can do the currency exchange. Now you will exchange your INR 1 lakh and you are supposed to get around USD 1180 (as per the current rates, which may vary depending on the fees and rates offered). Here, if you are not aware of the entire procedures of currency exchange in that country you may end up either paying more money as charges or any other kind of fraudulent activity. Hence, always look for reputed and trusted merchants like banks, unions etc.
Also Read: Decoding the Liberalized Remittance Scheme
Effective Strategies for Managing Currency Exchange Risks
It’s not always a difficult task to get your currencies exchanged for a foreign currency. When you are planning for currency exchange do proper research and make smart strategies in order to exercise the cheapest money transfer services. Let’s check some of the preventive strategies which will help you avoid any kind of currency exchange risks:
- Plan Your Budget: Create a comprehensive budget that considers tuition, accommodation, living expenses, and a reserve amount for emergencies. If you have the entire budget planned then you will be able to figure out how much amount of money you need to exchange.
- Monitor Exchange Rates: Always stay informed about exchange rate trends. Tools like rate alerts from currency exchange providers can notify you when rates are favourable. As the exchange rates keep fluctuating with the moment you need to figure out the best offer from your bank.
- Forex Cards: Using Forex cards is probably one of the best ways to manage your finances abroad. With a Forex card, you will be able to manage your day-to-day transactions easily without using paper currency. Also, you don’t have to pay transaction fees or commissions frequently and every transaction will be done with the local tender. Most of the forex cards offer competitive exchange rates, lower fees, and the convenience of managing multiple currencies on a single card.
- Local Banking Services: Always try to open a bank account in the local bank of the country where you are studying. Opening a local bank account can easily reduce transaction fees and provide access to banking services tailored to your needs. Also, for any kind of issues and grievances, you can visit the branch at your convenience.
FAQs
Always go for a bank or other merchant which has an outstanding track record in currency exchange service. Some of the renowned money exchange service providers are Western Union, Axis Bank, ICICI Banks etc.
Money exchange services are available at most domestic and international airports where you can easily get currency exchange offers. However, it is not suggested to exchange currency at an airport as they charge unfavourable exchange rates and higher commissions.
Currency exchange has become risky due to a lot of reasons like increasing globalization, increased levels of market volatility, and new regulations by different monetary authorities. hence, you should always prepare better strategies so that you can make the cheapest currency exchange transactions.
Currency exchange risks can put you in deep financial trouble. Hence, it is very important to identify each and every risk and deal with them with effective strategies.
To know more about the currency exchange rates, 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 study abroad experience.
