Understanding Currency Conversion Charges
Traveling internationally for studies is exciting, but students need to be aware of extra costs, like currency conversion charges. These fees may seem small, but they can quickly add up, especially when you’re managing a student budget. In this blog, we’ll break down what currency conversion charges are, how they can impact your transactions, and share tips on how students can avoid paying more than necessary when spending in a foreign country.
What Are Currency Conversion Charges?
Currency conversion charges are fees you pay when converting money from one currency to another. They typically occur when:
- You use your debit or credit card abroad.
- Withdraw cash from a foreign ATM.
- Exchange your home currency for foreign cash at a currency exchange counter.
- Transfer money abroad to your foreign account.
These charges compensate banks and payment providers for converting your money into a different currency. Depending on how you spend money abroad, the fees may vary.
How Currency Conversion Charges Work
Let’s say you’re a student traveling from India to the U.S. and need to buy something worth $100. You use your Indian debit card to make the payment. Now, your bank will convert Indian Rupees (INR) into U.S. Dollars (USD) for this purchase.
Here’s where the currency conversion charges come into play: If your bank charges a 2.5% conversion fee, you won’t just be paying for the $100 item. Instead, you’ll be charged an additional 2.5%, making your total cost $102.50.
In rupees, instead of paying ₹8,000 (assuming the exchange rate is ₹80 per USD), you might end up paying ₹8,200. While ₹200 may not seem like much for one purchase, imagine spending $50,000 over 2 years and spending $1250/₹1,00,000 extra on these fees.
Where is Currency Conversion Fee charged?
There are different types of conversion fees you might encounter while spending abroad:
- Foreign Transaction Fees on Cards: Most debit and credit cards charge a foreign transaction fee when you make a purchase in a foreign currency. These fees typically range from 1% to 3% of the total purchase amount.
- ATM Withdrawal Fees: When you withdraw money from a foreign ATM, you not only pay a currency conversion fee but also an ATM service charge. Both your home bank and the foreign ATM provider may charge you.
- Foreign Exchange Fee on Taking Cash from a Forex Agent:
When you exchange currency through a forex agent, a foreign exchange fee is usually applied. This fee is added to the conversion rate, making the total cost higher than the actual exchange rate. - Forex Markup on International Money Transfers:
When transferring money internationally, banks or money transfer services often add a forex markup. This is a percentage added to the exchange rate, meaning you receive less than the market rate for the transfer.
How to Avoid or Minimize Currency Conversion Charges
- Use Cards with No Foreign Transaction Fees: Some credit and debit cards like Niyo don’t charge foreign transaction fees, which can save you a lot of money. If you travel or shop internationally often, consider using one of these cards.
- Use Multi-Currency Travel Cards: Prepaid travel cards allow you to load money in multiple currencies and lock in exchange rates in advance. This way, you can avoid fluctuating exchange rates and minimize fees.
- How Niyo can help:
With Niyo’s Zero Forex Card, you can spend in multiple currencies while avoiding the typical forex markups and foreign transaction fees imposed by traditional banks helping users save on the 1-3% markup commonly charged on international transactions.
Additionally, Niyo allows for fee-free international ATM withdrawals at select locations, offering further savings. The card is designed to provide transparency, favorable exchange rates in advance so that you can spend worry-free while abroad.
Niyo offers:
- Zero Foreign Transaction Fees: Spend in multiple currencies without paying extra foreign transaction fees.
- Real-Time Currency Conversion: Spend at live rates
- Fee-Free International ATM Withdrawals: Withdraw cash from ATMs abroad without worrying about additional withdrawal charges (at selected locations).
- Transparent Spending: Monitor your transactions real time in the app.
- 100% Digital Experience: Manage your international finances easily through the Niyo app, with a smooth and user-friendly process from start to finish.
- Add Money via UPI, Spend in 180+ Countries: Conveniently add funds using UPI and use them in over 180 countries.
Click on this link to download the Niyo app: https://ctr.niyo.me/start?utm_campaign_id=QKZWfAil&utm_source=Youtube&utm_campaign=Youtube_AI_Videos&utm_adgroup=Mobile_Onboarding&utm_medium=Youtube
Conclusion
Currency conversion charges may seem like just a small extra cost, but over time, they can significantly increase the amount you spend while abroad. By understanding how these fees work and using strategies to minimize them, you can save money and make your international travels more affordable.
Whether you’re heading abroad for studies, travel, or shopping online in foreign currencies, keeping an eye on these conversion charges is a key to staying within budget.
