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Studying Abroad: A Guide to Financial Preparedness
Studying abroad is an exciting opportunity for students to experience new cultures, learn independence, and create unforgettable memories. But before they leave, it’s important to equip them with the right tools to manage their finances overseas. Credit cards are a key component, offering convenience, security, and rewards. Here’s a comprehensive guide to help parents and students make smart decisions and prepare for a smooth journey abroad.
1. Selecting the Right Credit Cards
Choosing the best credit cards for a student studying abroad involves careful consideration of several factors:
a. No Foreign Transaction Fees
Foreign transaction fees can add up quickly, typically ranging from 1-3% of every purchase made abroad. A card with no foreign transaction fees is essential for minimizing unnecessary costs.
b. Decent Credit Line for Emergencies
Ensure the card offers a reasonable credit limit to cover unexpected expenses or emergencies while abroad.
c. Visa or Mastercard Preferred
While American Express cards can be valuable, many international merchants do not accept them. Visa and Mastercard are more widely accepted worldwide, making them a safer choice.
d. Carry More Than One Card
Encourage your student to have at least two credit cards. This ensures they have a backup if one is lost, stolen, or declined.
2. Additional Considerations
a. No Annual Fee for the Additional Card
If your student is an authorized user on your account, look for cards that don’t charge extra fees for additional users.
b. Unique Card Numbers for Authorized Users
Some banks, like Chase and Citi, assign the same card number to all authorized users. This can become a major inconvenience if the card is lost or compromised. Opt for banks that provide individual card numbers, such as Capital One and American Express.
c. Useful Card Benefits
Look for cards with travel-focused perks like:
- Lounge access
- Trip insurance
- Purchase protection
- Lost luggage reimbursement
These features can provide extra peace of mind during the trip.
3. Preparing Before Departure
Planning ahead can save students and parents from unnecessary stress:
a. Get Local Currency in Advance
Obtaining the destination country’s currency ahead of time is wise. Ordering foreign cash from your bank can take several days, so plan accordingly.
b. Register with STEP
The Smart Traveler Enrollment Program (STEP) is a free service for U.S. citizens. Registering ensures the nearest U.S. embassy can assist in emergencies and keeps families updated on travel alerts. You can register your trip with STEP here.
c. Check Passport Expiration Dates
Ensure the student’s passport is valid for at least six months beyond their planned return date. Parents should also check their own passports in case they need to travel abroad unexpectedly.
d. ETA for UK Travel
Starting January 8, 2025, U.S. citizens traveling to the UK will need an Electronic Travel Authorization (ETA). The application requires a passport and costs €10. Processing can take up to 72 hours.
e. ETIAS for EU Countries
Although not yet required, keep an eye on the upcoming European Travel Information and Authorization System (ETIAS) for travel to EU countries.
4. Smart Financial Practices Abroad
Here are some tips to help students manage their finances while studying abroad:
a. Choose the Local Currency When Paying
When given the option to pay in U.S. dollars or the local currency, always choose the local currency. This ensures the best exchange rate.
b. Avoid Card Fees
Consider a debit card if the vendor charges a fee for using a credit card. Unless, of course, you are getting a great multiplier where it may make sense to pull the card anyway and pay the fee.
c. Use Bank ATMs for Cash Withdrawals
For the best exchange rates, withdraw cash from ATMs located at reputable banks rather than at airports or hotels.
5. Maximizing Rewards for Free Travel
Studying abroad presents an opportunity to earn rewards that can offset future travel costs. Parents and students can work together to maximize these benefits:
a. Contribute to Family Points Buckets
Ideally, the points earned on the student’s card should be able to flow to the family buckets. This can amplify the value of rewards for group travel.
b. Look for High Multipliers
Select a card that offers bonus points on common expenses like dining, groceries, and travel. These categories align well with student spending habits.
c. Designate the Student as Trip Organizer
If the student is responsible, encourage them to take charge of booking group activities or paying for shared meals. They can collect reimbursements from friends while earning valuable rewards points for the family.
6. My Top Travel Credit Cards for Students Studying Abroad
These cards offer no foreign transaction fees, valuable travel perks, and great rewards on common spending categories like dining and travel:
a. Chase Sapphire Preferred® Card
- No foreign transaction fees
- No fee for additional cardholders
- Rewards: 3x on dining, 2x on travel
- Comprehensive travel insurance (great for peace of mind abroad)
- Annual Fee: $95
b. American Express® Gold Card
- No foreign transaction fees
- No fee for additional cards for authorized users
- Rewards: 4x on dining, 3x on flights booked directly with airlines
- Annual Fee: $325 (can be reduced with benefits)
c. Capital One Venture Rewards Credit Card
- No foreign transaction fees
- No fee for additional cardholders
- Rewards: 2x on all purchases
- Annual Fee: $95
d. Capital One Venture X Rewards Credit Card
- No foreign transaction fees
- No fee for additional cardholders
- Includes Priority Pass Lounge Access
- Rewards: 2x on all purchases, higher rates through Capital One Travel
- Annual Fee: $395 (can be reduced with benefits)
e. Citi Premier® Card
- No foreign transaction fees
- No fee for additional cardholders
- Rewards: 3x on dining, travel, and hotels
- Annual Fee: $95
Final Thoughts
With thoughtful preparation, the right financial tools, and a bit of strategy, studying abroad can be a rewarding experience in more ways than one. By selecting suitable credit cards, planning ahead, and maximizing rewards, parents and students can ensure a stress-free and financially savvy adventure.
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