You should plan banking needs before you move to your new country to ensure that you always have easy access to your money. Two key considerations to think about are flexibility and security.
Flexibility means easy, hassle-free access to your money no matter where you are. It also means the ability to transfer your money internationally and have access to cash both in the U.S. and your new country. Security is simply how safe your money is wherever you have it deposited.
We spoke with Wells Fargo’s Jane Hennessey, executive vice president of the company’s international group, to get her view on the best approach for you to plan banking needs before moving abroad.
“People should think long and hard about keeping their U.S. account,” she said. “I think they should for several reasons. First, you may come back someday and need your credit history maintained. It is difficult when you come back to the U.S. after a prolonged stay in another country because of the long lapse in your credit history. You may not be able to get a new credit card when you return. Having a U.S.-based account is convenient if you have U.S. payment obligations in this country like a mortgage payment or need to receive income such as rent, Social Security checks or other U.S.-based income.”
“With integrated global banking systems and online banking, it is very easy to use a U.S.-based bank from anywhere in the world,” Ms. Hennessey explained. “If you have a current bank account and want to keep it, you can use your new address with no problem. However, if you do not keep it and decide to open a U.S. bank account at a later date after you have moved, it is much more difficult.”
A big part of the reason U.S. banks shy away from accepting new accounts from Americans with foreign addresses has to do with the Know-Your-Customer provision in The Patriot Act. It requires U.S. banks to know more about potential customers in much greater detail. “We have stringent customer guidelines,” she said. ”Financial institutions can interpret the guidelines in various ways, but Wells Fargo has its own methodologies that are quite rigorous.”
Another plus for keeping your U.S. account is the ability to use your ATM card in your new country for ready cash. Although most ATM machines have maximum withdrawal limits, withdrawing from your dollar-based U.S. account is a real plus in countries where the dollar is very strong against the local currency. One thing to keep in mind, however, is that some countries restrict ATM PINs to just four-digits. If yours has six-digits, you will not have access to your cash. Find out in advance.
You should consider keeping a U.S.-based account for its convenience and flexibility and to ensure financial history continuity if you think you may return to live in America.
If you are retiring or generating your income from companies in the United States, you may be able to function perfectly well with just your U.S. bank account. But if you are employed locally or start your own business, you will also need a local bank account. This is where the security consideration comes into play.
“If you want or need to open an account in your new country, you should speak with your U.S. bank to see if they have any branch locations in your new city or ask if your bank would recommend a local bank for you to use,” Ms. Hennessey advised. “They should provide you with a recommendation and a letter of reference you can use to open your new local account. Here at Wells Fargo we have a group called the International Connections team. If you call 877-593-2468 and ask to speak with a team member, you will have a direct connection to someone who can handle all your international banking inquiries. You can also send us an email to International Connections at Wells Fargo.”
Recommendations and references can be invaluable in light of the passing of FATCA legislation in the U.S. FATCA is an acronym for the Foreign Account Tax Compliance Act, which was passed in March 2010. It seeks to target those who evade paying taxes by hiding assets in undisclosed foreign bank accounts. By January 2013, the act requires all foreign financial institutions to provide annual reports to the IRS on the account balances and total debits and credits of any account owned by a U.S. person. If you have in excess of US$50,000 in your account, you will be required to complete Form 8938 to be filed with your tax return. The point is this: FATCA’s IRS reporting requirements may make it more difficult for you to establish a local account to receive your local currency income or revenue. Read our article on how expats face local FATCA banking challenges.