If you’ve decided to spend a significant amount of time outside of the United States, you might find it difficult to conduct relatively routine banking transactions and to access cash while you are out of the country. For that reason, many Americans living and working outside the U.S. decide to open a foreign bank account. Offshore bank accounts are also popular for some investors who don’t want to keep all of their money in U.S. banks.
Determine Your Need for a Foreign Bank Account
Whether you actually need to open a foreign bank account depends on factors such as how long you will be in the country, if you are working, and if you have family there.
If you are just living in the country for a while but not working for an employer in that country, you might be able to use a large U.S. bank that has branches in that country. U.S. expatriates living and working in a foreign country, however, need a local bank with an account in local currency to deposit their salary and pay their bills.
In addition, U.S. citizens whose family members are citizens of a foreign country might be subject to different rules with local banks. So be sure to consider the options and rules specific to each country and situation.
Get to Know U.S. Rules for Sending Money to an Overseas Account
Individuals who engage in overseas banking must report the account to the U.S. government if its balance exceeds $10,000 at any point during the year. This is part of the Report of Foreign Bank and Financial Accounts. You’ll be required to pay U.S. income tax on any earnings on your money in a foreign bank account. So, if you earn interest on your deposit in a foreign bank account, you will also owe federal income taxes to the United States for those earnings.
Sending money from your U.S. bank account to your foreign bank account by wire transfer generally takes a minimum of two to three business days. Wire transfer fees are higher when sending money to a foreign bank, and the fees often depend upon the currency.
Finding the Right Bank
Due to the burden of reporting to the IRS, many foreign banks simply don’t allow U.S. citizens to open a bank account anymore. Finding a foreign bank that is willing to work with you is the first step. Next, you’ll want to ask about fees, services, and online banking options just like you would with a bank in the United States. Finally, consider the safety and banking regulations in the country and whether or not your money will be protected by those regulations.
Ask if deposits are protected by the government in a way similar to Federal Deposit Insurance Corp. protection in the U.S. Choosing a bank that is a correspondent bank affiliated with a large U.S. bank may be one of the safer options.
Opening a Foreign Bank Account Online
Larger foreign banks let you apply for an account online just like you might do in the United States. The process and requirements, however, are a little different.
You will fill out an online application with basic information such as your name, address, and Social Security number. Be prepared to submit several forms of identification such as a driver’s license, passport, and birth certificate.
In addition, foreign banks may require a credit check in order to open a bank account. Finally, you’ll need transfer the funds from your U.S. bank account to the foreign bank account.
Opening a Bank Account in a Foreign Country
To open a bank account in a foreign country, you will need to make an appointment at branch office to open your account. You will fill out an application and provide all of the relevant documentation to the bank officer at that time.
Be prepared to present your birth certificate, Social Security card, passport, and proof of local residency. You will also need to have funds available to open the account.
Keeping Your Money Safe
What to Do
- Ask your U.S. bank or locals you know for trustworthy banks
- Remember to file any necessary paperwork with the IRS
- Ask about government regulations that protect bank deposits
- Find out if there are minimum balance requirements
What Not to Do
- Assume the banking disclosures are the same as they are in the U.S. Read all of the paperwork before you sign anything
- Forget to ask about all banking fees and if account services are provided in English
- Use a foreign bank as a way to hide money from the U.S. government