The Foreign Account Tax Compliance Act (FATCA) implementation by the U.S. Internal Revenue Service (IRS) has made planning your banking needs before you move abroad a top priority for Americans.
Many American expats have been having a difficult time opening and maintaining bank accounts abroad primarily because FATCA requires all foreign financial institutions to provide annual reports to the IRS on accounts held by Americans living abroad with more than $200,000 in their accounts. The high cost and complexity of compliance with FATCA is driving many foreign banks that serve expats to turn them away.
What should you do? Start developing a plan that keeps two key considerations in mind: flexibility and security.
Flexibility means easy, hassle-free access to your money no matter where you are living. 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.
Many financial experts recommend that you consider keeping a U.S.-based account for its convenience and flexibility and to ensure financial history continuity if you plan to return to America.
To help you consider your options, we spoke with international banking consultant Jane Hennessy to get her views on the best banking approach for you to take.
“First, I think people should think long and hard about keeping their U.S. account,” Hennessy said. “I recommend they should for several reasons. First, you may come back someday and need your credit history maintained. It can be difficult to get accounts 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 payment obligations in this country, like a mortgage payment, or if you need to receive income such as rent, Social Security checks or other U.S.-based income.”
Hennessy explained that with integrated global banking systems and online banking, it is very easy to use a U.S.-based bank from anywhere in the world. “You typically have 24/7 access to managing your money in the U.S.,” she told us.
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 and establish a PIN with the number of digits required in the country you will be living in.
Plan ahead to keep your U.S. account because opening a new account in America once you have moved to another country could be a problem. “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,” Hennessy said. “It requires U.S. banks to know more about potential customers in much greater detail. There is typically greater scrutiny of accounts with foreign addresses, if an institution is even willing to consider offering accounts to people living outside the U.S. The best solution is to use the address of a relative or friend to maintain your U.S.-based account.”
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