As a relocation specialist, one of the most common questions I get from people is how to open an offshore bank account. But what most people don't know is that you might not actually need one. So, in this news, I'm going to tell you why I closed eight of my offshore bank accounts so you can decide if you need one and how to manage your money internationally.
So, why did I have so many bank accounts in the first place? Well, there's a lot of reasons why you might want to open a bank account in another country. First and foremost, if you're going to be living there, it can be a lot more convenient to be able to go to a local bank account, have a local debit card, pay lower or zero ATM fees, be able to pay your rent, groceries, things like that in another country.
Most of my life, I've been traveling as a digital nomad. So I've spent anywhere from a month or so to a few months or even years in certain other countries. And so while I was living there, I tried to open different bank accounts. And mostly this was for my own convenience, but it it's also for my relocation business to understand how to open bank accounts in other countries as a US citizen and then help my clients do the same.
Besides living in that country, you might want to open an account in another country to be able to diversify investments, maybe holding different currencies. There's a lot of different like interest-bearing accounts and other types of investment vehicles that you can find in other countries. And it could also be for security if you don't feel safe having all of your money in one country, such as the US.
I'm getting a lot of people asking, can they move their IRAs and 401ks and savings account and things like that to different countries just to be able to hedge against any kind of risk that there might be having all of your assets in one country.
So over my 20 years of traveling internationally, little by little, I started opening accounts in different places wherever I was going, Costa Rica, because I spent a lot of years there.
But what I found is that that can be a lot of hassle and a lot of headache, more than it's worth, getting any of those benefits from having those accounts there.
One of the first reasons why I decided to start closing these accounts in different countries is because I wasn't spending a lot of time there anymore. So, the last time I was in Canada was actually in 2020, right before the pandemic started, and I haven't been back there since. So, it's a lot of administrative hassle and headache to maintain accounts open in different countries if you're not actively using them.
And during the pandemic, when we couldn't travel for a while, I lost access to a lot of my bank accounts. I lost access to my account in Malta, in Nicaragua, in Costa Rica, because if you're not using the accounts often enough and if you're not logging in and if you're not physically there, then these things can happen. The accounts can go inactive, you might change your password and then get locked out for some reason.
In the case of Costa Rica, I had to change my password every 3 months and I had to use my debit card to be able to change my password. And when my debit card expired and I couldn't get a new one because I wasn't in Costa Rica, I then got locked out of my bank account for like 2 years and had to go back there and reopen it.
And the same thing happened with Nicaragua. I crossed over the border into Nicaragua and tried to withdraw money from an inactive bank account, a closed bank account, because I lived there back in 2008 and owned property there. It had a significant amount of money in it, enough to justify crossing the border, but it took me all day to reopen the account, prove who I was with a new passport, go through bank management, and finally withdraw the money.
Another account I had back in 2013 was in Malta. After leaving Europe, I didn't use the account for a while. The only way I could officially close it and withdraw the money after my debit card expired was to physically go to Malta. I happened to be there on a cruise, had one day in Valletta, and while everyone else was out enjoying excursions, I was sitting in the bank withdrawing my money.
If you're not physically in a country, even with online banking, it can be really hard to renew debit cards or solve issues if you ultimately have to go into the bank. So if you have accounts in different countries, it's better if you're living there or nearby.
In many cases, banks won’t send money internationally unless you go in person to fill out a wire transfer form. Flying to Panama just to fill out a form is not effective.
From a US perspective, there's also the administrative side. If you have foreign bank accounts with a combined balance of $10,000 or more during the year, you need to declare them using the FBAR form. This means reporting balances, bank details, addresses, and account numbers. This is extra administration for you and for the banks.
Because of FATCA, many foreign banks don’t want US customers at all. I've walked into banks where the moment they saw my US passport, they refused service. You want to feel like a valued customer, not someone a bank doesn’t want due to extra paperwork or perceived risk.
Opening an account in another country if you don't live there can be very difficult. Often you need residency, a tax ID, or a local address. Customer service can also be challenging, especially when banks only offer local phone numbers that you can't call internationally.
Traditional brick-and-mortar bank accounts abroad often come with higher fees, including international transfer fees and poor exchange rates. Some international wire transfers can cost $90 or more, plus hidden currency conversion markups.
This is why fintech solutions like Wise changed everything for me. Wise allows you to open multi-currency accounts online without visiting a bank, without excessive paperwork, and without hidden exchange markups. You get the mid-market exchange rate, low fees, and fast transfers.
Wise essentially replaced the need for nearly all of my offshore bank accounts. I can send money globally, pay rent, pay contractors, withdraw cash, and manage multiple currencies from one app.
So while I still maintain bank accounts in the United States, Wise eliminated the need for having 10 different bank accounts in different countries. You don’t even need to live abroad to benefit from it.
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