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Video SRQ: What is the Best Credit Card for Students Studying Abroad?

by on March 24, 2013 · 28 comments

in Credit Cards, Sunday Reader Questions

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TPG Reader Karsten will be studying abroad in the near future and would like to know what credit card would be best to use while she is away:

“I am a current college student at Georgia Tech with 2 years remaining in school. I have 2 questions for you:

1) I will be studying abroad this summer (Mid May – End of July) and I was wondering if you had any suggestions on what credit card I should look into using while abroad?

 
2) I already have a USAA credit card as they are my bank, do you have any other suggestions on another credit card that would be good for a college student to earn rewards with?”

Great question, and one that more students who are studying abroad should be asking! If you’re going to be spending a significant amount of time out of the country, it’s critical that you get a credit card that doesn’t carry foreign transaction fees.

I’ve written up a list of the top credit cards without foreign transaction fees before, but for those of you who don’t know what they are, forex fees (for short) are 1-3% surcharges that most credit cards charge on all purchases processed outside of the US. A note of caution:   if you ever purchase something and the vendor processes the charge outside of the US, you can also expect to get dinged with a fee.

Be sure to read your credit card's terms and conditions for the disclosure of foreign exchange fees.

Be sure to read your credit card’s terms and conditions for the disclosure of foreign exchange fees.

Three percent might not seem like much, but if you’re in Paris charging $3,000 on a week-long trip, that’s an additional $90 just for using your credit card, wiping out the value of any points that would earn. To make sure that doesn’t happen to you, and to verify whether your card does or doesn’t levy these fees, call customer service, or look up the Terms & Conditions documentation on your card.

Also beware that many foreign vendors will ask you whether you want to charge the purchase in the local currency or in US dollars. It seems like a modern convenience to help you track your spending but I recommend choosing the local currency and letting your bank/credit card company process the charge using their foreign exchange rate, which is  usually better than the one that you get through the vendor. When you allow the vendor to do it, you can almost be assured they are taking a cut of the action and will not give you the best rate.

For a comprehensive list of the credit cards that don’t charge forex fees, you can check out that post, but generally speaking, many of the Capital One cards don’t, including the popular Capital One Venture and  Venture One cards, and the Citi ThankYou Premier, as well as some of my other all-time favorites like the Chase Sapphire Preferred and the Amex Platinum Card (though its $450 annual fee might be out of your student budget!) – and all of those are great rewards cards. The BankAmericard Travel Rewards card is another good potential choice since it earns 1.5 points per dollar spent, carries no annual fee and has  no foreign transaction fees.

As for what card might make sense for a college student – hopefully you’ve been doing a good job building your credit with your USAA card, which is a great, solid product for college kids starting out with credit.

Even if you can’t get approved for one of the premium cards out there right now, there are still plenty of options. However, if you’re just starting off with credit and you’ve been paying your bills off on time you might get approved for one of the premium cards because more important than your income is your history of good credit and if you’ve been responsible, you shouldn’t have an issue. TPG readers, including college students who have been able to use their points to travel the world even at a young age.

The best piece of advice I could give you would be to start a relationship with banks now while you’re young, starting with Chase, which has the most lucrative line up of travel credit cards out there that you’ll likely want to apply for throughout the rest of your points-earning life. So for instance, now you could get the no-fee Freedom card from Chase and start racking up those Ultimate Rewards points on it, especially with those quarterly rotating 5x bonus spending categories, and then later on when you get the Sapphire Preferred or the Ink Bold or Ink Plus, you can combine your Ultimate Rewards points and transfer them to hte program’s partners: British Airways, United, Southwest, Korean Air, Hyatt, Marriott, Priority Club, Ritz-Carlton and Amtrak.

The Citi Forward card is another good cash-back card that earns 1 point per dollar on most purchases, but 5 ThankYou Points for every $1 spent at restaurants and on books, movies and music. When you just have the Forward card, you can redeem ThankYou points at a rate of 1 cent each for travel through the ThankYou rewards portal, but then later if you get the ThankYou Premier card, you can redeem them at a rate of 1.33 cents each – already a 33% bonus.  The Forward card is geared toward young people building their credit, and offers special perks such as lowering your APR for purchases by up to 2% when you stay under your credit limit, and pay on time 3 billing periods in a row (they will reduce it 0.25% every quarter, a maximum of 8 times). So it’s a good starter card, but don’t use it abroad because it does charge forex fees.

Another option for you in terms of both building your own credit history, earning rewards and using a card that has no foreign transaction fees is to have your parents add you as an additional cardholder on one of their premium cards if they’re willing to do so – just don’t abuse it or you might be coming home earlier than expected!

Have a great time, and let me know what card you end up getting.

 

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • adam

    for no annual fee and no foreign transaction fees, Capital One has many options. Not the best for earning lots of points/miles, but it is a worthwhile option for someone not wanting to worry about annual fees

  • Joel

    On a recent trip to southeast Asia, a vendor handed me the charge slip to sign but the amount was in US dollars. It was for a service that had already been provided, and it was awkward to protest at that moment. Of course the rate was terrible. I called Chase Sapphire Preferred after the bill arrived, and they said that there was nothing that they could do. I asked if they didn’t have an agreement with their vendors to bill in local currency, and I was told they do not. I’m not so sure about that. Chase should have made a correction to the amount billed, but they did not.

  • Kelvin

    Be sure to note that the Chase Freedom does charge foreign transactions fees, so you don’t want to use it overseas although it’s a great card to use in America.

  • meghanb904

    Do any of the no-forex fee cards have a chip and pin as well?

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  • Canton N

    I would strongly recommend getting a Schwab High Yield Investor Checking Debit Card if you are going to be studying abroad for more than a few months.

    That debit card carries no forex fees for purchases or ATM transactions, and will also rebate back to you any ATM fees. You can take local currency out of any ATM anywhere in the world and receive a refund from Schwab for any fees that ATM charged you. Furthermore, there are no fees for having the High Yield Investor Checking account (or its associated brokerage account).

    I have used this card for years and found it invaluable. In particular, while studying abroad myself, I saved quite a bit of money over my classmates because I didn’t have to pay ~$4+ in fees each time I wanted to withdraw cash from my home bank account.

    The only downside is that Schwab will do a hard pull on your credit report when you apply for your High Yield Investor Checking account, so I would recommend that you apply for any credit cards before applying for the Schwab account.

    As for credit cards to get as a student, I would personally recommend the Citi Forward card (5 points per dollar on restaurant and bookstore purchases, including Amazon). The Chase Freedom card would come in as a close second (5 points back in rotating categories).

    Good luck, and enjoy your time abroad!

  • Rob M

    I too love the Chase Sapphire card and their customer service is second to none. Just hit my first “wrinkle” with using the card in Mexico. Because there are no “raised” letters or numbers on the card, Dollar car rental required my rental to be prepaid in full before we took the car so they could swipe the card and get my signature on the credit card receipt. No big deal really, but the first time it has happened to me. They usually take an imprint of the card and you sign a “voucher” that is attached to the contract as “collateral”.

  • Rob M

    Second the advice. When our daughter was studying abroad in Italy, that’s what we did (Schwab card) and it was easy for me to load the account periodically so we didn’t keep large balances in the event her card was stolen……as did happen. Schwab got her a replacement card pronto too.

  • http://twitter.com/ED_EWR EW

    It’s not Chase’s fault after all. In that instance, the POS terminal should actually prompt a choice of either US$ or the local currency. But many times especially in Asia, the guy at register will choose US$ for you. They assume you would prefer that way.

  • http://twitter.com/ED_EWR EW

    Discover also has not foreign transaction fees.

  • A Fellow Student

    Even though it doesn’t get talked about a lot, for a globe-trotting student who is also relatively new to credit, the Bank of AmeriCard Travel Rewards for Students seems like a good fit.

    It is a student credit card, so it’s not super difficult to get approved for, and it comes with features you would need for travel: no forex fees and an EMV chip. It also earns 1.5% on all purchases (3% if you book through the BofA website), has a 10% annual bonus if you have another BofA account, and doesn’t charge an annual fee.

  • Tom

    I’m in France and use Charles Schwab checking, for ATM withdrawals with no fee, Chase Sapphire Preferred, for no foreign exchange fee, and a French ATM card with an EMV-chip, for use in machines train stations and with merchants who won’t take a magnetic card (the latter is rare). You’ll probably want a local checking account, so that’ll come with a card with an EMV-chip.

  • C75K

    Yes but he doesn’t get affiliate money if people apply for the Schwab card instead of any of the cards he mentioned

  • Zuko

    BofA has that i believe.

  • Mileshore

    Consider a credit union card – Pentagon Federal has very good customer service and has a no forex, no annual fee, and full chip and pin card – it is what you want to carry when traveling overseas. Qualifying for membership is easy and if you do a google search, there should be some good posts on this.

  • todd

    Yes, I agree. I think the BOA Travel Rewards card is a great on and it may work very well for this person with no foreign transaction fees. The chip will be very useful abroad and getting 1.5 points on a no annual fee card isn’t bad.

  • thepointsguy

    Very interesting- didn’t know about the card- will add it to the post

  • thepointsguy

    I’ve had that happen too- you can get one with slightly raised numbers, but sometimes that isn’t enough. Interesting to know you can prepay in advance

  • thepointsguy

    The question wasn’t about which checking account was best for students student abroad- which credit card. And I do not think the Schwab is the best choice for international credit card transactions. Do you?

  • thepointsguy

    No US credit cards are chip and pin- all Chip+ signature (to my knowledge).

  • thepointsguy

    Correct- as well as Citi forward. Good cards for US purchases- abroad, notsomuch

  • thepointsguy

    Correct- ALWAYS pay in local currency and let Chase or your local bank do the conversion. The merchants always skim off the top when doing you the “favor” of converting the currency

  • thepointsguy
  • Canton N

    Thanks for responding to my post TPG. I would suggest that you’re right and you’re wrong. You don’t earn any points from purchases with the debit card, so a points-earning credit card would be preferable for point-of-sale transactions. However, the Schwab debit card is an important supplement, as it essentially earns you 400 points with every ATM transaction (since that’s how much you would need to pay in fees with a normal ATM card). Karsten should really get both.

    Personally, after reading “A Fellow Student’s” comment, I would recommend getting the BoA Travel Rewards for Students card to use at point-of-sale transactions, and then supplementing it with the Schwab debit card for withdrawing cash. (Karsten, if you actually do this, make sure to apply to the BoA card first since Schwab will do a hard pull on your credit report).

    It’s important to note that in many countries she may be forced to make all transactions in cash, particularly in the developing world. I did a semester abroad in Botswana recently and was rarely able to pay by credit card, almost all vendors were cash-only. She should definitely get the Schwab card in that case. Of course, if she’s going to Europe, that would be a different story entirely. She might not want to bother with the Schwab debit card in that case (though I would still recommend it).

  • lilyiann

    Would anyone know if the Citi Forward’s 5x bonus on restaurants also applies overseas? I was thinking about this while traveling…. if the foreign transaction fee is 3%, then eating abroad still gets you a net 2% in rewards, making it a great rewards card for eating abroad as well?

  • Callmedory

    USAA has a true chip+PIN World MasterCard. It also has a magnetic strip for swiping. 1% FTF.

    I just got mine and used it (in the US, so no PiN used) to make sure worked.

    We’ll be going to London/Paris in a few months, so I’ll be getting a USAA ATM card attached to a checking account, and a 0% FTF chip+sig card for most usage. I just haven’t decided on which card. I dislike annual fees, but some rewards pretty much counter it. I’m considering CSP, if they’ve gotten chip+sig going.

    Good idea?

  • thepointsguy

    CSP is probably the best all around no foreign transaction fee Chip/Sig card out there

  • Callmedory

    Thanks! Got ours ordered.

    Add USAA atm for fee-reimbursed withdrawals and I think we’re set. At least card-wise.

    Phone-wise…still confusion.

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