As a tax accountant to U.S. expats, I am regularly asked about bank accounts and credit cards. Most often, the main discussion point has to do with the foreign transaction fees when using a U.S. debit or credit card. Many banks charge a fee when you withdraw local currency at an ATM. It can range from $1 to $5 per transaction, and sometimes 1%-3% on top of the fixed $ amount. Similarly, foreign transaction fees are assessed when using a debit or credit card to make purchases at a store or restaurant. As a result, one can rack up of hundreds of dollars in fees per year.
Needless to say, choosing the right bank relationship can mean big savings for full-time expats and people traveling abroad over an extended period. Aside from foreign transaction fees, there are additional factors to consider when evaluating a bank, including: Exchange rate used to convert foreign transactions to USD; wire transfer charges; account maintenance fee; minimum balance requirement.
We recently conducted research to identify banks that are the most expat-friendly based on the above criteria. In our opinion, three banks clearly stand above the crowd.
Capital One 360 – The best features of this bank account is no foreign transaction fee when using an ATM overseas (however, the local bank may charge a fee). Capital One utilizes very competitive exchange rates, much better than changing money at a local bank. There is no account maintenance fee and no minimum balance requirement. Capital One credit cards have similar benefits (read below).
Charles Schwab Bank – Same as with Capital One, Schwab does not charge a fee when using a foreign ATM. Almost incredibly, Charles Schwab Bank offers reimbursement for ATM fees charged by the local bank. There is no account maintenance fee and no minimum balance requirement. To open a Schwab bank account, however, one also needs to open a brokerage account – so there is an additional step involved. The only negative is that international wire transfers are not allowed.
HSBC Bank – This bank’s value proposition is quite different. Whereas Capital One and Schwab are basically online banks, HSBC has a huge global footprint. Therefore, it can offer its international-oriented customers the ability to open bank accounts in multiple countries. Wire transfers between HSBC accounts are free. In short, HSBC is a good pick if one needs a bank account in a foreign country where HSBC operates.
Now let’s move onto credit cards. The criteria that we used in our assessment include: foreign transaction fee;
Exchange rate; Account maintenance fee; Rewards.
In our opinion, there are three credit cards that are definitely worth considering.
Chase Sapphire Preferred – The best features of this credit card is the rewards program. Kiplinger’s Personal Finance named Chase Sapphire the best credit card for flexible travel redemption (July 2016). There are a lot of bonus points one can earn within the first 3 months of opening an account. Importantly, there are no foreign transaction fees. The big negative with this card is the annual fee. There is none during the first year. However, Chase Sapphire charges $95 per year thereafter.
Capital One Quicksilver – No foreign transaction fee. No annual fee. The rewards program is quite good (although not as good as Chase Sapphire). Fraud coverage is excellent (zero liability if the card is ever stolen or lost). The Quicksilver card is available only as a MasterCard.
Capital One VentureOne – The pros are basically the same as with the Quicksilver card. The VentureOne card is available only as a Visa.
An important fact to know: It is best to utilize a U.S. address to open a U.S. financial account. Cross-border financial relationships are being increasingly regulated by the government, and often times, the paperwork involved to open a U.S. financial account using a foreign address is very cumbersome.
To summarize, choosing the right bank and credit card relationships can translate into big savings. For the average expat, Capital One seems to be a good choice for both banking and credit card. Depending on an individual’s particular situation, however, it may be more advantageous to mix and match (e.g., Schwab Bank with Chase Sapphire).
Expat taxes may be complicated, but our process makes it simple. Let’s talk.
Email: firstname.lastname@example.org website: holaexpat.com
John Ohe does the tax work at Hola Expat.
He is an IRS enrolled agent, and holds the CFA designation.
John graduated from Dartmouth, and has an MBA from the Wharton School.
Here are a few articles from Revue magazine by John Ohe you may find interesting:
Key Tax Changes for 2016
We’d like to take this opportunity to review the
important tax changes impacting U.S. expats living around the world.
Establishing a Business Abroad, Guatemala
Many U.S. expats operate their own business while living abroad. In this article, we discuss the advantages and disadvantages of establishing a foreign corporation from the standpoint of U.S. taxes.
Saving for Retirement in Guatemala
Living abroad, many U.S. expats give too little thought to saving for retirement.