Opening An Overseas Bank Account: Why You Should Do It And Where
Overseas Banks 101
I’m on record as saying that banks suck.
You’ll hear me say this at every Live And Invest Overseas conference.
At any given time, some countries have better banking sectors than others—and some banks suck more than others.
But banks generally suck… Things have only gotten worse since the Financial Crisis of 2008: Banking customer service got worse and worse, and it hasn’t improved. The consolidation of the banking sector globally left fewer options available in many locations…
It looks like things may get worse again after recent events.
(If you haven’t seen it yet, check out my video discussing the current crisis here right now.)
But here’s the thing: The world needs banks. Banks will always exist.
Some may be worse, some may be better… Individual banks may come and go (with hell for the depositors involved)… But the world’s workers, employers, pensioners—all of us—we can’t do without banks.
Because banks suck, you may be surprised to hear me say that you should deal with more than one bank.
In fact, it’s essential that you do—this is the only way to spread your risk in a sector that, as we’ve seen, is prone to risk.
Ideally, you’ll open a bank account in a country that’s not your home country. This way you are diversified not just beyond your first bank, but also beyond your home market…
Right now, as you read this, I’m in Waterford, Ireland, with my team to discuss our real estate business. This brings back a lot of memories because Kathleen and I lived in Waterford for many years…
This is also where I opened my first bank account outside America.
So, in honor of that—and to help prepare you for the next bank crisis—I’m going to share with you what you need to know about offshore banking right now…
Offshore Banking—How To Get Started
If you haven’t attempted opening an overseas bank account before, the idea can be intimidating. How? Where? Why?
And, the reality is that, simple idea as this is, opening a bank account in another country is sometimes easier said than done. Especially if you’re an American, thanks to the U.S. government’s requirement that foreign banks report on accounts held by U.S. persons (thanks to the 2010 FATCA law).
Jurisdiction options are many. The traditional “banking havens” are well-known: Switzerland, Austria, the Channel Islands, and the Caymans. However, these choices are more for high-rollers with lots of cash. A bank account in one of these places would generally be what is considered a “private” account—that is, an investment account—and would generally come with a minimum deposit requirement of as much as US$1 million.
However, there are other options for where you could open your bank account…
Belize, Panama, and Uruguay are three good locations for establishing an offshore bank account that also qualifies as a private (or investment) account but for which the account minimums are much lower.
Another option would be a “local” account in a place such as the U.K. These accounts aren’t typically investment accounts but operating accounts. Still, they provide a place to park cash outside your home country and (verify that this is a possibility in advance of opening the account) in different currencies. Look for banks that allow currency accounts in the major hard currencies (U.S. dollars, euro, pounds sterling) at a minimum.
For this kind of an account, there is no minimum opening balance required, but I’d suggest that you’d want to keep at least US$25,000 on deposit considering the ongoing fees and the time and trouble involved with opening the account in the first place.
Other jurisdictions I’d suggest today include Singapore and the Cook Islands. However, opening an account in these countries can be difficult without an introduction, requires a personal interview (which means a long plane ride), and can come with high fees, including a fee to get the account opened in the first place.
It’s the fees that get most Americans riled up when considering offshore banking options. We Americans are used to free checking accounts in the United States, where the banks all clamor for business. However, those banks typically make their money on your money, as well as by selling you other products… like credit cards.
Offshore banks are more conservative in their lending habits, and, unless you’re using them for investment, they make their money charging fees.
If you are moving to a particular country, you may simply open a local account and keep a minimum amount there for paying local bills.
A local account is typically attached to some local agenda, either living in the country, full- or part-time, or managing a rental or business investment there… rather than purely a diversification play.
When shopping offshore banks, start by checking minimum balance requirements and fees, both ongoing and one-off fees, such as the fee charged for sending a wire. These things vary considerably.
For opening any account, you’ll need documents such as an ID and residency information…
Being an American not living in the United States seems to confound many offshore banks. At a minimum, it increases the chances that the bank won’t deal with you.
This is just the reality of the post-FATCA world. And, it increases the importance of other aspects of your diversification strategy—like overseas residency and citizenship…
Wherever you decide to open an offshore bank account, keep it active. You might not have the possibility of opening the same account at the same bank in the future.
In the current climate, my mantra is: once you get an account open, keep it open.
Editor, Offshore Living Letter