Tuesday, June 12, 2012

Choose your offshore bank in haste, and you may end up regretting it

Moving overseas is a major upheaval for any family, and getting the finances right from the start is a key part of being able to settle into your new home as soon as possible. Yet many people will make a panic decision about which bank they want to use because they are about to be paid, and they could be left rueing that decision for months or even years to come.

Choosing an offshore bank as an expat is not simple – some people will prefer the comfort of choosing a name they know from home, which is effective as many banks are now global entities – while others would prefer to use a service that is part of the local economy, and provides good access to cash machines and other services that could be lacking from other providers.

When choosing your bank account, the first thing to consider is what you are using that account for. For example, are you intending to save money in the account, or do you need to make regular transactions from it? It may seem obvious, but you would ideally not use a single account to do both.

Current accounts are the day-to-day accounts that you use to pay bills and transfer money. Some will offer cheque books and cards, access to ATMs worldwide, and the ability to set up money transfers to make life easier. Some services do cost, however, so check the charges on like-for-like accounts before you make your decision.

An existing relationship in the UK with a bank that has an offshore arm, such as Barclays, HSBC or NatWest, can make it easier to open an account because of the history you have built up with that provider. But check what you are getting, because it won't necessarily offer you the services you need at, more importantly, the price you want.

If you are after a savings account, it is not as vital that the bank has a physical presence where you are. The interest payment you will receive is clearly a key driver to the particular account you choose, but it should not be the only thing. You need to look out for special introductory rates that may expire after six or 12 months, which can leave your interest looking the worse for wear.

By all means make the most of them while they are available, but remember to move your money when the introductory rate ends, so you are making the most of your offshore savings.

You also need to decide how long you can tie your money up for, as you can often get better rates on accounts that require a notice period. So if you are happy to give, say, 60, 90 or even 180 days' notice of a withdrawal, you will boost your interest payment. Penalties are charged, however, if you make a withdrawal without the notice period being completed, so try to stick to
the rules.

If you are travelling extensively for work or leisure, you may need to use a variety of currencies, and you can do this from the same account by choosing a multi-currency account. You can hold funds in a range of currencies, including sterling, dollars and euros.

Using these accounts effectively can reduce your costs when you need to move money around the world. You can also boost your earning potential thanks to the variations in exchange rates and interest applied on multi-currency accounts to the different currencies available.

Of course, an important thing to remember is that if you are subject to tax in the UK, you must declare any interest you receive to HM Revenue & Customs, as the taxman is clamping down on tax avoidance by expatriates.

It may seem easy to find a bank account, but it is easier to find the wrong one. There is a lot to consider, so be prepared to do your research carefully whether you have already left the UK, or plan to do so in the coming months.

1 comment:

  1. First, you might want to consider the geographical location and the languages supported by the bank. There are a lot of banks that offer services to non-residents that would allow them to open accounts without visiting the bank. However, it is preferred that you are still able to visit them physically should there be any problems with your account. Also, read up on the laws and legislation of the country where you are planning to set up an offshore account. You should know if the government is requiring its banks to share your information and on what occasions. Most importantly, do read up on the economical stability of the country and the bank. Ask how stable is the bank itself, or how long they have been around. Make use of independent sources to see how credible the bank is.

    Cameron Scott