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If you’re planning to start banking abroad, here’s what you need to know first.
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Remote work is in, and many remote workers are choosing to move internationally. If you live in another country, whether it’s because you work remotely or you retired abroad, you could benefit by opening an offshore bank account.
Your U.S. bank accounts and credit cards are fine for going somewhere on vacation. When you’re actually living in a foreign country, having a bank account there often makes life much easier. For example, some rental agencies might only accept bank account transfers. A local bank account could also be a good way to get cash at ATMs fee-free. And those are just a few of the many reasons to open an offshore account.
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I live abroad in Colombia and have an offshore bank account, so I have first-hand experience with this subject. As I learned, opening a bank account in another country can be a lot different than what it’s like in the United States. If you’re thinking of getting a foreign bank account, here are the most important things to keep in mind.
1. It will probably take longer than you’re used to
It’s not a huge chore to open a bank account abroad, but it will likely be more complicated than doing so in the United States. You’ll need to provide your passport or another identity document, and potentially proof of address, as well. There could be quite a bit of paperwork involved, and you may get asked some questions you’re not used to. For example, the bank might want to know where the funds you plan to deposit are coming from.
Also, there’s a good chance you’ll need to visit a bank branch in person to open an account. Many banks don’t allow foreign citizens to open an account online. Make sure to look up all the requirements before you go in so you can get your account set up in one visit.
2. Don’t expect the same features
In the United States, you have access to lots of quality banking options. There are plenty of checking accounts with no fees and minimum balance requirements available. There are also quite a few online banks offering high-yield savings accounts, which have competitive interest rates.
In other countries, it varies. Interest rates may be higher or lower than what U.S. banks offer. Keep in mind that a high interest rate doesn’t necessarily mean you’re getting a great deal. If the national currency is unstable, or the country is going through rapid inflation, then you could still end up losing money even after factoring in the interest you earn.
Fees are another area where it varies from country to country and from bank to bank. In some countries, your best option could be a bank account with a small monthly fee.
3. You need to file a form with the IRS if you have over $10,000 in foreign accounts
Offshore bank accounts are often associated with shady activity, such as tax evasion. It’s actually normal and completely legal to have an offshore account. But if the value of your foreign accounts exceeds $10,000 at any time during the year, then you need to file a Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is an annual report that’s due the following year on April 15. If you don’t meet that date, you’re allowed an automatic extension until Oct. 15. If you don’t file at all, there can be civil and criminal penalties.
It’s important to reiterate that the requirement to file an FBAR is when you have over $10,000 in foreign accounts. It doesn’t all need to be in a single account. If you have $7,000 in one offshore bank account and $4,000 in another, then you need to file an FBAR.
Banking isn’t too different in most of the world. There’s a bit of a learning curve to banking in another country, but once you find and open an account, it won’t take long to get familiar with it. Other than that, you’ll just need to decide how much money to keep abroad and file paperwork with the IRS if necessary.
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