A Guide to Outward Remittances for Education Abroad
Foreign education comes with a mixed bag of emotions. While happiness and excitement are the dominant ones, there’s a bit of anxiety as well. Compounding the anxiety in this situation is the constant worry over expenses, as any untoward expenditure in a foreign land has the general ability to suddenly put your family’s budget back home in disarray. Mentioned below are certain tips, tricks, info and hacks that might help students studying abroad and their parents save wherever possible in what is otherwise quite a pricey affair:-
1) Do a thorough check of the entire course fee structure-Studying the prospectus with extreme care is necessary to identify all the aspects covered in your overall fees. Careful evaluation and communication with concerned authorities in case of any confusion helps to avoid unwanted situations of asking for emergency money. Furthermore, this helps to identify sources of scholarships available which might help in reducing the financial burden in a significant manner.
2) Make use of online forex marketplaces for transferring funds-It is essential to keep a close watch on forex rates. Various online forex currency exchange platforms provide updated forex rates 24X7 and also allow travellers to freeze the rates and transact when a suitable rate is available. Online forex marketplaces have also significantly reduced the complexity associated with foreign currency transfer. They also provide forex services at wholesale rates, thereby reducing cost.
3) Be aware of policy changes-As per the recent Liberalised Remittance Scheme, the total amount of remittances in a financial year must not exceed USD 250,000 for educational purposes. Parents who wish to send their children money need to produce only a proof of identity and proof of residence apart from a PAN card. In case the funds are being transferred directly to the university, they can be sent under the “education” category that requires the student to submit a copy of the air ticket, education visa, passport and PAN card (an I-20 form is also needed for American universities). Payments for remittances must come from a savings bank account and can be transferred via NEFT/ RTGS or cheque.
4) Choose the right forex product – The most common medium of transferring funds from a bank in India to a bank abroad is the traditional wire transfer, which is known as SWIFT transfer (Society for Worldwide Interbank Financial Telecommunication). However, apart from being commonplace there is no other advantage of transferring funds via SWIFT transfers. The charges levied by the home bank and the receiving bank makes SWIFT wire transfers an expensive affair and significantly increase the overall cost of education.
What is the ideal way then? A relatively new alternative to transferring money abroad using traditional bank remittance products is to use a forex card, which can also be carried abroad. Forex cards are Visa/ Mastercard powered cards that can be used just like international credit or debit cards. These cards, when bought through a forex marketplace, come with zero charges whatsoever. Using the correct service provider can obviate all charges that are commonly associated with using plastic money abroad. Marketplaces let you buy a forex card with 0 interchange margin. They also waive off all charges associated with issuing/ reloading or unloading the card or for using it in stores, online or at ATMs.
While a great alternative to traditional remittances, forex cards have the drawback that they must be physically carried by the student and cannot be delivered overseas. Additionally, certain universities charge a fee to accept tuition payments via Visa/ Mastercard cards and forex cards may not be the best option in such scenarios.
Foreign exchange decisions should be an integral part of your long-term foreign study plans and should never be left to the last minute. An ideal outward remittance strategy i.e. using the right forex product, provider and time to transfer money can help a student save an average of 5% over a traditional bank transfer, which over the course of a 4 year college term can easily add up to over USD 10,000 in savings.
