If you decide to leave the US and move to a foreign country, one of your first decisions is ‘How do I get money when I need it?’. Are there difficult expat banking issues to deal with? We have had to answer that question in 6 different countries. There are some similarities, but also opportunities for costly mistakes. But it does not have to be complicated as long as you educate yourselves and get the help of a professional in each country.
Foreign Bank Accounts – A Trap for the Unwary!
THIS IS AN IMPORTANT WARNING FOR U.S. CITIZENS! If you plan to move significant amounts to an account outside the US, there are complex reporting rules that, if violated, carry extremely high penalties. And these penalties are charged every year whether you know about them or not. These are Expat Banking Issues that can have a lasting negative impact on your life. Therefore, please consult a U.S. Income Tax expert for answers to your specific circumstances. I know the answers to my circumstances, but everyone’s needs and financial status is different.
For this reason and others, we have chosen to leave our money in our US bank account, and only transfer what we need for our personal living expenses. Our foreign account never gets much above $2,000 USD, so we are not subject to the complex rules that start at about $10,000. And we have our Social Security checks direct deposited to our US bank account. We want to keep our lives and financial needs are very simple.
These are our Personal Experiences
Before I share our experiences, I must advise you that these comments are based on our experiences as well as our personal circumstances. I am not nor do I claim to be an expert in foreign banking matters. But I think our experiences can shed some light for you and perhaps reduce your concerns. Here are a few of our experiences.
This was our first stop after leaving the US. And we brought cash of less than $10,000 with us on the plane. I rode to Coxen Hole to the Banpais office with my US passport to open a bank account. It took a while, and there was lots of paperwork, but we opened a checking and savings account the day after we arrived and the bank ordered debit cards for us. They required me to wait a couple of days until the account was fully open in their system before allowing me to deposit the cash we brought. But then, they would only allow me to deposit $3,000 per day.
The “Deadly Scooter” Strikes Again
Two days later, I put $3,000 cash in my pockets and wallet, jumped on my Scooter, and drove into town. On the way, it started to sprinkle. Then the scooter engine died. So, I’m on the sidewalk next to the ocean with lots of cash! A guy comes up to me and says he can fix my scooter, but he needs to tow me to his shop. He came up behind me on his scooter, stuck his toe into position, told me to get on, and he “toed” me to his shop. It was in a very impoverished part of town but only a block off the main road. He told me to go take care of my business and he would have the scooter fixed when I returned.
After that, everything worked as expected. I deposited the cash, rode back to the mechanic, paid him $40 (which my landlord later said was way too much), and rode home without incident. A couple more days and we had deposited all the cash we brought from the US. I selected Banpais because they had a working relationship with Bank of America, and subsequent transfers were very easy. Our experience in Honduras was much different than with other countries. Most will not let you open a bank account without an official identity card known as a Cedula.
I had a rude awakening when we arrived in Panama. No bank would open an account for us without a Cedula. This is a national residency card, and the process takes months and costs nearly $3,000 USD. This was one of those Expat Banking Issues I was not expecting. Fortunately, we had not decided how long we were staying, so we just used our debit card to get cash from our Bank of America account in the US. This was fairly expensive, but we really saw no other alternative.
Shortly after this decision, we learned that Scotia Bank had an arrangement with Bank of America for no ATM fees, and that made our life much easier. We lived in Boquete Panama for 17 months and never did open a bank account in Panama because there was no need.
We only stayed in Cuenca for 3 months. Again, we used our debit cards when we needed cash. We reduced our cash needs by paying as many of our expenses as possible with our Chase credit card because Chase did not charge international fees. Then we paid the credit card charges each month from our Bank of America account. Had we stayed longer we would have needed to obtain a Cedula before being able to open an account.
Ecuador has what is called an “Exit Tax”. If you leave the country with more than USD 1,098, you must pay 5% of the excess at the airport before you will be allowed to board the plane. This is another of those “gotchas” that catches Americans unaware. There is a simple answer – Only transfer what you really need to your account in Ecuador. Then you won’t have that much to take with you to your next destination. Companies like World Remit are very handy for this purpose.
Banking is one more reason we love Medellin. When we came to Medellin, we had a specific purpose to start the first Christian Church for English-speakers. We knew this was a long-term project, so we immediately applied for residency. We also rented an unfurnished apartment for a year and started buying furniture, kitchen utensils, linens and everything else we needed for a long-term stay. It only took about 4 weeks to obtain our 3-year visa and Cedula. After that, we opened an account at Bancolombia and they gave us debit cards. This was mostly because it was more convenient to pay utilities, health insurance, internet, and mobile phone bills online with the debit card. But we still had to find a better way than ATMs because the fees were about $15 per transaction, and the most we could get in each transaction was about $200.
Fortunately, I discovered World Remit! What a life-saver they are. With World Remit, I can transfer as much as $5,000 USD from my US bank account to my Bancolombia account. The total charge is about USD $4. The transfer takes at most 15 minutes, and it can be done 24 hours a day 7 days a week. This makes it much easier to keep up with our costs in Medellin. It also doesn’t require currency exchange every time we go to the grocery or a restaurant. And World Remit gives us a much better exchange rate than the ATM machines or money exchange stores.
Colombia Income Tax
Colombia’s tax system is very much like the US system in that they tax worldwide income if you are resident in the country for more than 182 days. But this may be a benefit. When virtually all of your income is Social Security, you don’t owe tax in the US or in Colombia. If you have “earned” income for the portion of the year you loved in Colombia, you may be able to exclude that income from U.S. income tax and also not pay Colombian tax. But the best way to figure this out is with the help of an experienced Colombian tax professional.
I know this is not an exhaustive treatise on all the Expat Banking Issues in these countries. But personal banking issues may not be as difficult as you may have been led to believe. And with a little bit of work, you can generally figure out the best solution for your particular circumstance.
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