Bank and Money Stuff

Advice on US banking while overseas

• Unless it's charging you crazy monthly maintenance fees, keep your American bank account open. If it's charging you crazy fees, switch to a bank or credit union that won't.  If you are getting a tax refund, you can get it direct deposited (and use it to pay your credit card bills), and if (heaven forbid) you owe taxes, it's easier to pay from an American bank account than to try to send a check in your local currency.  Also only use a US bank that has online banking. 

• You may find that having an account with a large international bank that has branches in your host country will be a benefit.  Often it is easier and cheaper to make an international funds transfer between a foreign account and a US account in the same bank.  And it's often faster.  You can look up lists of banks available in your host country and see if you recognize any of them. 

• If you have a US credit card, keep it, and use it at least occasionally. Even if you're earning enough at your job to pay in local currency for all your needs, expenses like gifts you order online and send to friends in the US, plane tickets, and hotel/restaurant bills while traveling are good candidates for keeping your US credit card active. If you don't use your card(s), it is highly (like 90%) likely that your financial life overseas will have no impact on your US credit history, and lack of activity for several years will have a negative effect on your US credit history.  This may not seem like a big deal, but when you want to repatriate, you may find your credit history has an impact on your job hunt in the form of security clearance and background checks.  And of course if you want a car loan or a home loan, a good credit history is a must.  Banks don't like it when you seem to disappear for years at a time.  

US Taxes

These will likely be difficult your first year. Here's why:

• The US has tax treaties with some countries stating that if you go work there and pay taxes there, you don't owe any US tax, immediately. Awesome. If you aren't in one of those countries, your return is more complex. If you live and work in a foreign country, you can get a Foreign Earned Income Exclusion if you live abroad for 330 days out of a continuous 365. If you move abroad in August 2014 and file your return in April 2015, you have not been away long enough to claim the exclusion, so you will have to declare your foreign income, pay tax on it, file an amended return once the 365 days have passed, and get a refund of the tax you paid. Or you can file an extension if it's enough time to meet the 330 days, but you still have to pay any tax owed by April 15^th even if you'll be filing later.

• To make this more fun, amended returns have to be snail mailed instead of electronically filed. You may find it easier to mail the return when you next visit the US, or give it to an American friend who visits you (who can mail it when she gets back home). The good news is you'll get money back, the bad news is the paperwork to get your cash is a pain in the neck. Also, amended returns take a LONG time to process- 12 weeks after in arrives at the IRS office is a common wait.

• Also note that the 330 out of 365 days requirement is just time spent out of the US, and NOT time spent in your new country. If you get generous vacation, it is easy to spend 35 days in the US over semester break without realizing it's more than a month, which will ruin your tax exemption. Either cut it short, or hop over the border to Canada or Mexico in the middle so you don't go over. Or spend just a few weeks in the US and a few weeks visiting somewhere else interesting in your new region.

• There are accountants that specialize in US expat taxes, though they may be located in a different country than you. It may be worth it to hire someone to deal with this for you, especially if you already know you'll need to do the amended return. Ask other American expats for recommendations.

• You will have to submit a form with the IRS declaring any overseas bank accounts you have and the highest balance in each account for the year when you file your taxes.  This form is called the Report of Foreign Bank and Financial Accounts (FBAR), and you'll need to file it if you have the equivalent of US$10,000 in your foreign bank account at any time during the year. Note that you might not be TAXED on this money, but you do need to declare it on this form (if the $10,000 rule applies to you- Lara has never accumulated that much cash in Fiji and has never had to deal with this form).

Taxes in your host country:

• No advice, since there's no universal rule other than you will probably have to pay some. Ask Human Resources at your institution for help. In Fiji, they deduct as you go and one year I had to fill out a tax form (reasonably easy compared to the US ones), the next year I did not.

Advice on overseas banking

• Banking systems in foreign countries can seem, well, really foreign sometimes.  For example, to open a bank account in the UAE I need a letter from my employer stating what my salary is and how long my contract is for, in Arabic.  Without this employment letter, I cannot open a bank account.  Many blue-collar ex-pats don't have bank accounts here and just cash their checks at the company bank branch and operate in cash. In Fiji, you have to have a Tax I.D. number to open a bank account, but you apply for this when you get there and it is reasonably painless. If you want your spouse to get an ATM card on your account, he/she will also need to get a TIN, even if he/she will not be working.

• Many expats trust their home banking system more than their host country's banking system.  It is common among expats to transmit money home via bank transfers (with wire costs on both ends, usually) or to take cash back with them when they visit the US.  Make sure that you either keep your cash on hand value below the amount you are required to declare on US customs forms (which is $10,000) or declare the total amount of cash you have on you at customs.  Failure to do so can result in forfeiture of the money.  

• Be wary of checking accounts in your host country!  Make sure that you know the laws regarding bounced checks in your host country.  Bouncing a check in the US is no big deal, you pay a small fee (or have overdraft protection) and you are fine.  Bounce a check in the UAE and you will go to jail.  

• Due to the fee structures on electronic funds transfers, most places in the UAE don't have automatic debit payments.  You can pay online, but you must use a UAE bank credit card.  To get around that issue, many people here pay for repeating fees like rent or a mortgage or a car payment with post-dated checks.  There is no way to stop payment on a check here, so once you write a check and hand it over, that money is gone.  You can't close a bank account until the bank is sure that you have no outstanding checks.  Before I can get my last paycheck I have to go through a clearance process which assures my employer (who is my financial bond) that I have no outstanding debts that they will have to settle in my absence.  Part of this clearance process is a letter from my UAE bank that says I have no outstanding checks.
• In Fiji, I have a savings account with a debit/ATM card and the ability to make online transfers to my landlord's account for my rent. Personal checking accounts aren't really common and there's no reason an expat would need one. I earn minimal interest on my savings, and this minimal interest is taxed (withheld by the bank) at about 10% since I am a foreigner. Frustratingly, although I bank with WestPac, an Australian bank with branches throughout the Pacific, my Fiji WestPac ATM card doesn't work in New Zealand or Vanuatu- I'd have to pay over $50 a year for a different kind of ATM card to do that; probably not worth it if I'm only travelling out of Fiji (but within the WestPac region) once a year.

• You may find it easier to deal with your finances if you have a local bank credit card.  Make sure you understand the terms of the card and the consequences for non or late payment.  Also know that your credit activity on that card is almost certainly not reported to the US credit bureaus (and maybe not to any internal credit bureau).  A foreign bank credit card is for convenience, not building a good credit rating in the US. Foreign credit cards may have different rules- in Fiji there's a 3% tax on purchases made by Fiji-based Visa cards.


• If you plan to purchase a car while overseas you should contact your US bank and see if they are willing to finance such a car purchase.  You may find the finance terms (length of payment and interest rate) are better than your local options.  Of course, you may find that the local finance options are better, but it's good to have options to compare.  

• Caveat to purchasing a car overseas - you may not want a US car loan if your car is not street legal in the US.  The cost of bringing my 2012 Chevy Cruze Gulf edition up to US air pollution standards is prohibitive, and I plan to sell my car before I return to the US.  The car loan will have to be paid off before I leave because I won't be able to receive my final paycheck and end of contract bonus money unless I get a letter from the bank saying I have no outstanding loans.

Retirement and your 401(k)

• Depending on where you are working, your employer may take out contributions for retirement. If you are working a three year contract, you won't be around long enough to vest into the system and/or retire, nor will you be able to roll your contributions directly into an American system like TIAA-CREF when your contract ends.
  
• You are also unlikely to be able to make contributions to a 401(k) plan or other deferred compensation program. If you are worried about taking a few years off from contributing to your retirement or already need to make "catch up" contributions to offset years where you didn't contribute, then maybe an international position is not for you.
  
• But your employer may have rules you did not anticipate. In Fiji, an expat leaving employment is entitled to a refund of ALL their retirement contributions in a lump sum. I haven't yet investigated whether I'll be able to use that to make a lump-sum contribution to my next retirement plan, but either way, that's better than what I thought would happen (paying into a Fijian retirement plan I could never utilize and getting nothing back).
  
• Do not expect your HR people at your foreign job to know anything about the intricacies of American 401(k) plans or Social Security rules, or to be able to give you any advice. They may have expat employees from multiple nations and no expertise with the tax and retirement laws of any of them. You'll be on your own for a lot of financial matters, so research accordingly.