Bank fees can be confusing and costly, especially for Australian expats regardless of whether you paying them at home or abroad!
In Australia, bank fees consistently increase, so it’s important to pay attention to rising rates. When you travel overseas, the situation becomes more complex, as high bank fees become even more difficult to navigate and avoid.
If you’re wondering what these fees cover and how you can avoid paying high fees whilst you live and work overseas, read on – we’ve put together this helpful article that should fill in some of the blanks for you.
Offshore bank fees are used to cover the cost of local regulations that impact a bank’s profits in order to keep it operating.
But what happens when you find yourself paying too much in fees? Is there a way to avoid those high costs? You’ll be pleased to know there are simple things you can do to keep those offshore bank fees down and help you save money while you’re abroad.
Avoiding high offshore bank fees
While paying a little more in bank fees does carry some benefits, we know you don’t want to rack up exorbitant offshore costs – especially if your bank isn’t delivering on service so here’s a few tips (below) on how to avoid high fees.
To avoid high fees while still enjoying the benefits of banking overseas, consider the following tips:
- Don’t work with an introducer – websites that offer to help establish offshore bank accounts often charge high fees.
- Keep an eye on maintenance fees. Many banks charge maintenance fees for the upkeep of their accounts and their services. Research the bank’s fee structure and don’t be afraid to ask if their fees are negotiable.
- Be aware of foreign currency transfer fees. Banks generally charge very high Foreign currency transfer fees to and from your intended destinations and currencies. Consider third party money transfer companies such as www.ofx.com and www.wise.com or perhaps look for banks with clearly defined maximum fees and/or fee caps.
- Use a prepaid travel card or debit/credit card for purchases such as those offered by www.wise.com. These options offer better exchange rates and can prevent conversion fees.
- Steer clear of airport conversions and wait until you’re settled to convert currency to avoid receiving the worst conversion rate and commission charges.
Don’t work with an introducer
If you’re planning to set up an offshore bank account, you’ll likely hear about introducer websites offering to help you establish your account. This might sound like a great idea – as there’s definitely appeal in employing someone else to take care of the tricky stuff – but these introducers usually charge high fees just to choose your bank and submit an application.
If you don’t work with an introducer, your fees will be much lower – you’ll just pay to physically open your account. At the end of the day, introduction services might sound appealing, but they aren’t really necessary and will often just end up costing you more than they’re worth.
Keep an eye on maintenance fees
Banks also charge maintenance fees, which go towards the general upkeep of their services and accounts. When you set up an offshore bank account, it’s important to know how your bank structures maintenance fees and when, or if, they’re liable to be paid.
You may be able to avoid maintenance fees entirely if you maintain a balance over a particular threshold, but this will depend on the bank you choose. Some banks also offer negotiable maintenance fees, which might see you better off in the long run. It’s important you do your research and ask the right questions before establishing your offshore bank account to make sure you get the best deal.
Be aware of foreign currency transfer fees
Some banks charge high foreign currency transfer fees to and from your intended destinations and currencies. Major banks charge ridiculously hight costs for foreign currency conversions (usually starting around 4 -5% of the value of the transaction).
Alternatively, perhaps look for banks with clearly defined maximum fees and/or fee caps. Make sure you do your research before staging a transfer or opening a new account.
Some banks will also charge higher fees if you have a non-resident account with them, if you receive many high-value incoming transfers, or if you make a lot of international transfers each month – so it’s important to clarify these points, too.
Invest in a good offshore business structure
If you’re conducting business overseas and want to avoid those higher offshore bank fees, set up a business structure that favours good banks. Structure your business in a jurisdiction in which you’ll have access to traditional banking – in other words, where you can walk into a branch and set up an account.
Avoid the hassle of fluctuating exchange rates
Make the stress of seesawing exchange rates a thing of the past with a prepaid travel card such as those offered by www.wise.com, which you can load foreign currency onto before you leave Australia.
This allows you to secure one exchange rate, but you might not experience the benefits if the Australian dollar sees a boost in value, and you may be subject to reload fees when you top up your card. Ultimately, there are great benefits to using a prepaid card, as you’ll touch down at your destination and be good to go as far as money’s concerned.
Use a debit or credit card for purchases
When buying things overseas, ensure you use a debit card or a credit card. This gives you access to interbank exchange rates, which are usually the best rates across banks. And if presented with the option to pay for your purchase in the local currency or your home currency, always choose to pay with the local currency (as the exchange rates charged by the EFTPOS terminal’s payment processors are usually much worse than bank conversion rates).
You will still be vulnerable to fluctuating rates, but using a card does mean you’ll achieve the best rates available to you. Credit cards tend to be better for larger purchases, and may come with rewards or free travel insurance provided you spend the stipulated amount prior to your departure.
Steer clear of airport conversions
As tempting as it might seem, don’t convert money at the airport or at exchange offices, as you’ll most likely receive the worst conversion rate and be slapped with commission charges. Wait until you’re settled in town before converting your currency.
Avoid conversion fees
When you choose a prepaid travel card, you can ensure your card holds substantial foreign currency to prevent conversion fees. Some conversion fees won’t be adjustable, but there are some cards that do waive the currency conversion fee. It does help to do your research to make sure you’re getting the best outcome.
Minimise ATM withdrawal fees
Opt for a travel or debit card that doesn’t charge you a fee when you withdraw from foreign ATMs. You’ll likely still be charged a fee by the foreign bank, but this means your Aussie bank won’t charge you a fee at the same time. What’s more, some Australian banks partner with overseas institutions, meaning cardholders can make withdrawals without being charged. Do some research to make sure there are partnering banks at your overseas location that’ll help you secure the best deal on your withdrawals.
It’s also important you avoid using your credit card when withdrawing money overseas. You’ll likely be charged an ATM fee, along with hefty Foreign exchange conversion fees and will pay interest on your withdrawal from day one, which can really impact your savings.
Seek tax advice
While offshore banking is totally legal (so long as you declare any income that you earn correctly), you’ll only get by with offshore banking options if you follow the rules. It is definitely not legal to use an offshore banking account to:
- Evade taxation, either at home or abroad
- Avoid paying tax on your income
- Hide money that you haven’t declared to the authorities
- Hold money that you’ve obtained illegally
Different countries have different tax laws, and some of these laws can be complex.
Make sure you’re aware of the tax implications and legislation in Australia so that you stay compliant with regulations. If you are caught using an offshore bank account illegally, you will be slapped with a hefty fine or even with jail time. Don’t risk it.
Make sure you know exactly what’s involved in opening and maintaining an offshore bank account, or in using money while overseas. And if you’re a bit stuck on what to do, seek expert advice from taxation specialists. These professionals can help you understand and maintain compliance with the tax regulations surrounding offshore banking.
Want to avoid those high offshore banking fees? Contact us here at Expat Taxes
When you’re relocating and want to stay on top of those offshore bank fees and charges, there’s no one better to have in your corner than Expat Taxes Australia.
We specialise solely in expat tax returns Australia-wide, offering advice for Aussie expats overseas and for foreign expats who now live down under. Best of all, we’re all expats ourselves, so we know exactly what’s involved in expat life and in living and working in a foreign country.
If you feel swamped by tax regulations or requirements of offshore banking, we’re here to help. We’ll help you organise your Australian tax returns, assist with tax planning and structuring, and help you minimise your tax implications as much as we can.
You can contact us for reliable, fast and friendly expat tax assistance when you need it most. Our reliable tax specialists are on hand to connect with you remotely for quality advice and support wherever you’re living.