The International Banking Guide for Expats
Bank easily in any major currency from any country
An international bank account is a must-have for expats who deal with multi-currencies and global money transfers.
For those of us who live a global lifestyle, international banking is a must-have tool crucial for effective management of our money and wealth. An international bank account is a brilliant way to organise and control your finance, can be suitable for wide range of earners and helps a better financial planning.
In case of expatriates it is also a simple matter of convenience.
Do I Need an International Bank Account?
The answer is “Yes” if you are retired or planning to retire abroad, have a property, business or other interests and assets overseas, if you are saving for overseas retirement or planning to move abroad soon, if you often have to transfer money across the globe or in different currencies at a moment’s notice, or just want to have more control over your own money.
If any of the above relates to you, it is very possible that you can benefit greatly from having an international bank account.
The following guide to international banking can hopefully help you decide whether an international bank account can be of great benefit to you.
How You Can Benefit from an International Bank Account
An international bank account allows you the following advantages:
- Keep Multiple Currencies in a Single Account
This is the most substantial advantage of international banking for expats with financial commitments in more than one nation or currency.
International bank accounts allow you to bank in different currencies and even multi-currencies. It means you can hold the euro, sterling and US dollar within the same account, withdraw money from your account in a currency of your choice and even move your cash between currencies to take advantage of currency fluctuations.
It also allows you to be paid in one currency, while paying your day-to-day bills and expenses in the currency of your current country of residence.
- Keep Money Transfer Charges Low
There is a huge reason why international accounts are becoming more popular among expats and global individuals – it is mainly because they dramatically reduce the charges and punitive exchange rates incurred when moving money world-wide.
Certain banks can offer you Foreign Exchange services, which could minimise the risks of currency fluctuations and allow you to wait for a specific rate before making the transfer.
Some banks offer no fee services, but pay attention to the conditions they set out.
There are banks that let you send money free to anyone who holds an account with the same bank overseas, and there are banks that may require both the UK and the foreign account to be in your name. It is worth, therefore, shopping around for an international bank account that is right for you and suits your needs.
- Safeguard Your Money from Political and Economic Upheaval
If you live and work in economically and politically volatile countries (which in the present state of the world’s economy can be applied to almost any country), it makes a lot of sense to have an international bank account. This way you can avoid the risks in your country of residence such as high inflation, currency devaluation, a coup or war.
Moreover, it’s not a rare occurrence nowadays when your own government tries to make a grab for your savings by means of a bank haircut, bank deposit taxes, capital controls and anything else they can come up with when they are desperate for extra cash.
Keeping at least part of your wealth offshore in an international bank account can ensure you won’t fall a victim to governments’ political and economic failures.
- Protect Your Money from Income Tax
If your country of residence only imposes tax on the money you remit into the country, there is an obvious tax benefit to keeping your money in an international bank account.
Depositing your money offshore will allow you to bring in your country of residence only as much money as you need for your day-to-day expenses and leave all the rest untaxed in your international savings account.
- Have More Control Over Inheritance Tax
An international bank account can be of a great help if you are seeking to protect your estate from inheritance taxes in the future. Accounts tied to trusts or companies can sometimes be beneficial for the legitimate optimisation of estate taxes upon death.
It is important to consult a specialist in estate planning to make sure you can benefit from such an advantage.
- Make Your Savings Work Harder
Some international bank accounts can pay more interest on your savings.
This is becoming less and less the case nowadays, but it’s worth looking closely at what’s available when seeking to establish a new international bank account. It is still possible to find banks that pay higher interest rates than what you’d find with your home banks.
However, the main advantage comes with the fact that with an international saving account interest is paid gross, rather than being automatically taxed monthly as it is in the UK when your interest exceeds £1,000 for basic tax-payers and £500 for higher-rate tax payers.
It means that if you are paid interest on your international account in February, you will have until January 31 to declare it to the HMRC, thus allowing your interest earn even more interest. Timing is the key here and it is especially beneficial for savers with large sums of money.
- No Fuss, You Can Stay with Your Current Bank
Many of the high street banks such as Barclays, HSBC, Lloyds and others have their own international branches.
It means that if you bank with any of them, you can potentially remain with your current banking provider when you expatriate, and simply swap to having an international account.
- Access More Versatile Services and Products
As there is less government intervention in international financial centres, international banks can very often offer more interesting investment services and solutions to their clients. It is, for example, possible to invest with all kinds of Collective Investment Vehicles: mutual funds, hedge funds, unit trusts and so on.
Since these funds are domiciled in a low tax jurisdiction, investors only have to consider the tax implications when they want to bring money over to their own domicile or residency.
So, if you are looking for financial planning options that aren’t available locally, then an international account can be a perfect solution for you.
- Enjoy a More Personal Customer Service
You may benefit from having a relationship manager or private bank account manager if you choose a premier or private international bank account. Such a service is of benefit to those who desire a more hands on approach to their account’s management from their bank.
- Bank Flexibly
International accounts are usually designed to offer customers maximum flexibility in terms of account usage.
Expats can benefit from this no matter where they are in the world as it can mean they can access their funds from ATMs or online or over the phone at any time of the day or night, no matter what the time zone.
- Have More Privacy
You can potentially enjoy greater account privacy. Some jurisdictions – e.g., Switzerland – place great emphasis on maintaining client confidentiality at all times.
For anyone wishing to protect their assets from unfair or speculative litigious behaviour, an international bank account can be an added deterrent.
- Access International Mortgages
When you move abroad and decide to invest in property in your new country of residence, you will find that it is next to impossible to get a local mortgage without a credit history. That’s when your international bank might be of great use to you, for most international branches can offer international mortgages for their clients subject to certain rules and conditions.
What to Look Out for When Opening an International Bank Account
There are not many disadvantages to international banking as the whole concept of it aims to improve and optimise financial planning and money transfer across the globe. So, if you are in need of either, there will be more advantages for you in international banking, then possible disadvantages.
However, when considering opening an international bank account it is really important to remember the following:
- Check Exchange Rates
The lack of fees on a multi-currency account will be appealing, but you must still look at the exchange rate you are getting to ensure you are being given a good deal. It may not be as beneficial as the exchange rate you can get elsewhere. So, be sure you check what you will receive on the exchange, especially if you are transferring a large amount of money.
- Check How Your Money Will Be Protected
You have to choose your offshore jurisdiction carefully.
You may well be aware of how the banking industry operates in your own home nation and how it is regulated, but when it comes to the rules and regulations abroad, they might differ massively.
When you save in the UK, your money is protected by the Financial Services Compensation Scheme (FSCS), which covers up to £85,000 of your money in each bank you chose to deposit it with.
With an offshore savings account it’s not as simple. That’s why it is essential to check with the offshore bank of your choice what compensation scheme will protect your money.
Before opening an account, it’s worth checking with your provider to see whether your money will be protected by a different compensation scheme.
Banks in Guernsey, for instance, will cover your first £50,000 per bank. The same goes for the Isle of Man’s Depositors’ Compensation Scheme.
- Read the Small Print
It’s also important to look at the terms and conditions of an international bank account.
Will you be charged higher fees if you fail to maintain a minimum balance, what are the fees and charges for the account and the services you may wish to use?
It is true that some international accounts can be opened with just £1, however check for operating charges: sometimes withdrawal fees can be up to £25. On the whole, if you are a smaller saver, an international savings account might not be the best option.
- Make Sure You Can Resolve Issues with Your Chosen Bank Online
In some cases, it might be more difficult to resolve any issues that may arise with your international account. This is because you cannot physically visit your branch and speak to someone in person.
However, you might find to your great surprise that many international banks are now offering a much more efficient way of communication and resolving problems than your local branch on a high street.
Keeping Your UK Account Open
It might be a good idea not to completely sever your financial ties with Britain. You might want to return one day if your overseas life hasn’t gone the way you expected or when your work assignment abroad comes to an end.
To make your return home less stressful, you would probably want to consider keeping your UK bank account alive and working. I
t might come especially useful if you have financial obligations in the UK – paying certain bills, for example, or having domestic investments that you would like to keep (like renting out a property).
Although it is not as easy nowadays as it used to be, it is nevertheless possible to keep your UK account open while you are living abroad.
Some banks will allow you to maintain your UK bank account alongside your international account, you just need to shop around for such a possibility.