49% of international students in Australia hurt by foreign transaction fees, new research finds
It’s no secret studying abroad sits on many of our bucket lists. But from tuition to accommodation, the whole experience doesn’t come cheap, and you could end up digging a lot deeper into your wallet than what you bargained (or budgeted) for.
According to new research from international student payment platform CohortGo, there’s one cost that’s potentially causing some students to throw thousands of dollars down the drain: foreign transaction fees charged for sending money overseas.
The survey with nearly 700 international students in Australia found as many as 49% of respondents felt that the foreign transaction fees they pay are too expensive. These students called for education providers to reduce those transaction fees, while 35% said they wanted more global transfer options to pick from.
The most popular ways to pay for international tuition - and their pitfalls
Depending on the university you’re attending, valid payment methods for your tuition can range from BPAY to credit cards.
CohortGo’s survey shows both payment methods are quite popular with international students - 1 in 4 respondents said they used internet banking while another 15% whipped out their credit card to meet education expenses.
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But by far the most common way for international students to fund their exchange trips was to turn to the bank of mum and dad, with 37% saying they relied on their parents to cover costs of studying and living abroad.
Keep an eye out though, as all of these options could have pesky fees and costs attached.
With BPAY, for instance, many banks and credit unions give customers a specific number of ‘free’ BPAY transactions before charging a small amount (usually less than $1) per transaction. Although this seems like an innocuous price to pay, it can build up over time and leave a dent in your bank account.
As for credit cards, the foreign exchange (FX) margin is the big killer. Right now, the average margin for personal credit cards is 2.72%,* which means if you’re buying $500 worth of textbooks, that’s at least an extra $13.60 you could be slugged with.
On the bright side though, 21 credit cards in the Mozo database have a 0% foreign transaction fee, so it could be worth your while to shop around for a more travel-friendly credit card.
Finally, parents providing their kids with financial support overseas may want to think twice before making an international money transfer (IMT) with a big bank. It was only last year that an ACCC report found big bank customers who transferred money in USD or GBP could have collectively saved a whopping AUD150 million in fees from 2017-2018 alone, if they had chosen a cheaper IMT service.
Tips for finding a great IMT deal
As an international student, sending money overseas is something you can’t afford not to think about. Making tuition payments to your university every semester, receiving income from your family, transferring savings from your own bank account to cover day-to-day expenses… the list goes on and on.
And as with any kind of financial service, it pays to shop around rather than simply stick with your current bank.
“It’s extremely common for many customers to use their bank back home to make the transfer; however, they are known to have extravagant pricing and also include a fee, making it an extremely costly transfer,” IMT specialist WorldFirst’s Ben Smith said.
“There are many alternatives to the big banks available for international money transfers, so ensure you do sufficient research on the fees and pricing of their services to get the best deal.”
But what exactly does this research involve? Here are some IMT features worth looking into:
- Exchange rate and final cost: The more competitive your exchange rate, the better bang you’ll get for your buck. But when comparing IMT services, make sure to find out the total transaction price, which includes both the rate on offer and any fees that may apply. This can help you dodge any nasty surprises in the final price, like foreign transaction fees.
- Customer service: Check to see what kind of support your IMT provider offers to its customers. A perk of sending money with a FX specialist, for instance, is that many provide you with your very own account manager. This is an expert whom you can turn to for assistance, should you have any burning questions about your money transfer or should anything go wrong down the track.
- Recurring payments: If you’re paying your tuition or student housing fees on a monthly or semesterly basis, consider an IMT service that gives you the option to set up automated regular payments. That way, you can avoid the hassle of completing a new transaction every single time.
- Forward contract and limit order: According to IMT specialist OFX, forward contracts and limit orders are also key features to keep an eye out for, as they help you manage risk and avoid poor exchange rate fluctuations. If you’ve spotted a great exchange rate but don’t need to send money just yet, a forward contract lets you secure that rate for up to 12 months. Meanwhile, if you’re aiming for a specific exchange rate and aren’t fussed about when to transfer your money, a limit order lets you wait until that target rate becomes available before conducting your transaction.
Ready to shop around for an IMT deal for your overseas study trip? Then make your first stop Mozo’s international money transfer comparison table!
*Mozo data as of 20 January 2020