Leaving the US? Your bank might get anxious, and the feds will treat you with suspicion. Here’s how to manage money, taxes, and your privacy.

Dealing with US banks

When you leave the US, you’ll probably encounter two problems:

  • Your bank expects you to have a US mobile number to approve transactions.
  • If the bank figures out that you’re no longer in the US, they could close your account.

This happens because the ironically named PATRIOT Act has made banks crack down on who can access accounts. As soon as you no longer have a US address with the utility bills to prove it, you become suspicious. You’re not a patriot anymore!

Common choice: Pretend you haven’t left

Some people try to convince their banks that they’re still in the US. They pay painful amounts to keep a US mobile number alive, they use a VPN to look like they’re logging in from the US, and they rent a US address at one of the mail scanning services, even though banks increasingly reject those addresses.

If you’re thinking, “My friend from the expat group has been using one of those mail services without issues,” my response is, “Give it time.” I had an account in the US that was fine with my mail-service address for more than 10 years and then suddenly rejected it and me, locking me out of my account.

Better choice: Switch to sane banks

A few sensible banks in the US don’t mind if you have a foreign address. They’re your best solution for the long term.

Before you leave: Credit unions

When you’re still in the US, try to qualify for your local credit union. They seem to be more relaxed about addresses once you’re a member, and they often use email verification instead of text messages. Use an email address that you’ve created specifically for that account to improve the security of your verification messages.

Once you’ve left: Try these banks

When you leave, get a foreign address where you live at least part time and for which you can produce a utility bill in your name. Use this address when you do the following:

  • Move money to the “international” version of your current US bank or investment service, such as Charles Schwab International.
  • Find a way to qualify for an account at the State Department Federal Credit Union, such as through membership in American Citizens Abroad. The credit union accepts Americans with foreign addresses and phones.
  • If you have an incorporated business that has US activity, switch to an online business bank like Mercury or get a USD business account at Wise. Both work with US citizens living abroad. Mercury is a US bank with FDIC protection.

You don’t have to worry about these banks suddenly locking you out of your account, and you don’t have to pretend that you’re calling from the US when you’re really in Peru.

Get a local account

Once you’re spending significant time in one place, get a local account. This will make it easier to pay bills and protect yourself from exchange rate fluctuations, and it might be required for a residency visa.

Prepare for a challenge at first. All foreign banks that accept US citizens have to submit reports of their activity as part of FATCA. From the bank’s perspective, an American customer means extra work and possible fines. As a result, you might have to visit several banks before you find one willing to accept you.

You might also need to wait until you get residency before a bank will accept you. However, there might be banks willing to use just your passport; ask on local expat groups for the banks that do this.

Use services like Wise to transfer money from the US when the exchange rates are in your favor. You’ll probably get a better rate than either of your banks will offer.

Use direct deposit

If you receive a Social Security check or other regular payment, have it deposited electronically into one of your new accounts. Social Security payments can go directly to your foreign account.

Taxes: You will file with the US forever

Even if you live in another country and pay taxes there, you also have to file income taxes with the US. You’ll do this every year until you die or you get another citizenship and renounce your US one.

The amount you pay to the US could be zero or could be significant. It will depend on:

  • How much earned income you have: The first $120k or so is excluded from tax if you qualify for the foreign earned income exclusion (FEIE)
  • Your housing costs abroad, if you qualify for the FEIE
  • How much tax you paid to your current country, which you might claim as the foreign tax credit if that gives you a better result than the FEIE

For your first year in the new country, you might want to hire a local tax professional for your local taxes and an expat-savvy US one for your US filing. A common approach is to pay local taxes first and then file with the US.

After the first year, you might be able to file the US portion online yourself using MyExpatTaxes or similar tools. You can usually file and pay online. You shouldn’t have to send any paper to the US unless you have a strangely complex situation.

Your US filing deadline is automatically extended to June 15 because you live abroad. However, you’re supposed to magically know how much you owe and pay that by April 15.

Protect your financial privacy

You might feel like you have less financial privacy once you move abroad. This is due partly to the US government’s mistrust of citizens who have left and partly to the hoops you have to jump through to get a visa.

You’ll file extra reports to the US

You’re required to tell the US government if you have more than a small amount of money in foreign accounts. You have to submit sensitive details about each account.

I’m not a fan of this for many reasons, one of them being that a US government data breach released my Social Security number, bank details, and even information about my clients several years ago. Reportedly, the government hadn’t bothered to encrypt the data or protect it with two-factor authentication. Before that, an Ethiopian enjoyed using my Social Security number for awhile, suggesting a previous leak. There have been many breaches since then – have fun searching “US government data breaches.”

As long as the government requires us to submit valuable private data, we should arm ourselves with security measures as described below.

Avila, Spain

Have some money abroad? FBAR

You’re required to submit the Foreign Bank and Financial Accounts report if the total of all your foreign accounts reaches $10,000 at any point in the previous year.

So if you have a non-US account that had the local equivalent of $500, another that reached $5500, and your Wise Euro account had $4000, you have to report all the accounts, regardless of their current balances.

It’s a requirement of the charmingly named Financial Crimes and Enforcement Network (FinCEN). This won’t affect your tax and isn’t an IRS thing; you submit the information to FinCEN.

For each account, you have to provide the bank’s name and address, your account number, and the highest balance in the account during the previous year – not the kind of information that you want to send out into the world, especially since the form also includes your name, email address, Social Security number, and date of birth.

Protect yourself from leaks with these precautions:

  • Use a unique email address and password to log in to each bank account.
  • Use whatever two-factor authentication each account provides, such as an app like Aegis.
  • Set notifications for each account that alert you about activity.
  • Use another unique email address for submitting the FBAR. If your information gets leaked, the bad guys won’t be able to associate the FBAR email address with any of your bank accounts, and if you get phishing emails, you’ll know where the leak occurred.

Don’t pay a specialist to file the form for you. You can do it online in 15 minutes using the rate of exchange that was in effect on Dec. 31 of the year.

Currently the due date is October 15.

Have a lot of money? FATCA, too

In addition to the FBAR, you also have to file a different form if you have foreign financial assets that total a bigger amount. See the IRS rules for the current thresholds. The total doesn’t include foreign stocks that you hold in a US brokerage, so you might want to keep your foreign investments in a US institution to reduce paperwork.

Visa applications and privacy

Often, a visa application requires you to submit proof from a bank showing that you have a certain amount of money. Some visas just need a formal notice from the bank that gives your current balance. Others want to see several months of complete bank statements, such as the previous three months.

Usually, you have to leave the full account number on display. You might need to send the statements to other services to get notarized, and a translator might also get involved.

That’s a lot of people seeing your name, address, account number, transactions, and balance. If you’ve used your everyday account, they might also see that you buy an embarrassing amount of crap at Amazon or withdraw more cash each week than they earn in a month.

These bank statements will be stored with copies of your passport, which includes your photo, signature, and date of birth. The visa office, translator, and any lawyer you hire will have all this information along with your local address, US address, local phone, email address, and even such information as the names and addresses of your relatives.

How well do they protect this data? A quick search for “immigration data breaches” or its equivalent in the local language will give you an idea. Your safest bet is to limit what you provide and lock it down.

Create a bank account just for visa applications

If the visa you want requires a few months of complete bank statements, put a pile of money in one interest-bearing account just for the visa and leave it there for the required period. How it works:

  • Use a unique email address for the bank account, different from the email you use for the visa application.
  • Put money in the account shortly before it’s required. For example, four months before you apply for a visa that requires three months of statements, transfer money into the account. Use an amount that will comfortably qualify you for the visa. (Use your own money, not a loan. A loan would be deceptive, and you might be required to show where the money came from.)
  • Let the money sit.
  • At visa time, you’ll be able to provide three months of statements showing the required amount without revealing anything about your spending.
  • When your visa is approved, move the money back to your investments or some other better-paying account.

This has worked for me for three visas – no one questioned why there are no transactions on the account. They just care whether I have cash that I can easily access.

Credit card for a visa

Sometimes a bureaucrat will require you to submit a photocopy of a credit or debit card, both sides, including the CVV number and your signature. This is supposedly to prove your financial stability. (Yes, this really happens; it happened to me.)

Of course you don’t want to do this. If the visa you’re interested in requires this, consider getting a Wise account, parking some money there so it will pass a card check, and have Wise send you a physical debit card for that account.

Once you’ve gotten the visa, freeze the card and report it as lost.

Create an email address just for visa applications

Reduce the impact of a leak or bad employee by using a unique email address for your visa application.

This way, even if everything you submitted gets released, including your email address and bank account number, no one will know how you log in to the bank because the address you used for the visa isn’t the one you use for the bank.

Also, if you get a phishing email at your visa address, you’ll know that a leak occurred and you should keep an eye out for problems.

Embrace cash

Your new country might be more cash-happy than you’re used to. You might not be able to pay with a card at all in small restaurants and shops.

Embrace this and welcome cash back into your life. It has several advantages:

  • Easier budgeting: Withdraw a week’s worth of daily expenses as cash. Watch it dwindle as you spend it. You can’t hide purchases from yourself by putting them on a card.
  • Happier vendors: Shops have to pay a fee to accept cards, phone payments, or other transactions that involve third-party processing. They get more money if you pay cash. Support small businesses, not big payment processors.
  • Happier waitstaff: If you put the tip on a credit card bill, you’re trusting restaurant management to pass it along. Instead, just hand the server cash.
  • Less risk of misuse: A hacker can’t steal the serial number of your cash and use it to buy $3000 designer shoes.
  • More privacy: Governments and financial institutions who think they know what’s best could scrutinize your card transactions and do anything from telling you to reduce your carbon footprint to locking you out of your account if you’ve donated to a cause they don’t like. But they have no idea what you did with the $300 you took out of an ATM recently.

Cash only! Mérida, Mexico

Credit cards are harder to get

You might find that in your new country, new credit cards are harder to get or have bad rates, especially for unemployed foreigners. It’s simplest to use cash or debit cards.

Do you even need credit cards?

I haven’t used credit cards in more than 20 years and have never missed them. What I do instead:

  • Everyday purchases: cash
  • Online purchases: debit card that’s in the same currency as the seller
  • Utility payments: debit card or bank transfer (common outside the US)
  • Rent: cash or bank transfer
  • Services (tutors, notaries, etc.): cash or bank transfer
  • Travel points: I buy points directly rather than using a rewards card
  • Tracking my spending: I enter purchases in a private system I built for my phone; normal people might use an app

I’ve had no trouble disputing transactions that were made on a debit card. For me, the only “advantage” offered by a credit card is debt, and if you’re still relying on debt, you’re not ready to leave the US.

“Credit history” might not be a thing

You might think you should get local credit cards so you can build a credit history. Then, if you decide to buy a house, you could qualify for a mortgage.

However, do banks in your current country care about your credit history? They might focus on your earning power, not your spending power. Ask experienced immigrants whether it’s worth the trouble.

Investing from abroad

Prefer a US-based broker

Ideally, you’ve moved your pile of money to a US brokerage that accepts Americans who live abroad. That way, if you invest in foreign stocks, they’ll be held in a US institution and you probably won’t have to file the FATCA report mentioned above.

Become more hands-on

Even if your brokerage is a US institution, the fact that you’re living outside the US limits how you can invest. The limitations depend on where you live.

For example, Americans in Europe can’t directly invest in US ETFs due to EU bureaucracy. There are workarounds that might add unacceptable fees. So rather than choosing one fund, you might end up creating your own by buying individual stocks.

For example, you could find a good dividend growth fund and invest in its top 20 holdings, imitating the fund’s sector weighting. This is more work at first, but it gives you finer control over performance.

Avoid PFICs

A Passive Foreign Investment Company is an institution that makes its money from money, basically. These include “foreign” (though local to you) mutual funds and similar investments, as well as businesses that generate more than 75% of their income from passive sources like dividends or rent.

Avoid investing in these because you’ll be punished by the IRS with extreme paperwork and higher taxes.

Resources

Facebook groups for expat finances

  • Charles Schwab International
  • Interactive Brokers

Password managers

A password manager is software that you install on all the devices that you use to log in to sites. It remembers the email address and password you use to log in to each site, which makes it easier to use unique addresses and complex passwords.

Most of the programs store your data in the cloud, so you need to trust them to keep your passwords safe. (LastPass famously got hacked, twice.)

Here’s a good review of several options.

Unique email addresses

It’s a good idea to use a unique email address for each important login, in addition to a unique and complex password.

Gmail and similar services let you add a + and some characters to your main email address to create an alias, but that format makes your main address obvious.

Instead, use a service that lets you create normal-looking addresses that deliver to your core email address. Then never use your core address so it can never be compromised.

Some high-security options:

  • Proton Mail
  • Fastmail
  • Tuta
  • Buy a domain, create your own email addresses at it, and forward them to your core email address at a standard email provider

I recommend the above over the services that let you generate aliases that they forward to your main email. Those services tend to be small projects that could disappear suddenly, making you miss an important email from the immigration office. Also, when you use them, you’re giving your information to yet another site outside your control.

What normal Americans say

Here’s useful advice from two Americans who have a stronger and more recent connection to the US. John and Bev are frequent travellers rather than emigrants. They still have accounts in the US and use American cards and phone payments extensively.

I don’t think their approach would be sustainable for someone who has moved abroad full time, but John and Bev don’t plan to do that. As long as their main interests are still in the US, this works fine for them. It could be a good option for you as you decide whether you want to leave permanently.


Photo at top: Hong Kong