One of the most common answers given when expats are asked why they’re moving overseas is that they want to change their way of life and experience the culture of another country.
It’s always a little odd therefore, to find that many seem very reluctant to change their bank as part of their international relocation.
In a sense this is understandable. Foreign banking can seem intimidating, formal and very complicated – particularly to those who have become cosseted by ‘on demand’ banking as it exists in much of the English-speaking world today.It’s also fair to say that although in the past a local bank account in your new country would have been essential for survival, in today’s technological world it is possible to live abroad and function reasonably well using cards and accounts from the your existing bank ‘back home’.
So, the first logical question then is ‘Is a local bank account essential for an expat?’
Well, the answer may be technically ‘no’ but any expat is going to find their life a lot easier if they do open a local account. The reasons for this are many and to give just a few examples:
– Expats often find that their old bank is suddenly a LOT less willing to help with loans and such once they’re overseas with a foreign postal address!
– Many overseas countries still use cheques extensively and many people in them do not accept cards. For example, if you need to pay by post you’re going to need a cheque and the chances are you’re going to find it VERY difficult to get people to accept a cheque from say an UK bank they’ve probably never heard of.
– Your cheques will need to be written in the local currency and in the local language. Few if any banks back in the UK will be able to handle this level of complexity.
– In some business or legal formalities, expats are inevitably asked to supply banking details to establish their credibility. It’ll look odd if you give addresses of foreign banks that are thousands of miles away from where you live.
If you’re planning to live in a large city it may be worth checking out if your existing bank has a local branch, but it is not that common. For all these reasons most expats find they need to take a deep breath and walk into their local bank to open some at least basic banking facilities.
Opening a bank account
In most overseas countries, opening a basic current account is much easier than many expats fear. Just walk into your bank and ask to open a current account but be aware that you may need a translator and you may have to make an appointment to see someone. Don’t expect shop-style service!
Once you’re there, you’re going to have to accept that foreign banking is different. Be prepared for far more paperwork than you may be used to, some bizarre questions and some delays.
At the start, due to current international laws relating to money laundering you may have to go through a few hoops to prove that you are who you say you are.
You may know you only have a pittance to deposit but your bank has to be sure that you’re not an international criminal intent on laundering billions. So you’ll need a passport or similar and some proof of address – utility bills are normally acceptable.
You may also be asked for marriage certificates, birth certificates and copies of recent ‘old bank ‘statements. Remember to keep all these documents to hand in case they are needed.
Once you’ve signed a few forms, and seen very frequent use of the rubber stamp still much beloved by overseas banks, it’s done! You just have to wait for the cheques and plastic to arrive. It is not unusual for it to take 2-8 weeks to open a current account and get your first chequebook or card.
In some countries of course it’s a little harder than others, and you may need local referees and evidence of character or residence qualifications, though these things are rare in most EU countries. In some other countries though it is even easier – for example in some you can open an account by fax whilst still living in your old country, even if you do not yet have a ‘new country’ address. This can be useful.
REMEMBER – in most foreign countries bank accounts are a privilege and NOT a right/entitlement. Conduct yourself accordingly when applying!
Expat current accounts – ebanking & charges
So, you’ve received your cheques and maybe a plastic card or two. What can you do with them?
The first thing that often comes as a slightly nasty surprise to expats is that whatever you do with them is going to cost you money! Although we all love to moan about banks in our home countries, it is a fact that in countries such as the UK banking is still relatively cheap or even free. In many overseas countries though you’ll find every time you make a cash withdrawal from an ATM, order a statement or use another bank’s ATM, a small charge is going to be made by your bank.
The amounts are tiny, but they can mount up. You can reduce these by shopping around a bit between banks and reducing how often you use the ATMs. You may also be able to negotiate special deals with your bank.
Another shock for expats is electronic banking from home. In many countries overseas these facilities are limited. In others even where the facilities are excellent, you will find again that it may be a chargeable service. You may even find you’re charged for moving money from one account of yours to another in the same bank, or even receiving money inwards.
Expat current accounts – facilities & overdrafts. There are huge variations between countries here, but a few general points worth noting.
Firstly, your basic current account probably will not come with many facilities automatically attached. If you want say a plastic card to use at an ATM, then that will be ordered separately and you may have to pay a fee each month. You may find that a joint account costs more than a single name account.
Secondly, and this often confuses and infuriates expats, many foreign banks apply limits to how much cash you can withdraw from an ATM in any week even if you have large sums in your account. Let’s say the basic is a maximum of 250 euros per week – if you find that is not sufficient for your needs then you can increase that to say 500 euros, but you may have to pay a monthly fee for the privilege of withdrawing a little more of your own money! Taking money out by personal visit at your local branch is usually free and unlimited, but of course it is not always convenient to visit your branch.
Thirdly, the much dreaded subject of overdrafts. Few overseas basic current accounts come with an automatic overdraft facility and when they do, it is usually tiny. You can expand this limit to higher amounts but once again you’ll probably have to pay a monthly fee for that and even so, many expats find the upper limits small by the standards of the UK.
Just about everywhere, overdrafts are a very expensive way of borrowing money and you should always think about asking for a loan instead.
Sadly, there is no point moaning at your bank about all these charges. It is just the way things are done. Try to negotiate a better deal (it is possible), shop around the local banks, and most of all be prepared to adjust your normal ways of doing things so as to cut your costs.
Finally, here is one critically important point to note for all new expats in proud possession of their first foreign chequebook.
Although it is declining rapidly in favour of plastic, the old-fashioned cheque is still much used and accepted in many parts of the world. In some countries you’ll have to use cheques regularly as many outlets do not have the technology to accept cards and they’ll demand cash or a cheque – the latter normally with proof of identity as few countries operate cheque guarantee card systems.
In some countries, notably the UK, writing a moderate cheque without sufficient funds to cover it will probably be ‘OK’ and your bank will sort it out, providing you don’t make a habit of it and the amounts aren’t too large. The worst that’ll happen is a caustic letter and a charge. As a result of this leniency, many people have become careless about watching their real account balances day-by-day.
Attention expats – Leave at home any such casual ideas about unauthorised overdrafts!
Most overseas banks do not find it amusing when a cheque arrives and there are insufficient funds to cover it, even if the amounts are small. In some countries giving a cheque is legally the same thing as offering cash, and writing a cheque with insufficient funds to cover it is a criminal offence. In some countries the law demands that banks enter onto a central database the details of anyone who writes a rubber cheque – in effect meaning your cheques are unlikely to be accepted by anyone anywhere in that country again.
Few people overseas have much sympathy with the expat plea “it was all a simple mistake… ”. Getting off these registers and databases is not easy; so don’t get on them to begin with!
The moral of the tale is – be responsible and ALWAYS know your account balance before writing cheques. If in doubt, contact your bank BEFORE the cheque reaches them and gives them a nasty shock!
In summary, the above points are general and the situation does vary from one country to another. There is no substitute for detailed specific research so make your enquiries sooner rather than later!