This becomes more relevant when tuition and other education-related payments run into several lakhs and are made through different channels during the student’s stay abroad.
Look beyond the exchange rate
The exchange-rate margin is one of the key costs to examine when making an overseas payment. Even a small difference can become meaningful when the transaction value is high.
For example, a 1% difference on a ₹10 lakh remittance amounts to ₹10,000, while the same difference on ₹25 lakh amounts to ₹25,000.
Gagan Malhotra, COO, BookMyForex, an online marketplace for retail foreign exchange and international money transfers, said the exchange-rate markup is the difference between the prevailing market or interbank rate and the rate ultimately offered to the customer.
“On a large tuition payment, even a small difference can translate into thousands of rupees,” Malhotra said.
Apart from the exchange rate, students and parents should check transfer or processing fees and any SWIFT or intermediary-bank charges, where applicable.
Sai Shankar, CBO, Niyo Forex, an Indian fintech platform that provides international travel cards and digital banking services, said families should compare the landed cost of a transaction rather than focusing only on the exchange rate or transfer fee. This means looking at how many rupees they ultimately pay for the university or student to receive the required amount in dollars, pounds or euros.
For a large payment, one way to make the comparison is to calculate the effective exchange rate by dividing the total rupee amount paid by the foreign currency received.
Different expenses may require different payment options
The costs to consider can vary depending on whether the payment is for tuition or everyday expenses.
For large overseas payments such as tuition, students should compare the exchange-rate markup, transfer charges, intermediary-bank costs, the amount credited to the recipient, processing time and documentation requirements.
For living expenses, the relevant costs can include forex charges, ATM withdrawal fees, reload or funding charges and cross-currency costs.
Malhotra said ATM withdrawal, cross-currency, reload and unload charges can add to the cost when a forex card is used over a student’s stay.
Shankar said students using cards for living expenses should separately examine forex markup, ATM withdrawal charges and other card-related fees instead of looking only at the headline forex rate.
Education loans and forex payments are separate considerations
An education loan determines how the overseas education is financed, while a bank, remittance platform or card determines how the money is converted, transferred or spent.
Families should therefore examine the loan’s interest rate, processing fee, repayment terms and disbursement conditions separately from the costs associated with overseas payments.
The disbursement terms are particularly relevant because some loan arrangements may specify how funds meant for tuition or other overseas expenses are to be routed.
Shankar said students should check the exchange rate and charges applicable when an education lender disburses funds, as these costs can form part of the overall expense of financing an overseas education.
Malhotra said families should assess an education loan beyond its interest rate and also consider the costs associated with converting, transferring and using the funds abroad.
A low headline fee may not mean a lower overall cost
Students may come across products or services advertising zero transfer fees or zero forex markup. These features address specific charges and should not be treated as an indication of the total transaction cost.
For example, a card with zero forex markup on eligible transactions may still have ATM or other applicable charges. Similarly, a remittance service with no upfront transfer fee may have a different exchange rate.
Shankar said the simplest comparison is to ask how many rupees will be paid and exactly how much foreign currency the university or student will receive.
For large tuition payments, students should also check whether the university accepts card payments, whether transaction limits apply and whether the university or payment processor levies an additional charge.