Foreign Perspectives

Archive for the ‘Banking’ Category

So what are your options if you find yourself in need of an American bank account yet don’t actually want to visit America to open one?

There are three basic options that are known to work:

1. Form an American company and then open the account for it. This option is obviously a bit over the top if you’re only making $50 a month from your online empire although it’s probably the best way to go if you’re making a living online.

2. Try opening an account with a bank that operates both in America and your own country. The two most common options for this are HSBC and Citibank as they seem to operate in more countries than most.

3. Open a brokerage account with one of the brokers catering to non-residents.

In practice, the third option is by far the simplest for most people. Most American brokerage firms operating overseas cater exclusively for high net-worth clients (ie assets of $100,000 and more) but two offer accounts for the masses. Schwab has a minimum of $10,000, Etrade has a minimum of $1,000 although you can open it with zero cash upfront. How come the brokers can manage to give you a bank account when nobody else seems to be able to? Simply because the brokerage outfits operate as integrated international organisations whereas the banks don’t (eg Citibank USA isn’t the same as Citibank UK).

The etrade account is free for the first 12 months. After that, it costs $40 per quarter unless you meet their requirements which are either 1) $10,000 balance or 2) $1000 in automated credits per month or 3) one share trade during the period. If you don’t have the $10k and don’t have the $1k going in, then it is cheaper to buy or sell some shares than pay the $40. Our American bank account kit contains all the information you need to do this.

The second option isn’t quite so popular mainly because it isn’t as well known. The easiest way is if you have a premium account with either Citibank or HSBC in your own country as your relationship manager will be able to do it for you. These services are CitiGold and HSBC Premier but the downside is that the rough requirements for them is that you have $50,000 on deposit with them, or have an income of $75,000 or have a mortgage of $200,000 with them (roughly; the requirements vary depending on the country). It has recently become a good deal more difficult to persue this option.

Next easiest (and more economical) is to phone Citibank or HSBC in America and they’ll open an ordinary account for you on presentation of the appropriate ID and, sometimes, a bank reference. Citibank seems more geared up for this: call their International Personal Banking people on 001-813-604-3000. The latest information is that the banks are making this option almost impossible to use.

That’s just saved you between $5 and $250 which is about the going rate to buy the relevant information as above. Swiss bank accounts are slightly more difficult but definitely not worth paying the $1000 or more that I’ve seen quoted to provide you with the information. I’ll be covering Swiss banks in a later article, but if you can’t wait, pop a comment on this post and I’ll pass the information on to you (free!), likewise for other countries.

Don’t forget though that the first question you should ask yourself is: why do I need an American bank account? Google will only make payments into an American account if you live there and Citibank offers a US$ account in the UK (and other countries) which will let you deposit US$ cheques free of charge. It’s really only Paypal that requires such an account and even then that’s only if you live in one of the countries for which they don’t support withdrawals direct to your bank account.

This is part of our series on international banking which covers how to open and use accounts in various jurisdictions around the world including France, Switzerland and various offshore banking centers such as the Channel Islands, Isle of Mann and Bermuda.

An updated version of this article is on our expat banking site which also includes access to the detailed opening instructions that many people have asked for.

Most French banks are what would be termed building societies in the UK and consequently the banking scene is fairly different in nature in France.

There are only two proper banks, Societe Generale and BNP Paribas. These both operate nationwide networks but their branches are largely confined to the towns so they may not be entirely practical if you live in an isolated village.

As in other countries the Post Office and co-operative movement operate their own banks offering some advantageous accounts which we’ll be covering separately.

The majority of banks are effectively small regional building societies. For example, the Credit Agricole you see in Normandy is a totally different outfit to that which you’ll see in Paris. Although it is possible to open an account in one region and operate it via the branches in another region, this will entail delays in having your deposits credited and limits the facilities you have access to. So, I can’t use the deposit machines in Perpignan with the card from my account in Normandy.

The other banks worth looking into are those of the various supermarkets. By and large these are re-branded versions of some of the banks covered above but not always, for example Auchan operates its own bank. Generally speaking, the charges for these accounts are lower.

The main postal banks are those operated by Axa (a full-service bank) and Ing (savings accounts only).

One difficulty that you will have in opening any of the accounts is that you are usually required to provide proof of income. If you are living in France, they will ask for proof of a French income and this can take several years to acquire so it’s generally better to open an account with one of the banks before you move here or very shortly after you get here.

Offshore banks are banks that operate in various tax havens around the world. The most familiar in the UK are the Channel Islands and the Isle of Mann but there are many based in small islands in the Carribbean.

If you’re moving abroad, it can be useful to have an account with one of these banks both to simplify your taxes a little and for the additional services that many of them offer to the expat community. None of the legitimate centres offer tax-free interest on your accounts these days but offer you two options for the interest on your accounts: 1) a withholding tax roughly equivalent to the tax that you would normally pay in your country of residence and 2) no tax but they report your income to the authorities in your country of residence.

Although no longer taxfree, the additional services that many of these banks offer can still make them worthwhile. Even the simplest of them are much more familiar with international bank transfers than a normal high street bank could be expected to be but most go beyond that offering multi-currency accounts, debit cards in a range of currencies and often expat advisory services.

On the whole, the range of services on offer increases in proportion to the increase in the minimum income that the banks ask for. A reasonable compromise with this seems to be Abbey International which offers accounts and debit cards in pounds, euro and dollars for an opening balance of £5000.

Most people will think of Switzerland in terms of “offshore” banking, but is there anything special about it? The banks there are generally more aware of the needs of international clients but this generally comes at a price. By and large, unless you have fairly sizeable amounts of money (say 25,000‚€ upwards) to deposit or invest, they probably aren’t worth it. However, even the post office in Switzerland is geared up for international clients and in this case a relatively modest amount of money (about £3,000) will get you quite economical banking.

We’ve included a list of the main banks operating in this arena in the directory which should let you choose the perfect combination of prices and services for you.

Even if you are intending to live the rest of your life in France, you should resist the temptation to close any UK bank accounts or credit cards. The only exception to this is, possibly, for those accounts/cards which have an annual fee.

In addition to the accounts which you already have, you may find it useful to open others as the international dimension changes how you use accounts. For instance, if you have a holiday home in France you’ll obviously be transferring money from pounds into euros much more than you were previously.

The range of accounts in the UK is massive and therefore we can only give an indication of those that you might find useful here; the reference version of this guide will be more comprehensive.

The Nationwide Building Society Flexaccount (cheque account) is a must. It gives you entirely free transfers from pounds to euro and, at the moment, is the only truly free currency exchange service. Their credit card comes close behind with free exchange on purchases.

Beyond that, if you are going to live in France, it’s useful to open credit cards with a number of card issuers. In general, you will not be able to do this if you are living in France and neither can you easily get credit facilities in France so it’s useful to have a number of UK cards as a fallback should you need it. The main issuers are Capital One, the Co-Operative, GE, Halifax, HSBC, LloydsTSB, MBNA, Nationwide and Royal Bank of Scotland (most other cards are rebranded versions of these eg Sainsbury is really Halifax). It’s worth getting an American Express credit card too as you can transfer the account to France, although as the charges in France are considerably higher you may not want to do that right away.

Cheque accounts are also useful to have. If you qualify for the HSBC Premier service, they’ll open an equivalent account with HSBC France for you which has the additional advantage that you get free transfers between your UK and French accounts with them. Barclays and LloydsTSB offer a similar (but more expensive) service though their branches are largely confined to Paris and the Cote d’Azur. The Barclays account offers withdrawals with no transaction charge at BNP-Paribas machines in France (you are still charged 2.75% on the exchange rate). I used to recommend Citibank a lot but they have increased their charges substantially and it’s not as clearly a useful account for expats as it once was.

The Nationwide account is excellent if you are in France and need to transfer relatively small amounts of money from the UK but the £500 per day (about 750‚€) limit means that it’s not practical for large amounts such as for your house purchase. You can use your own bank for this but the charges are generally quite high and the exchange rate isn’t particularly good either in most cases. To transfer more than a few thousand euros you are best to open an account with one of the specialist companies such as moneybookers; if you are going to be making regular transfers (eg paying for a French mortgage from a UK account) then HIFX offers a facility for this.

If you are retaining your house in the UK as we recommend, then you will probably need to change the mortgage to a buy to let one. It’s best to do this before you leave the UK as there are a relatively small number of brokers who deal with overseas clients.

The field of investments in the UK is even wider than the range of banks. However, most seem prepared to change your address to an overseas one. However, if you don’t yet have a UK broker or similar it’s worthwhile opening an account with one before you leave as few will open accounts for overseas clients. We’ll cover it in more detail later but at this point it’s worth mentioning that having a SIPP (Self-invested personal pension) account open is also useful.

If you’ve not yet ventured into this arena, a few useful accounts to have are the Halifax sharebuilder (which lets you buy shares monthly), Fidelity’s Funds Marketplace (which lets you buy numerous unit trusts) and TD Waterhouse brokerage. All are free to open.

As always, you can find links to sites we have mentioned in the Foreign Perspectives directory along with other similar outfits which we haven’t had the space to mention here and the reference version of this entry on our Living in France pages is more complete.

Although you can open offshore bank accounts after you leave, it’s best to open your choice from the above before you leave the UK as it can be difficult or even impossible to do it after you leave.

International banking raises issues that rarely arise when you confine your transactions to one country and we’ll be covering these over the next couple of weeks.If you are moving to France to live, you might think that you may as well either close or at least tidy up your finances in the UK before you leave. Resist this temptation! It can be much more difficult to open UK accounts when you are living in France and if you have closed everything you may find it virtually impossible to open any account in the UK.