Are you trying to determine the benefits of an international bank account? Then, this article is for you. We’re going to dive straight in and cover the specific benefits that attract so many people to international banking. We’ll also explain why keeping at least some of your money outside your home country makes sense no matter what.
For many people, the most important benefits of international bank accounts include convenience and the ability to access safer banks in stable banking jurisdictions. But, you can also benefit from enhanced asset protection and tax benefits by banking in the right countries. Of course, by choosing banks that are located in jurisdictions with strong rule of law, you can also protect your deposits from corruption, theft, and unlawful seizure.
If you’d like to get a head start on international account opening then download our FREE Non-Resident Banking Starter Guide right now!
Here’s a look at the top benefits that most people access with international bank accounts:
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Let’s begin by taking a look at some of the most accessible benefits that almost any international bank account can offer, convenience.
If you work, travel, or live abroad, having an international bank account in the country where you pay bills, get paid, or spend money is not only convenient, it’s sometimes a necessity. Other times it just makes life easier.
In France, for example, you need a bank account before you can lease an apartment.
Similarly, if you work in Singapore and get paid in Singapore dollars (SGD), it’s cheaper to receive your salary at a local bank. If it’s sent to your home country, you’ll get hit with unfavorable foreign exchange rates and international transfer fees.
Likewise, Canadian travelers and retirees abroad get penalized every time they use their Canadian ATM card to withdraw cash. Paying up to $15 in fees for each and every withdrawal in some countries. Having an ATM card from a local bank that allows you to withdraw cash in local currency is a godsend.
Another major benefit of an international bank account? There are safer banks overseas.
Shifting assets from a high-risk bank to a low-risk bank is just smart. It’s basic diversification.
If you keep all your eggs in one basket, or at only one bank in your home country–that’s risky. And as a result, you risk being financially cut-off from your cash.
In fact, when there are financial shocks or market slowdowns, risky banks can fail. And customers get the short-end of the stick. In the end, they’re cut-off from their savings and have to deal with disruptions like branch closures, no customer support, withdrawal restrictions, technical difficulties, etc.
So consider this a warning, if your home country is bankrupt, has fluffy bank regulations, and is like an episode of banks gone wild–be careful.
For example, if there’s an economic crisis or global pandemic, banks with shoddy financials can stumble. In fact, overnight, banks can find themselves in a massive pit of trouble as loan repayments stop and investments turn toxic. Then, risky banks suddenly find themselves insolvent.
Above all, you need to protect yourself by moving some of your savings to well-capitalized foreign banks in a stable country.
Bankrupt governments, corrupt politicians, and draconian laws are dangerous. In fact, the rules and restrictions they impose can eat away at your life savings if you’re not careful. Having an international bank account can protect you.
When governments start behaving badly or there’s an economic crisis, citizens head for the exits. And that’s usually followed by a mad rush to get money out of the country.
Why? Troubled governments impose exchange controls to prevent capital flight. After all, they desperately want to keep capital in the country.
South Africa and Argentina are economic basketcases that already have capital controls. In 2020, Lebanese banks slapped customers with withdrawal restrictions and refused to give customers US dollars (even if they had US dollar accounts). Likewise, China limits the amount of money citizens can take out of the country.
In Greece and Cyprus, customers had withdrawal limits. Then, when the banks simply couldn’t give depositors back their money, they received worthless bank equity instead of their cash.
Economies and political situations can deteriorate rapidly. Get your money out before it’s too late. Or, at the very least, keep some cash outside of your home country so you can be in a position of strength no matter what happens.
Have you ever had your bank account suddenly frozen? Similarly, maybe you’ve had a bank refuse to give you your money? Many people have. It seems like it’s happening more and more these days.
Regulations are increasing. As a result, more banks are moving online, heavily regulated, and using AI and algorithms to sniff out compliance issues and risky customers.
For example, if a bank thinks you’re a risk, doesn’t like your transaction patterns, or a low-level employee labels your business as high-risk, you’re in trouble. Then, your account could get investigated, frozen, shutdown, or all three.
In fact, transferwise is deactivating accounts and holding customer funds for 6+ months. Similarly, Paypal has done the same for years. And now, major banks are getting in on the trend. And now, account freezes are now used as a compliance tool.
As a result, one of the benefits of an international bank account is that you minimize the risk of account freezes and asset holds. So, by diversifying funds across multiple banks in different jurisdictions with different legal systems, you reduce risk and ensure you always have access to your money.
Your personal assets can be frozen in seconds. That is a fact. For example, creditors, tax authorities, or court judgments, can result in your money being legally seized, even before a trial for any wrongdoings.
So it’s no surprise that one of the major benefits of an international bank account is that your money is held in a foreign jurisdiction.
By keeping your money overseas, in a jurisdiction that is subject to different laws and outside the reach of your home country, you can limit the power that any single government has over you and your money. Your account can’t be frozen or seized in seconds just because a creditor or a judge made a mistake.
If you keep 100% of your assets in the same country where you live and work, you’re exposed to serious (and unnecessary) legal and financial risk.
Consequently, asset protection is such a major benefit of an international bank account. In fact, by simply having bank accounts in different countries that are subject to different laws, you can minimize risk and legally protect yourself from a host of unpleasantries. And by having an emergency fund in a foreign country, you ensure that you always have access to your cash, no matter what happens.
Think about it. Above all, you could be left cut-off from your funds and financially stranded for any of the following reasons.
For individuals and companies in certain countries, a major benefit of an international bank account is lower taxes–or no taxes at all. For that reason, lower taxes are often a major attraction to offshore banking.
A few examples…
A Singaporean company with foreign-sourced revenue going to an international bank account in Hong Kong doesn’t pay tax in Singapore. Zero.
Similarly, a UK citizen who is a non-resident of the UK will pay tax on any interest or savings income if the source of that income is in the UK. By simply opening an international bank account outside of the UK, that UK non-resident legally avoids tax.
These are just a few examples, and there are countless more. Each time, individuals and companies can drastically reduce or eliminate taxes by simply opening an international bank account outside their home countries, so long as they follow the laws that govern them.
Do banks in your home country have painfully low or negative interest rates? In many western countries, you have to literally pay the bank for the privilege of keeping money there.
Well, if you go abroad, things get interesting. In fact, another major benefit of international bank accounts is higher interest rates.
For example, you can find interest rates on fixed deposits (or certificates of deposit) in US dollars ranging from 3.5% to 6% overseas. And, depending on which country you’re considering, interest rates can go even higher.
But remember: There’s a reason why interest rates are higher – there’s increased risk somewhere. So be sure to do your homework. Understand the country, the banking system, and the fundamentals that make it tick.
For example, in Mongolia, deposits in US dollars are about 5%. But fixed deposits in the local currency, the Mongolian Tugrik, are much higher, 13% to 15%.
Double-digit rates in local currency look attractive at first. But since the inflation rate in Mongolia is also high, this takes a big bite out of your gains in local currency. In some countries, if you don’t look closely at the local economy and inflation rates, you can even end up with a negative return. So, be careful.
To get the highest possible return while still protecting your principal and limiting risk, consider fixed deposits in relatively stable currencies, like US dollars or Euros instead.
To learn more about higher interest rates and high-yield fixed deposits, check out the GlobalBanks Rates Index, which you can access for free. Additionally, we also share tips and recommendations for how to access the highest interest rates in different countries around the world.
Do you have an international business? Have you ever done business abroad? Then you know how expensive things can get if you bank in the wrong country.
Similarly, if you run a business that has any cross-border transactions or deals with other currencies, the benefits of an international bank account can be enormous.
International bank accounts help businesses keep costs low by allowing them to operate in their desired currencies. A wider variety of currency choices can instantly reduce foreign exchange fees, transfer fees, and mitigate foreign exchange fluctuations.
For example, let’s say a Canadian company is using a Canadian bank and they have to pay business expenses in US dollars. If the CAD plummets against the USD, then the Canadian company has to pay significantly more for those expenses.
And while the Canadian company could have a USD account at their Canadian Bank, Canadian banks often have unfavorable currency exchange rates and fees…. because, well, they can.
In contrast, if the Canadian company had a USD account at a US bank in the United States (an international bank account), they could minimize their currency risk, gain favorable exchange rates from USD to CAD, and enjoy the appreciation of the USD against CAD.
This scenario plays out for international businesses each day. Those that take the time to identify the international banks with the best rates for their operating currencies will save big and protect their businesses from currency fluctuations in the future.
The benefits of international bank accounts are many. The above are only a few examples.
If you want to learn more about the benefits of an international bank account, you can get started by using the information in this article or learn more here.
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