MONEY MANAGEMENT OVERSEAS

It may not look like real money, but the currency you are going to be using overseas is very real. Before you go overseas, you should find out how easy it will be able to use ATM machines. You should also read this section to understand how currency exchanges, travelers’ checks, ATMs, banking, and credit cards work internationally. You should pay particular attention to the information concerning money management that is included in the materials specific to your program. There are so many on-going changes in the banking world that we don’t really know what will be available by the time you arrive at your program site. It is worth your time to look into the possibilities.

There are various ways to manage your personal finances overseas. There are two easy ways:

1. Travelers’ Checks
2. ATM Cards

A combination of both is best. However, if you cannot bring all the money you will need with you or use an ATM card, you may have to open a bank account or use credit cards to obtain cash, but these methods are likely to be more difficult or expensive. Read further for details.

Travelers’ Checks

Some students prefer to bring all the money they will need with them in travelers’ checks. Travelers’ checks are the safest and most convenient form of currency. You can almost always use them, even in very small villages, and certainly on days when banks are closed. You can purchase them at your local bank prior to departure. The checks are insured and can be replaced if they are stolen. If your checks are lost or stolen, they will be replaced by the company you bought them from. Because these checks can also be cashed almost anywhere, they are preferable to your ATM card, which will only work in some places.

You can buy checks in U.S. dollars and in many other currencies, but probably you will buy all your checks in U.S. dollars. Often, there is a fee for these checks, but you may be able to get them at face value at the bank where you have an account or at a travel club such as AAA if you are a member. Read the directions on the folders of these checks when you get them so you will have an idea what to do if you lose them. Also keep a copy of the serial numbers in two separate places and record the check numbers as you cash them. Otherwise you may not remember using a check and might suddenly think you have been robbed when really you are fine.

You have to plan ahead if you are going to use travelers’ checks. The reason they are safe is that once they have been signed, they will be cashed only for the person who has signed them. YOU sign them as soon as they are in your hands, before you leave the bank! There is no way they can be purchased in the U.S. and safely mailed to you for your use once you are overseas. If they are stolen before they reach you, someone else will sign them. However, travelers’ checks are also used in other countries. If you are going to travel widely while you are overseas and you have your money in a local overseas bank, you may be able to obtain travelers’ checks from that bank before your travels begin.

ATM Cards

Some students prefer to use their ATM cards in local machines in the country where they are studying and just use travelers’ checks when they cannot use an ATM. In many countries you can use an ATM card to access cash from your own accounts at home or from a credit card to take a cash advance. (Caution: taking a cash advance via a credit card rather than withdrawing funds from your own account through an ATM means you are taking a loan which can carry a very high interest rate, so try to avoid doing this.) Funds can usually be withdrawn in either U.S. dollars or local currency. Most ATMs allow a maximum withdrawal of $250 at a time and your bank or credit card company may have its own regulations concerning the weekly maximum.

If you plan to use an ATM card overseas, find out if you can use your current card. Start the process of getting a usable ATM card by asking your own bank about their services overseas. You may need a different card and/or a different PIN. Also try to find out how much it is going to cost you to make withdrawals because these fees can be quite high. If your current bank does not offer overseas service, you will have to open an account at a bank in the U.S. where you do not currently have an account. Contact the central office of any major bank where you have an account for more information. When you have a usable ATM card, someone at home can deposit funds for your use while you are away.

Overseas Bank Accounts

You may be thinking that it would be a good idea to open a checking account at a major bank in the country where you are going, but actually, using checks overseas is difficult even when you have a local account. Your personal checks will not ordinarily be accepted overseas. When personal checks are deposited in an overseas account, they take months to clear, and the person who deposits them usually has to pay fees to have them cashed. (However, you can cash personal checks at any American Express office if you have an American Express card. Check with that company for details if you expect to use this card overseas.) If you do decide to open a bank account, find out how you will be able to put your money in! Look into the costs of wire transfers and international bank checks because those are the only ways you will probably be able to make deposits.

Credit Cards

You will want to have one or two major credit cards such as Visa, MasterCard, and American Express with you while you are overseas, but you will find you will use cash for most of your daily expenses. In many countries, you can only use credit cards for large purchases in shops, restaurants, and hotels. You may also be able to use your credit card for cash advances at affiliate banks in foreign countries up to the credit balance, but the fees and interest charges will probably be very high. You should check with your own credit card company for details and then decide how you will use your cards.

American Express (AE) card holders can obtain cash advances at any AE office around the world by writing a personal check and using the credit card as identification. A maximum of $1,000 every seven days can be cashed this way. AE will give you 20% of the amount in local currency and the rest in travelers’ checks in either U.S. dollars or the local currency. With an American Express card you can maintain your checking account in the United States, and someone else can deposit money into it periodically if you are lucky. Note that this service is not available where there is no AE office. AE also has a "moneygram" service that is available to members and non-members alike. Call 1-800-543-4080 for information. Western Union has similar services that you may wish to investigate. Other credit cards may also have similar programs. Consider the fees per transaction and the number of locations where such transactions can be made before you select a plan.

Currency Exchange

During the time you are overseas, you will need local currency. There are two things to consider when you change cash or travelers’ checks or get money via your ATM card: the exchange rate and the fee for any transaction. Basically, if you are exchanging a small amount of money, you will be better off with a low transaction fee, even if the exchange rate is unfavorable, since the fee will consume a large percentage of the money you are exchanging. If you are exchanging a large amount of money, then the transaction fee will be less important than the exchange rate itself.

Exchanging U.S. dollars for foreign currency is really purchasing currency. The seller will charge you a fee and exchange your United States dollars according to the exchange rate, which fluctuates daily. In general the fees charged by the seller are less at banks and official “Change Bureaus” than at other places, although sometimes guests at hotels are not charged fees at all. Note: the rates for US dollars that you see in the windows are usually the rate for converting local currency into dollars, not your dollars into local currency! You will probably have to go inside to find the rate and fees that will apply to your intended transaction.

In most countries, you cannot exchange money without showing your passport as identification. Money can be exchanged at banks, hotels, restaurants, shops, airports, railroad stations, American Express Offices, and travel agencies. If you are traveling to more than one country, plan your exchanges to avoid double or triple exchanges, such as dollars to yen to remnibi.

Usually, only paper money can be exchanged for other currencies, so any coins you have left when you are leaving a country are not going to be usable for purchases any place else. Unlike here, there are many countries that use coins that are worth $10 or more. These make nice souvenirs, but expensive ones!

You might want to get some foreign money before you leave for overseas. You can get foreign currency at the international department of major American banks or at international airports during normal business hours. Having some local currency beforehand is a good idea; you will then have some to use right away for taxis, local transportation, tips, and unexpected purchases. However, it’s usually a very expensive choice: you get both high fees and an unfavorable exchange rate! That means that if you are exchanging a small amount of money such as $25, you might be charged a minimum transaction fee of $5 and the poor rate may cost you another dollar or so of value so that your $25 is only worth $19 when you are done.

It is also a good idea to keep a small amount of money ($50) in U.S. dollars in denominations of $1 and $5. The dollars can probably be used for taxis, tips, and airport transfers when you arrive in a new country and when you return home.

Lost or Stolen Wallets

If your wallet is stolen, you will need to contact your credit card providers as soon as possible. Before you leave for overseas, photocopy the fronts and backs of all the cards and papers in your wallet and leave copies with your family. If your wallet is stolen, you or they will have the emergency numbers needed to report the theft right away. Also alert the major credit-clearing agencies in the US to prevent having new cards or accounts opened without your permission: Equifax 1-800-525-6285; Experian (formerly TRW) 1-888-397-3742; Trans Union 1-800-680-7289; Social Security Administration (fraud line) 1-800-269-0271.

If your passport or travelers checks are stolen, report them immediately and begin the process of having them replaced.