Expert Tips for Expatriates to Manage their Money Abroad
By Volker Poelzl
Among the biggest challenges for expatriates
finances while living overseas. Expats must
deal with the ever changing exchange rate, inflation, varying
interest rates, and unfamiliar banking rules. In addition, economists
predict that the U.S. dollar may fluctuate wildly based upon current events, worldwide labor costs, and automation against many of
major currencies for several years to come. Economic uncertainly makes it even more
important to manage your funds wisely if you plan on living overseas.
For short overseas stays of up to six months,
there are less options to maximize your purchasing power.
With thousands of ATMs in almost every corner of the globe, the
most economical way to get money while living overseas for a short
time is to use your debit card, drawing funds directly from
your U.S. account. Mastercard/Eurocard/Cirrus, Maestro, Visa/Plus,
Visa Electron, and American Express cards are accepted at almost
every ATM around the world. Compared to exchanging cash, ATM withdrawals
have the advantage that you can withdraw funds 24 hours a day
at most locations and you may get a better exchange rate than
for cash (though that really varies country-by-country as the
dollar is valued as a stable currency). Debit cards with the Visa
or Mastercard logo can also be used for purchases just like credit
cards, but they don’t generally offer the
same purchase protection against theft or fraud. On the other
hand, most U.S. credit card companies charge a small but ever-growing
percentage for overseas purchases, which can start to really add
up for large purchases or a long-term overseas stay. Make sure
you use the best
credit card to manage international interchange fees.
If you exchange
cash regularly, keep
in mind that banks and exchange houses charge widely ranging commissions for
exchanging currency. Exchange houses are often difficult to find
in remote locations, therefore I urge you to always carry some
cash on you hidden in one or more locations of your clothing, often
best done using undercover
hidden pockets. Money wires from home
are another backup solution, but bank transfer fees are often
high and can be time-consuming to perform. Money transfer services
such as Western Union offer money transfers for a lower but still
largely excessive fee, but with agent locations worldwide for convenient pickup
of funds (usually paid out in the local currency).
As a general
rule, we recommend that you avoid changing money on the street
even if you are an experienced traveler or expatriate. You
may get a much better rate, but you are taking the risk of being
ripped off if the area is unfamiliar. Experienced travelers or
expats often will learn who they can trust to make such currency
exchanges on the streets. But in some countries this
is also illegal, and could result in everything from harassment
by authorities, to fines, to deportation, or even prison. Don't
risk it no matter how tempting.
Where to Keep Your Money Abroad
If you are going overseas for an extended
period of time, up to a year or longer, making informed financial
decisions can save you a lot of money. Research the financial
policies of your host country, and investigate the stability of
the local economy and the currency. Has there been a large-scale
devaluation of the currency, or has there been a high rate of
inflation? How stable is the currency against the U.S. dollar
and other major currencies? If the country has economic or financial
problems, keeping large amounts of money in the local currency
may not be a good idea. There are natives in some countries who
do not even keep cash in their own currency due to inflation.
The more you know about
the local banking system’s
rules and regulations, the easier it will be to make the right
choices for your financial needs abroad. If you have overseas
income or a stipend, it makes sense to open a local bank account.
Your money is safer at a bank, and you can easily access your
funds at bank machines. If you depend on savings in the U.S. during
your stay abroad, you might want to consider transferring some
of your money to a local bank account. You may earn a much higher
interest rate than in the U.S., and if the local currency is stable
you can expect it to stay strong against the weakening dollar,
which will also save you money in the long run.
Some countries have liberal banking policies to invite foreign investments regardless of immigration status, and they freely issue tax identification cards to foreigners and allow them to open bank accounts. Most countries,
however, require a permanent or temporary residency permit in addition to a tax identification card and proof of address to open a local bank account. This could be a student, missionary, retirement, employment or volunteer visa, for example.
Once you have decided to open a bank account in your host country, find out how much banks charge for checks, overdrawn amounts, ATM withdrawals, etc. Some banks in developing countries and tax havens offer savings accounts in foreign currencies,
including ATM withdrawals in U.S. dollars.
For More Info
Sample Worldwide Banks
- BNP Parisbas
- Banco Santander
- JPMorgan Chase
- HSBC Bank
- Bank of America
Here are some general resources that may help you manage your money overseas:
Location of ATM's Around the World
American Express ATM Locator lists ATMs around the world where American Express cards are accepted.
Mastercard/Maestro/Cirrus Global ATM Locator, provides Mastercard/Maestro/Cirrus ATM locations for most countries.
Visa/Plus Global ATM Locator lists Visa/Plus Automated Teller Machines in most countries worldwide.
Payment Transfer Methods
Union allows you to send money abroad for pickup
at worldwide Western Union agents. internet money transfers
are also available for some countries. Large fees per
Paypal allows you to send internet money transfers to 190 countries and regions and send, receive, and withdraw in many others.
Volker Poelzl is a Living Abroad Contributing Editor for TransitionsAbroad.com. He has traveled in more than 40 countries worldwide
and has lived in 10 of them for study, research, and work.