International Banking: Open for the Average Joe?

In 2014, I studied abroad in Madrid. I shared that experience with several peers from the same New England school, most of whom came from families more willing to offer financial support. I have vague memories of other students specifically choosing Santander Bank as their choice for spending euros abroad. Back then, I was under the belief this was so the parents could add money to the account from Massachusetts and the student could withdraw it in Spain. That was noteworthy as my first exposure to the idea of international banking for regular people.

That is also what I first thought of when the lovely Revanche from A Gai Shan Life asked me to go over options for folks who want to be able to access their money internationally. I rarely get requests for articles, so I was more than happy to oblige.

I’ve been researching this myself as I consider becoming a FIRE world traveler (or straight up move abroad, as I touch on in my last net worth update). Before this, my only understanding of sending and receiving money internationally came from that study abroad experience, along with past roommates using Western Union with family overseas. Times have changed since my college days in 2014. It turns out that Santander Bank does not offer this capability, so that path is closed. Then I learned a lot more as to how accessible international banking really is.

Why International Banking is Not Commonplace

If you want to bank internationally, you will have to do some serious research to find a way to do so between the two specific countries you have in mind. Millennial Revolution has a great article on transferring Canadian dollars to USD via Norbert’s Gambit, a type of ETF arbitrage.

Notice how that ETF arbitrage is a creative solution? That is because there really isn’t an established, straightforward banking system between the United States and other countries. The biggest reason for this is to minimize financing international crime. The IRS – and other US-specific financial authorities – do not have say-so in the way other sovereign nations do their banking. It would defeat the point of having sovereign nation states completely if whoever was the most powerful could hold that kind of sway over the rest.

But the more globalization progresses, the more easily bad actors can finance crimes. Said crimes can include human trafficking, weapons/drug smuggling, and acts of large-scale terrorism. Such crimes also include theft of funds in your bank accounts. Imagine how much more easily scammers and hackers could access funds if international banking was much more commonplace.

That’s not to say the US is powerless in stopping such crimes from happening. Laws like FATCA – which stands for the Foreign Account Tax Compliance Act – help discourage these things from taking place. What it does mean is that the banking sector is, in a way, deliberately held back from the same innovations that enable you to video chat with people in Africa or watch TV shows from Asia. Given the sheer importance of money to everyone participating in society, you’ll want to keep those protection buffers in place.

But let’s say you’re an edge case with very good reasons for desiring an international banking setup. What would be your next steps?

Primary International Banking Options

Banks with an international presence do not have one-size-fits-all accounts you can easily access in both New York City and London. At least, not for your average customer.

In preliminary research, the most common recommendation I saw was for Wise. They have a lot of articles about international banking, which are all big green flags. I really liked this one about opening European bank accounts when you’re not a European resident.

It’s thanks to Wise that I better understand what the best formal options are for international banking. I got a list of these options from a Wise subsidiary; image below, with the original in text form here:

You’ll notice the banks with household names on that list are geared towards businesses. This makes total sense; there are likely more businesses than there are individuals looking for these types of accounts.

Your average bank will slap big fees on wire transfers between accounts from different countries. Outside of those like Santander, Citi, and HSBC, banks often cannot connect you to other countries even if they have a presence there. I asked a banker at my local Chase branch about it. They explained that JP Morgan Chase in Europe uses a different database than the one in the United States, so it wouldn’t even recognize you have an account with them if you tried to use it. Boo!

Other Recommended Options for International Banking

Besides Wise, I also saw frequent recommendations for its competitors Revolut and Interactive Brokers. For a compilation of international banking options, there’s a few articles I found most informative:

NerdWallet, 5 Best Banks for International Travel

Exiap (via Wise again), Best International Bank Accounts for Expats and Digital Nomads

I also look at what other personal finance writers I’ve met do for moving money across country borders (legally). Millennial Revolution from above also recommends Wise as world travelers. They explain their approach here on when they use Norbert’s Gamit, Wise, or another method to access money internationally.

Purple from A Purple Life has spent the last five years traveling all over the world. She gets by just fine without opening any international banking accounts. Her recommendations include a credit card with no international ATM fees; it’s a good reminder that, if you’re not working for an overseas company, you don’t strictly need to diversify beyond your US-based bank accounts.

A Fringe Approach to International Banking

There were some WILD alternative approaches to international banking I also caught wind of. Apparently, cryptocurrencies are independent of your home address and can be an option. I personally think it’s a bad option, and not one I’d recommend nor use myself. I’m only adding it here because I want someone to point me to someone who’s done it successfully. If someone has found success using it, I would like to hear from you about it.

For anyone who wants a banking option specifically with El Salvador, Bitcoin is legal tender there! It’s also very successfully causing a storm with crypto investors as their national holdings in Bitcoin approach $1 billion. So, perhaps something like that would just barely be an acceptable alternative.

International Banking as an American Citizen

As my readers are primarily US-based, I’ll address this section to that. If you want to bank within more than two countries, I’d urge you not to. The only way that path is worth all the hassle is if you’re a multimillionaire who needs to bank for your multinational business conglomerate. Which I know you’re not, because then you’d be paying professionals to inform you instead of reading a blog from God knows who. 😉

This can also avoid potential pitfalls and making an over-complicated personal finance system. One example of this: the US government wants all overseas bank accounts opened by American citizens reported to them. This has been in place for years as a measure against fraud and international money laundering, which is one of the biggest issues in our global community. This puts up hurdles to overcome for any Americans looking to open bank accounts abroad, not just the multimillionaire would-be criminals.

If you end up living abroad, make sure you always file your US taxes. As long as you make less than $120,000 a year overseas, America won’t send you a tax bill.

(Thanks, Foreign Earned Income Exclusion!)

They just want to ensure you’re not hiding crazy amounts of drug money; the Foreign Earned Income Exclusion in the US tax code is there so you won’t get taxed by two different countries.

Otherwise, I guess your option is to lug a huge suitcase full of cash with you and convert your currency as needed. According to US law, you can, in fact, use this as an option and carry up to $10,000 with you. If you’re carrying more than ten grand, they want you to fill out forms and go through extra steps with customs officials. I wouldn’t do this due to the sheer inconvenience and high risk of theft. Historically, though, carrying physical money with you was the only way to transfer money internationally.

My Thoughts

For me, I think international banking would only apply to me when it comes to moving money between my US financial accounts and some future Irish one as a dual citizen. While I can open an Irish bank account with minimal issue once I’m there, that would overcomplicate my current financial management. I can already buy plenty with my US credit cards, or go to an ATM to get physical tender if need be. Attempting to bank in another country means I would need to understand the banking systems of two different countries with two different sets of banking laws. That is double the work and quadruple the grief when I do not need to take on that burden.

So, if you’re considering international banking options, also decide whether that truly is the best option. I hope this helps!

Cover image credit: Ibrahim Boran via Unsplash