Those of you who have experienced international relocation will be familiar with the joys of fluctuating currency exchange rates, fund transfer fees, and a net worth that is virtually impossible to track on a regular basis. There are three main options for getting access to your money and retaining some sense of control over your finances, and while some are specific to international relocation, all have relevance, wherever in the world you find yourself.
The Cheat Sheet
Three Main Options:
Keep your home bank and withdraw cash via:
ATM (quick, usually easy, expensive, insecure)
Forex Bureaux (slower, but cheaper and safer)
Bank Draft (painfully slow and expensive)
This is easier in the short term, but it does not establish a credit history for you, not all banks and businesses will honor your card, and you will be constantly required to verify your identity. It is also very expensive; you will pay bank fees at both ends of every transaction, and you are vulnerable to exchange rate fluctuations.
Open a host country bank/credit union account and be paid locally, provided you meet their requirements, usually:
Proof of identity and legal status (e.g. passport and resident visa)
Proof of residence
Social Security/Tax Identification Number
Excellent for long term residence as it establishes credit history, you are able to budget accurately, and is a cheaper form of banking. If you still have financial commitments in your home country, you will pay fees to transfer money back, and again, are vulnerable to exchange rate fluctuations.
Combined home and host banking, using wire transfers to move money between accounts.
Cheaper in the long term, providing that you transfer larger amounts less frequently. Transferring money often requires contacting your home bank directly, which is inconvenient if there is a time difference. Keeping track of your finances across two bank accounts can be confusing, and again, you are vulnerable to exchange rate fluctuations.
Global bank accounts
Becoming more popular as international assignment numbers increase. Highly convenient, but accounts typically require considerable financial investment or income.
Primary Account – Home Country
Cashing Checks from your Home Bank Account
Foreign Exchange Bureaux. For 3 years, this was my main way of accessing my money, and I have to say, one of the most manageable. It’s advantages were multiple; I knew exactly how much I was taking out of my account, I could use my checkbook for my UK bank account, so didn’t incur fees; I got a decent and immediate rate of exchange which I could negotiate, it was secure, and it supported our local foreign exchange business. My weekly trips meant that I built up a very good relationship with the business owners, and I got extremely preferential rates whatever amount I needed, simply because they wanted to keep my business.
It worked like this: I would go to the Forex bureau in my local town centre and write a check for the amount I wanted to withdraw in UK currency – for example, £ 100. (Obviously, if I had had a different home location, it would have been in whatever was the currency of my home bank location). They would then give me the UK pound – Kenyan shilling exchange rate for the day, and after a considerable amount of haggling, we would agree on a rate, and I would leave £100 worth of Kenyan shillings.
The weekly withdrawal of living funds from my UK account, small number of transactions, only known and trusted people having access to my bank details, and an immediate written record & receipt meant that my risk of fraud on the account were low, a priority in a country where there is a considerable amount of credit card fraud. As I had a consistent exchange rate for the weekly withdrawal, my living expenses could be tracked accurately in the local currency, and I had only relatively small amounts of money on hand at any one time.
Cashing cheques (or checks, depending on where you are reading this!) is not as strange as it sounds, especially when in developing nations where
a)bank accounts are expensive,
b) ATM’s are less secure, and
c) local cost of living is lower, so less money is needed.
It has the advantage of only allowing very limited access to your account details, and only in writing (i.e. the cheque); of building a relationship with a branch that will often give you preferential rates (often beating those of the banks, especially with less desirable currencies) and of taking place in a more private location with security provided.
If you are going to use this method, make a point of taking some simple precautions.
Don’t make transactions at the same time every day / week.
Use a trustworthy Forex Bureau (other expats or your embassy will happily give recommendations, or ask in the forex themselves for references that you can follow up on). Make sure your money is stowed out of sight before you leave the branch, preferably in more than one location.
ATM using an international debit card.
Getting access to funds in your existing bank accounts has become more and more simple with credit card issuers cashing in on the increasing popularity of world travel. Visa is currently the global leader in this field, so if you have a visa debit card as part of your home location banking arrangements. you should not find it too difficult to get hold of your money, providing that you;
- a) notify the bank of your travel plans
- b) don’t exceeds your daily cash limit
- c)have other funds available if the ATM retains your card
- d)are vigilant about ATM tampering
On the surface, this seems like the most convenient way to withdraw money, a myth the banks are keen to perpetuate, once you have used this approach a few times, you realize it is virtually impossible to keep track of both your local and home spending. The reasons for this are multiple, and not limited to the banking world’s ever changing rules and charges.
Firstly, there are usually charges levied at both ends of the transaction, meaning that for each withdrawal, you have often paid a significant percentage of the money you withdrew for the privilege of putting it in your wallet. Banks typically charge an international transaction fee of between $3 and $5 per transaction AT EACH END, so it’s worth taking out the maximum allowed and cutting down on the number of transactions.
Secondly, exchange rates for the money you are withdrawing are not displayed at the time you make the transaction, and are typically poor, so you get stung both ways. Establishing exactly how much you are paying for items, especially small transactions such as coffees and snacks, becomes nearly impossible.
Thirdly, you are usually limited to the amount of money that you can take out, and it is rarely enough to cover living expenses for the week, so you are committed to a larger number of transactions (and, of course, fees) over the course of the month. This makes it more difficult not only to keep track of your own financial activity, but also to spot fraudulent transactions. You are also exposing yourself to the risk of theft , especially if you are using the same ATM as part of a regular routine.
And finally, in a link to the previous point, with rising levels of card fraud, banking computer systems are now set up to pick up on ‘unusual’ levels of activity, especially in foreign countries, and will cancel the active status of a card after a certain number of transactions or a certain period of time – defined as ‘unusual activity’. The indicators for this include the use of the card beyond the date that you gave them for travel (most banks have a time limit that you can use it for before you need to refresh the international use capacity – for my bank it’s three weeks, but these timeframes vary) or a high number of transactions, whichever comes sooner. And bearing in mind that setting up a home requires a considerable amount of financial activity, you will almost certainly be in the ‘call for authorization’ situation at least once. This hold can be reversed by contacting the bank and verifying the activity, but making calls to an automated banking system falls into the third ring of Hell category at the best of times – doing it at international rate, from a different time zone and with often poor telephone reception makes it horrific. And having your card publicly declined gets embarrassing, very quickly.
Funds Transfer between your home bank and a local bank.
The advent of internet banking and wire transfers in a global market mean that this is easier than ever to do – most banks offer this service, and it means you keep your preferred home bank, with an established credit history and all your associated payments etc in place, and transfer funds as required. (There are also many online currency exchange options, but those require a little more time and expertise, so for now, we’ll just concentrate on the basics.) The bad news is that banks inevitably levy a charge for this, which can vary widely between banks, and the intermediary bank who handles the exchange also potentially takes a fee. And to cap it off, some banks also takes a fee to receive the funds, despite the fact that it is in the correct currency. No, I can’t explain it either, but Bank of America is one of them, so don’t assume it’s the small, local banks that are the culprits. This is where shopping around for your host bank is vital – you can save yourself a significant amount in fees just by choosing one that has no ‘funds acceptance charge’ – often the credit unions are far more desirable than the banks, not least because they mostly don’t charge to receive money, their charges as a whole are a great deal fairer, and, as they tend have a more personal approach, they are often a little more flexible when regular payments are delayed because of international bank holidays or time differences. However, the host bank option is not always available, depending on your circumstances. Post 9/11, banks are requiring significant proof of identity to open accounts, which may rule a portion of the relocation crowd out, at least until they have the required documentation. The banking community is also required to report deposits of more than $10000 as part of the anti-terrorism effort, so depending on the amounts that you are transferring, your account may come under scrutiny. For details on host country accounts, keep reading.
Primary Account – Host Country
Opening a host bank account will mean that you are starting to establish a credit history and financial record at the earliest opportunity, which (providing you manage it well) will mean that you have access to a wider range of financial products and preferential interest rates earlier – especially important if you plan to buy a house or car in your new location.
To open a bank account, you will be usually required to provide at least the following:
Proof of Identity
Proof of Residence
Minimum monetary amount
If you are able to research these requirements before you go, your life will be considerably easier – other assorted documentation that I have been required to provide over the last 10 years include proof of employment and a marriage certificate – not documents I keep about my person – so it’s always helpful to have that information to hand, rather than safely stowed in your sea shipment.
You are looking for a number of key services in your banking institution, the most important being access to a real person, either within a branch or at the end of a telephone, who has the authority to make decisions. Get the direct number of the branch when you open your account, as all the literature that will be given will be for an automated call centre – no fun at all. You will also need a check book and debit card, and if your bank offers online banking and bill payments, all the better. Make sure you also get a written copy of the details you need to make international fund transfers. These are usually a ABA number or swift code, a full account number (many are abbreviated for internal use) and a non-PO Box address for the bank. Most banks use a PO Box for general correspondence, but this will not be accepted as the bank address when you try to transfer money internationally. Keep this information in a safe place, as it will usually not be stored on the banking system, so you will be required to produce it every time you make a wire transfer.
Within the US and the UK, Credit Unions offer an excellent option – insured banking services with a non-profit remit – and are provided by everyone from local towns and cities to corporations. Check which ones you may be eligible to join (sometimes it just requires an introduction from another member) and then decide which best meet your needs.
Once you have your account open, consider applying for a credit card immediately, to start establishing a credit history, and generally make life easier. Many businesses that you will be using (hotels, car hire etc) require a credit rather than debit card for deposit, and having a local one not only avoids more foreign transaction fees, but also gives your credit the longest possible history. It may seem irrelevant now, but when you start applying for mortgages, car loans or any other loan, interest rates are governed by your credit score, and the longer your account has been in good standing, the cheaper your loan will be. You are probably already aware that your credit score is made up of a number of factors, one of which is the credit use / credit limit ratio. Your first card will have a tiny limit, so even a Starbucks will have impact. You can counter this by ‘loading’ your card with money before you spend it so that you never carry a negative balance. Friends of mine use this as a simple form of budgeting – putting a weekly amount on the card and using that to govern their spending – and the low credit line works to your advantage by limiting the amount of credit card fraud you are exposed to.
As more and more people are traveling for long periods of time, whether for work, leisure or retirement, banks are increasingly becoming aware of the need for a worldwide presence. The leader of the pack at this point is HSBC, who advertise themselves as ‘The World’s Local Bank’, but there are others who also provide the service, and most banks now will wire foreign currency to your local bank or credit union. There are advantages and disadvantages to both approaches, and it’s worthwhile spending some time researching your options as the financial savings can be significant.
HSBC, Barclays, other global accounts. These are often very convenient and allow monies to be paid into an account in one country (e.g. salary, pension, etc), and withdrawn in the local currency of your host location. They also have access to your credit history in your home location, and so are fully aware of your financial standing, should you need to borrow money for international use. However, there is a price for this convenience; you are usually expected to have a high minimum income level or asset amount, which have to be held in one of their accounts , which gives them rather more control over your net worth than you light like, and you are somewhat tied in to their products.
As a final note, if you are allocated a relocation consultant as part of your employment transfer package, this is one of those tedious jobs that can be made far more simple by them. And if not, ask for recommendations at work for who they use, and contact the branch in advance – they may have a personal banker who can smooth the way or send paperwork to be completed in advance, and the more that can be done without having to sit in yet another office, the better.