2-5: Banking

by Jon SenderBack to Guide

You want to bank smart and avoid unnecessary commissions and fees while away, right? Great! Here’s how you can do that.

Credit Cards:

Most regular credit cards have a 3% commission tacked onto them for purchases outside the US, which there’s really no need for. That means for every $100 you spend, you actually spend $103. I’m assuming you’re going to be spending plenty of money on this trip. I mean, the main flight alone is going to cost at least $1,000. Many travel cards offer great rewards—such as miles for booking your flights around the world—and 0% commissions on international transactions, along with no annual fees the first year. One such card is the Chase Sapphire Preferred, which I recommend you get, use, and then cancel after you return. You’ll want to have a parent apply and add you as an authorized user, because the application requires actual income to substantiate the card’s high credit limit. But if you don’t like this card, there are others you can look into as well. Whichever card you get, start using it immediately for all trip-related purchases to maximize your reward points.

If you don’t want a travel card and prefer to deal with the 3% commissions, there are a few things you still need to do for your existing card(s). Request a higher credit limit—between $2,000 and $5,000 will do—which you’ll need for major purchases. Check expiry dates and request new cards if any will expire while you plan to be away. Add a parent as an authorized user in case they need to talk to the bank. Finally, make sure all of your cards cards are chip-enabled and have PINs. If this isn’t the case, request new ones because you won’t be able to use old ones in many parts of the world.

Call your credit card companies in advance to place travel notices on all your cards. This is key because if you don’t, your card could easily be frozen the first time you use it after landing.

Debit Cards and Bank Accounts:

Just like you want a solid credit card with no commissions, you also want an ATM card with no fees worldwide. One such example is the Charles Schwab debit card, which comes with their High Yield Investor Checking Account and also has 0% commissions on debit purchases. Open an account with a parent as a joint tenant, and do it sooner than later—there’s no minimum balance or annual fee—because processing the paperwork can take time. Just a heads up, though, Schwab is a very conservative bank, which means things like electronic funds transfers take more time than you’d expect, like four days instead of two. So each time you fund your account, make sure to leave extra time for the money to clear. To be clear, Schwab is the bank that screwed up my wire transfer, but I ultimately saved a ton in ATM fees over the six months I was gone. I was furthermore able to make small withdrawals at my convenience, like I would at home, knowing I wasn’t paying extra for each swipe.

If you choose not to get a no-fee card, expect to pay $5/swipe, plus up to 3% commission on the value of the dollar figure you withdraw. In this case, your goal is to take out large sums of cash as infrequently as possible.

Again, the same rules for credit cards apply to debit cards: check expiry dates, add a parent as an authorized user, make sure you have chips and PINs, and call your banks in advance to place travel notices.

You can look into opening up a foreign bank account when you arrive, but it’s easier not to deal with it. For the most part, you’ll be withdrawing money rather than depositing it, so with your ATM card, you’ll have access to all essential banking needs. The only reason a foreign account could be worth looking into is if you’ll be working for pay, in which case your employer needs to deposit your wages somewhere. Many student visas don’t allow paid employment, though, so look into this.

Make sure your bank account is funded the week before you leave and give your checkbook to a parent for safekeeping.

Cash:

You want to land overseas with at least $300 of local currency on hand. The best way to obtain this is to visit your local AAA if you’re a member, or your bank if you’re not. The bank will offer a better exchange rate, but AAA will get you the money much faster. You’ll likely have to pay by check at either one.

Once you’re abroad, the best exchange rate comes from ATMs tied to major banks, so use your debit card rather than running to a “change” place. Strong emphasis on the major bank part—this effectively means a popular bank, and not a corner store standalone ATM.

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