For many people, choosing a current account from one of the leading providers is fairly straightforward and is based on criteria such as branch locations, how much of an overdraft they will let a customer have, and what free gifts or incentives they give for opening an account.
However, when an expat relocates overseas – whether that’s for a long-term or short-term working assignment – then the limitations of many international bank accounts become very apparent.Money management is crucial for an expat and they need to understand a range of extra issues, such as currency movements. If they are from the UK but working in America and paid in dollars, for example, they need to know how much it will cost to convert currency back to pounds sterling.
A fair number of expats will opt to open a new bank account in their home nation since their employer will be paying in with local currency and bills can be paid from it.
Greater flexibility
However, many expats will be wanting greater flexibility than an ordinary bank account will bring, and they want it to be cost-effective so they make the most of their money earning opportunity.
So how does an expat who is going to be relocated frequently choose the best international or offshore bank account?
It’s important to point out here, particularly for UK expats, that just because their current bank account is with an international banking firm such as Barclays and HSBC, they will not necessarily be able to run it overseas or be given access to beneficial international banking services.
A specific international bank account will need to be opened, preferably before they move abroad as an expat employee.
And for those who choose not to open an international bank account before moving overseas the benefits of doing so will become apparent when they begin to withdraw money in local currency. The costs of transactions will quickly add up, through currency conversions and international fees, and they will realise they are paying over the odds for their bank account. With careful consideration, these excessive bank charges can be avoided.
The next important step is to realise that international bank accounts are a tad more complicated than the traditional domestic bank account. Many will want one account number to work as an umbrella that can deal with multiple currencies, including paying for things like airport lounge access and travel insurance as well as healthcare insurance costs.
There’s no escaping from the fact that a great deal of research is needed because an expat who is planning to relocate on a regular basis must look beyond the hype and the headlines of those banks offering offshore accounts to find out which will be the best for their individual needs.
Also, many of these offshore accounts will offer a relationship management service so the expat has a named representative they can call in times of emergency or just to ensure everything is working as it should be.
Indeed, it’s always good to know that when moving between countries on a
frequent basis, the relocating will not cause a problem with their banking needs.
To help determine which of the international bank account providers will offer the best balance of service and charges, the expat should really answer some important questions.
The first one is: How big is the minimum account balance needed for me to maintain the account?
There is no straight answer to this question since international bank accounts offer a range of services and, as such, they all require a different minimum balance to maintain those services and to keep the account open.
Some bank accounts will also insist that the expat client invests a substantial sum of money with them for managing the account or that the expat has a large cash savings account. Again, different banks will be offering different services and criteria.
The next most important question is: Do I really need a multicurrency account?
The biggest benefit for having a multicurrency account is the ease of moving money between different currencies cheaply and easily, which is the biggest attraction for expats who relocate on a regular basis.
Multicurrency accounts are also useful for those expats who earn in one currency, but will carry out their transactions or pay their bills in another currency. Again, the account makes this easy since the charges for converting currencies are reasonable.
The third question is: Would I benefit from the wealth management service?
As mentioned previously, many of these bank accounts are aimed at expats who relocate frequently and they offer a wealth management service. This is essentially an added incentive that will help attract new clients but it’s not usually an independent service – this is a crucial point because all or most of the advice from the bank’s wealth management service will be for the bank’s own services and products.
However, some expats may find the ease of dealing with one bank for all of their monetary needs will be a blessing in disguise, since they will know where their money is and how it is being managed.
So, by asking and then understanding the answers an expat can then really consider the offerings from various banks to find the account that will best suit their needs.
Once the expat begins to sift through the different offerings, it will also become apparent that there are different fee structures in place covering a wide variety of accounts.
Essentially, the more an expat holds on deposit with their bank, the higher the number of additional features and benefits will be. This also means that monthly fees will be lower and they could save a tidy sum in bank charges if they hold a substantial amount of money with the bank.
This also means that expats need to sit down and calculate whether they would be better off investing their money with the bank, and some are asking for minimum deposit of £50,000, rather than encouraging expats to spread their investments across several institutions.
There’s no easy answer for this issue since people have different needs from their current accounts than they do for their savings.
Expats who are on high incomes
For those expats who are on high incomes and understand and manage their own investments, it’s also possible to find an offshore account that resembles very closely the current bank account that they use.
Most banking providers will offer a central account to be used for a variety of international payments and obligations and they will charge a monthly fee for this. Again, if the expat is holding a substantial amount of money on deposit then these charges will be lower and this could be important for an expat working overseas.
Expats also need to appreciate that if they spread their financial wealth across several institutions and rack up charges with each then it might be cheaper to place all of their money with one bank who will charge less every month and generate more returns with a specific wealth management scheme in place.
Some employers will engage the services of specialists who help firms deploy employees abroad. They will have a wide range of knowledge about the types of bank account available and the pitfalls of certain options.
There are other issues expats need to consider and that is whether their move overseas is going to be temporary or permanent. It’s one thing relocating between different countries, but for banking purposes the expat needs to understand whether they will be returning home at some point in the future.
One of the issues of moving overseas and closing a UK bank account before making a move is that it’s not as easy as many believe it is to open a bank account in the UK. It can therefore be much easier to keep the account open, even if it means having to put some money into it and carrying out some transactions to maintain its activity.
The other question that needs answering is whether the expat will be earning their income in the local currency.
There are many good reasons for opening an account that is managed in the currency of the country the expat will be working in. The expat also needs to appreciate whether they will continue maintaining their assets overseas or in the UK, for example, paying a mortgage.
Most UK banks will offer an international bank account and it may make sense from an administrative point of view for an expat to simply open one of these accounts with their current banking provider.
By doing so they only have to deal with one organisation and they may be allowed to manage the foreign currency conveniently and quickly, though there will be fees and charges to pay. The other attraction is that the expat will be able to deal with the bank’s representatives in their native language, though they should appreciate that they may not be offered great rates of interest on their savings.
In addition, some banks offer a complimentary international savings account to run alongside the current bank account, which may prove useful.
The banks themselves also offer a lot of help and advice for expats looking for international bank accounts; among the best offerings is a guide from Barclays on international banking.
The bank also makes clear that their international bank accounts are available for those who have a minimum of £25,000, or a currency equivalent, in investments and savings held with them.
For expats who like the idea of having a dedicated relationship manager then they will need to have at least £100,000 held with the bank.
The HSBC also offers helpful information for expats who are looking to work abroad, or indeed emigrate permanently to retire or study overseas.
Essentially, they will provide help in setting up an international bank account in advance and help with the paperwork as well as the supporting documentation for the account that is available in 37 countries including France, Australia and Hong Kong.
Expats should appreciate that opening an international bank account is a straightforward process though they will need to do their homework thoroughly to ensure the bank account meets their needs.
For those who need more advice, the HSBC bank offers details about offshore banking facilities which they can provide via Jersey in the Channel Islands.
Moving to an offshore bank account makes sense for expats who are moving between countries since there might be tax advantages for doing so, though expats should appreciate the need to declare their offshore holdings to the relevant tax authorities.
The requirements for these accounts from HSBC is for a minimum of £60,000, or a currency equivalent, to be held in investments or deposits, and clients should be aged over 18. There will also be a relationship manager allocated and a big attraction is that the account will be free of charges, though should the minimum balance drop below the required amount, the bank will charge £35 for every activity.
Finally, there's another piece of advice that all expats who will be relocating regularly need to appreciate – that is the need to take advice from an independent financial adviser, particularly those who have experience of international bank accounts. They will they have the experience and may be able to set up such accounts. This article is purely aimed at offering advice to expats looking to relocate frequently to find a suitable bank account for their needs.