Ask The Expat
Making Your Dollars Last Abroad
Among the biggest challenges for expatriates is managing their finances while living overseas. They have to deal with the everchanging exchange rate, inflation, varying interest rates, and unfamiliar banking rules. In addition,
economists predict that the U.S. dollar will remain low against the world’s major currencies for several years to come, which makes it even more important to manage your funds wisely if you plan on living overseas.
For short overseas stays up to six months, there is little you can do to maximize your purchasing power. With thousands of ATMs in almost every corner of the globe, the most economical way to get money while living overseas
for a short time is to use your check or debit card, drawing funds directly from your U.S. account. Mastercard/Eurocard/Cirrus, Maestro, Visa/Plus, Visa Electron, and American Express cards are accepted at almost every ATM around the world. Compared
to exchanging cash, ATM withdrawals have the advantage that you can withdraw funds 24 hours a day at most locations and that you get a better exchange rate than for cash. Debit cards (check cards) with the Visa or Mastercard logo can also be
used for purchases just like credit cards, but they don’t generally offer the same purchase protection against theft or fraud. On the other hand, U.S. credit card companies charge a small percentage for overseas purchases, which can add
up for large purchases or a long-term overseas stay.
In case your bankcard is lost or stolen, traveler’s checks are a good backup, but the exchange rate is not as good, and you pay a fee for their purchase. If you exchange cash or traveler’s checks regularly, keep
in mind that banks and exchange houses charge a commission for exchanging currency. Exchange houses are often difficult to find in remote locations. Money wires from home are another backup solution, but bank transfer fees are quite high. Money
transfer services such as Western Union offer money transfers for a lower fee, with agent locations worldwide for convenient pickup of funds (usually paid out in the local currency). As a general rule, avoid changing money on the street. You
may get a better rate, but you are taking the risk of being ripped off. Always familiarize yourself with the look of the local currency and avoid accepting a huge wad of small bills. They could contain outdated or fake bills.
If you are going overseas for an extended period of time, up to a year or longer, making informed financial decisions can save you a lot of money. Research the financial policies of your host country, and find out how stable
the economy and the currency are. Has there been a large-scale devaluation of the currency, or has there been a high rate of inflation? How stable is the currency against the U.S. dollar and other major currencies? If the country has economic
or financial problems, keeping large amounts of money in the local currency may not be a good idea. The more you know about the local banking system’s rules and regulations, the easier it will be to make the right choices for your financial
needs abroad. If you have overseas income or a stipend, it makes sense to open a local bank account. Your money is safer at a bank, and you can easily access your funds at bank machines. If you depend on savings in the U.S. during your stay abroad,
you might want to consider transferring some of your money to a local bank account. You may earn a much higher interest rate than in the U.S., and if the local currency is stable you can expect it to stay strong against the weakening dollar,
which will also save you money in the long run.
Some countries have liberal banking policies to invite foreign investments regardless of immigration status, and they freely issue tax identification cards to foreigners and allow them to open bank accounts. Most countries,
however, require a permanent or temporary residency permit in addition to a tax identification card and proof of address to open a local bank account. This could be a student, missionary, retirement, employment or volunteer visa, for example.
Once you have decided to open a bank account in your host country, find out how much banks charge for checks, overdrawn amounts, ATM withdrawals, etc. Some banks in developing countries and tax havens offer savings accounts in foreign currencies,
including ATM withdrawals in U.S. dollars.