Your study abroad experience is fast approaching! You’ve saved money, applied for scholarships, and met the remaining cost with loans. Now you are faced with a new problem — how do you spend your money while abroad?
Should you use a credit or debit card? Cash only? What about opening a foreign bank account? Let’s dive in.
Cash refers to the paper or coin currency unique to your host country, and you will often see it written as an abbreviation, such as USD for the United States Dollar, EUR for Euro, or JPY for Japanese Yen. You can bring up to $200 cash to your host country, but you will need to withdraw more to cover expenses over the semester, especially if you are in a cash-dependent country or prefer to pay with it.
Credit cards allow you to borrow money from a bank or financial institution to make purchases. All cards will have a credit limit, which is the maximum amount that you are allowed to spend. Since this money is borrowed, it must be paid back on time and in full, otherwise, you will receive fees and interest.
Debit cards allow you to spend your own money in your checking account (from job income, scholarships, loans, etc.) by swiping or tapping a card to make a purchase. If you don’t have enough money to cover the purchase, your card will be declined. Please note that some countries might not allow you to use a U.S.-based debit card to make a purchase, however, you can use your debit card at an ATM to withdraw your money as cash. There are three types of fees you might encounter when withdrawing internationally:
Foreign Transaction Fee
This is a charge for making a withdrawal out of your home country and is either a percentage (typically 1-3%) or a flat fee (such as $5).
ATM Fees
A fee charged by the ATM network for using their machine. Similar to foreign transaction fees, it is either a percentage or a flat fee.
Currency Conversion Rate
Some banks add an additional fee for the exchange from USD into a foreign currency.
Depending on your host country and living situation, you might make purchases only a few times a week or multiple times a day. Some countries or cities will be cash-dependent, while in others you can easily use a card. Here are some options to consider:
Opening a foreign bank account might be something to consider for yearlong students, but is likely unnecessary for shorter programs. This could allow you to have a foreign debit card and, depending on the country, use money transfers to make purchases.
Apps like Venmo, Zelle, PayPal, or Apple Wallet can be useful for transferring between friends, but please note that countries might use a different app than you’re used to — and might also require you to have a foreign bank account.
All of these can be great options for using money while studying abroad, but remember that the best option will depend greatly on what country you’ll be living in, so it’s vital to research before you go. Be prepared by knowing exactly what apps and cards you need to make your transition into study abroad as smooth as possible.
Using cash is a great option for smaller transactions, typically under $50 USD. This might be things like a meal, souvenir, or ticket to a tourist site. Depending on the country, you might use cash exclusively, while other places might only require cash at places like a traditional market or tourist attraction. Since international fees can add up when using a foreign ATM, it’s best to withdraw a large amount (such as one week’s worth) and then keep the extra cash locked in your room, carrying only what you need with you that day. Additionally, you can check with your home bank to see if there are partner ATMs in your host country, which can reduce or eliminate ATM fees.
Your U.S.-based debit card might not work in your host country, which means you will only use it to withdraw cash at an ATM. Even if it does work, keep an eye on the international fees you receive — in many cases, withdrawing larger amounts of cash for the week or using a credit card might be a better option. If you decide to open a foreign bank account and are issued a debit card, you can use it for all your regular purchases abroad the same way you would use your debit card at home.
A credit card is a great option for larger purchases (over $50) such as airfare, hotels, and other travel expenses, or making payments on things like USAC deposits, your dorm or homestay, or a meal plan. If you trust yourself to spend only money you know you have, then a credit card can also be used like a debit card for your daily or weekly purchases: make your purchases, and pay them off in full at the end of the month. This can be a good way to earn travel rewards and points through your credit card company, but only if you commit to spending wisely. Only use a credit card with no international transaction fees, otherwise, every purchase you make will rack up additional charges. This can be a great option in countries that are not cash-dependent because, in most cases, you can avoid exchange fees altogether.
Money transfer apps can be great for transferring money between friends or people you know, but be cautious when sharing money with strangers. You might use this to pay a friend back for dinner, or to purchase multiple tickets for a group discount and then have friends pay you back, but make sure your friends are trustworthy and will promptly pay you back. When in doubt, have each person make the purchase themselves to avoid confusion about who owes whom.
Before you go abroad, research the specific situations in your host country. Decide whether you need to download a mobile payment app, apply for a credit card that doesn’t charge international transaction fees, or discuss options with your bank regarding partner ATMs abroad. Prepare as much as you can, but remember that studying abroad is an opportunity to learn flexibility — spending money abroad might feel confusing now, but soon you’ll be living in your host country and making purchases like a local.
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