Why you should use a local bank account
It's not a legal requirement to have a local bank account in the country where you're studying. Indeed, with the interconnectedness of the international banking system, you could well rely on only the international credit issued by a bank back in your home country – and that for the entire duration of your studies. However, there are multiple benefits of opening a local bank account:
- You won't have to pay international withdrawal and currency conversion fees every single time. These fees aren't very high for occasional withdrawals from a foreign bank account, but if you keep doing it repeatedly, you will end up spending a considerable total amount of money on fees. This is money you could have used on grocery shopping or entertainment as an international student!
- If all of your money is abroad, you will also remain vulnerable to currency fluctuations. Consider this situation: You are an Indian student in the UK, and the Indian rupee fluctuates constantly vis-à-vis the pound. Your monthly mobile phone package in London costs £10. If your money is in pounds in a British bank account, you know exactly how to budget for this expense over multiple months. However, if your money is in rupees in an Indian bank account, £10 might sometimes be equal to Rs 1,000, Rs 1,500 or Rs 700, depending on various macroeconomic factors beyond your control. It's then more difficult to budget.
- Out-of-network withdrawal fees can also be very high depending on the country, region and the bank behind the closest ATM to you at any given moment. The consumer financial services company Bankrate has a list of the American cities with the highest out-of-network ATM withdrawal fees. In cities like New York, Pittsburgh and Washington DC, all of which have many international students, these fees are close to or even higher than US$5 per withdrawal. You can imagine how much you'll end up paying if you use ATMs this way all year long.
- Some services, websites and applications might accept only a local bank account. This includes widely used local payment apps. China, for instance, is a nearly cashless society because people tend to pay with apps like WeChat Pay and Alipay wherever they go. Indeed, many vending machines in the country don't even have slots for cash, only a QR code, and some cafés might not have change to give back to you because they're so unused to receiving cash. And you imperatively need a bank account based in China to be able to use these apps. The popular American payment app Venmo is also only supported within the US. So, you cannot use it with a non-American bank account, and neither can you access your existing US-based Venmo account when traveling outside of the country. Gyms, libraries and landlords also prefer standing orders from a local bank account.
- It will be easier to be credited money for your financial aid and/or part-time work. If you don't have a local bank account, local employers might hesitate to hire you because it will be too much of a hassle to transfer your salary and remain tax-compliant. If you are obtaining financial aid from your university or the local government, they'll also prefer to debit this aid to a local account. If you take out a local loan, it'll also be easier to pay loan repayments through a local account.
- You will build a credit score in that country before you even start working there. If you plan on working in the country after graduating, having a pre-existing credit score will be extremely useful to rent an apartment, take out a loan without a cosigner and get more local credit cards. Using a card issued in your home country will do nothing to help build your credit score in a new country; you need to be a user of the local banking system to build this score. Simple things like paying your rent and mobile package on time each month from a local bank account will help build this score.
How to choose a local bank for your student account
Now that you are aware of the importance of opening a local bank account, how should you proceed? First of all, out of all the banks in this new country, which one should you choose? Here are the factors that should influence your choice:
- Choose a bank which also has a branch in your home country. This will make transferring your funds from abroad easier. You will also be able to manage your account more easily whenever you're traveling back home, especially during semester breaks. For instance, if you're a South American student in Europe, it might be practical to open a local Santander account, because this Spanish bank is present both all around Europe and all around South America. If you are an international student in China, HSBC might be a good choice because it's present all around the globe, including in smaller countries.
- Choose a bank that has reliable internet banking and a good mobile application. This will also make managing your account from anywhere easier.
- If you are not fluent in the local language, choose a bank with a multilingual service – including a website, an app and ATMs in multiple languages. Otherwise, you might fail to understand important emails/messages from your bank, and you might also need to bring a local friend to act as an interpreter each time you visit a branch for a complex banking procedure.
- Choose a bank that has a branch close to your university campus or your dorm/apartment. Also, research if it has branches and ATMs throughout the entire country and in nearby countries, which will make your life easier whenever you travel.
- Choose a bank that doesn't require too many documents or a high opening deposit to create an international student account. Some banks have zero minimum deposit for student accounts or a very low one of around US$10-20. A few banks require you to submit additional documents like a certified letter from your bank back home – it can be a hassle, so choose a bank that requires only basic documents like your passport and student ID.
- Choose a bank that offers student benefits. Many banks waive or lower various fees for students, including maintenance fees for checking accounts, overdraft fees for withdrawing a sum that is higher than your available balance, international transfer fees, and ATM withdrawal fees. Other benefits they can provide are discounts for entertainment venues, hotels, restaurants and stores (bookshops, eyewear stores, etc). The apps of some student bank accounts can also help you budget by showing you charts of your weekly and monthly expenditures.
How to open a local bank account
Now that you've chosen a bank, how do you proceed with opening an account there? For all banks, anywhere in the world, these are the basic documents you'll have to bring to a branch:
- Your passport, with your student visa stamped in it. You might also need to bring a card that you'll get within your week in the country, like the Biometric Residence Permit (BRP) card in the UK for long-term students who are staying for more than 6 months.
- Proof of student enrolment, which is usually a Student Card issued by the university in the first week, a Student Status letter that you can download from your university account right after enrolment, or an acceptance letter.
- Proof of address (also called “proof of residence”) of the dorm/apartment you're renting or the relative's house you're staying at. It can be a signed tenancy agreement, a letter from your landlord or host, a letter from your university if you're living on campus, a bank statement or a recent utility bill. You should check with the bank to see which exact types of proof of address/residence and proof of student enrolment they accept.
- A local mobile number. You should get a local SIM card within the first few days of landing in this new country. You could even get one from the airport.
Some banks will allow you to start the procedure to open an account online, but you'll have to show up in person at a branch at some point during the process. If you feel unsure about what exactly to do at the bank or don't master the local language, do ask for help from the international student office of your university. They might even send a local – a member of the administration or another student – to accompany you to the bank.
Should you open a checking or savings account? It depends. If you plan on using a debit card, linking your account to payment apps, and need to create standing orders for things like your mobile plan, a checking amount (ideally one that waives maintenance fees for students) is necessary. However, nothing stops you from also having a second account, which is a savings one. A savings account will help you budget more efficiently and earn some money from interest.
Depending on the financial institution, it might take a few minutes to a week for your new bank account to be fully operational. In the meantime, it's important to have cash on you or an international credit card from your country, which you can use for basic expenses like food. It's not the most convenient situation, but it's manageable for a few days.
