A year abroad has become an integral part of many students' education. Parents' concerns while the little darlings are away usually centre on their nutrition, study habits and finances. Unfortunately, some parents have found the kids' finances were more expensive than initially anticipated.
A Family Money reader from Sligo, Ms S, writes that she is very unhappy with certain aspects of her daughter's student account with Bank of Ireland. Her daughter is studying abroad this year and using her bank account to obtain cash.
In a letter to the bank, Ms S says: "The amounts charged for withdrawals of cash abroad are outrageous. Bank of Ireland's minimum charge is £2.50 [€3.17] but it seems to apply to very small sums only. Between the 30th of September and the 8th of October my daughter was charged £4.97 on each of two withdrawals of £142, £5.79 for £166 and £2.50 for £47. "At least one competitor for student business charges £2.50 for amounts up to £500. I am aware that the Cirrus facility is not intended for long-term use, but when one arrives in a new country it takes a while to set up a local bank account and some countries have fairly stringent regulations which make the process difficult."
A spokesman for the Bank of Ireland said that the least expensive way to obtain cash abroad long and short term was to use a "credit card in credit" because no charges were incurred if the card was kept in credit.
If an individual has a longterm commitment abroad he or she should really set up an arrangement with a local bank, he said. "That's a more efficient way to operate than on a cross-border basis." Unfortunately for students, different countries have various rules for opening bank accounts. Some regulations are quite restrictive at banks abroad when it comes to opening an account. In others, it may take months to open a current account. Before departing the Republic, students are advised to determine the system in each country by discussing it with their university or other students.
Students may easily obtain a credit card if it is guaranteed by their parents. If a credit card is not possible, then Bank of Ireland says the cheapest way for students to transfer money - if they are not in a hurry - is through the InterPayEcon system.
This is only available within the euro area and Britain, Denmark and Sweden. It is limited to €7,000 (£5,513) and costs £10 per transfer with an optional £3 additional payment to cover all additional bank charges. This facility is only economical for shifting large amounts of money. For example, it may be used to pay rent from a bank account in Ireland or to pay larger bills, he said.
"For more immediate payment we would recommend Cirrus but this is not like a Pass card. We have arrangements with other banks around the world and we offer a flat fee to customers - 3.5 per cent with a minimum of £2.50 and maximum of £9 per transaction," he said.
One advantage to the Cirrus system is that there is no foreign exchange commission, customers receive a wholesale price. However, Cirrus is not meant to be a Pass card, it's meant to be another way of obtaining money when abroad. Travellers should also bring credit cards, travellers cheques and smaller amounts of money, said the spokesman.
The Bank of Ireland offers discounted rates to students for drafts and traveller's cheques.
Cirrus is not automatically available to students, they must apply for it and the literature indicates the additional charges, he said.
"If a student is using the Cirrus card incorrectly they are taking a big hit on small transactions because that's not the way it is designed," he said. It is not free to customers because there is a cost to the bank for using other banks' equipment.
"Customers who have had difficulty should come talk to us. We'd be sorry if people have incorrectly used our products. We'd look at their situation and see what we can do," he said.
Similar to Bank of Ireland, AIB recommends a credit card in credit for students living and studying abroad. Within the euro zone, withdrawals from a credit card in credit are free of charge. AIB uses Visa's Plus system rather than Cirrus.
"All Banklink cards will operate on the Plus network but this is not the most economical way, it's a contingency instrument."
If they are forced to use it, "students should take out larger amounts, less often as Irish instruments are not designed that way," he said.
Parents with an account at AIB may also use their 24-hour banking facility instantly to transfer funds into a nominated account.
AIB says ATM transactions within the euro zone incur a £3 flat transaction fee. Outside the euro zone, the charge is 1 percent of the transaction amount with a maximum of £5. It is advisable to take out larger amounts and transfer into an account locally, said the AIB spokesman.
Students living outside Ireland or Britain may use a eurocheque card says Ulster Bank. Eurocheque ATM withdrawals cost 3.5 per cent of the transaction's value with a minimum charge of £2.50 and a maximum of £10. It is subject to a maximum clearing limit of £800.
Banks with a red and blue `ec' logo should cash eurocheques or allow ATM withdrawals using eurocheque cards. However, increasingly some French and Italian banks are refusing to accept paper-based eurocheques and refer eurocheque users to local ATM machines.
One of the greatest problems for students using their cash cards on an ongoing basis is the limit placed on cash withdrawals in some countries. Lower limits force students to take out small amounts more often, thereby increasing their costs. The limits are machine driven in each country rather than by the student's individual bank. Withdrawal charges also differ around the world for different cards.
When it comes to obtaining cash abroad, a little advance planning and research saves money over the long term.
