Expat Banking: Choosing the right bank account

When we go on holiday, we wouldn't think of opening an international or local bank account and all too often expats take the same approach to bank accounts when relocating overseas.

It's only when the new people either start to withdraw their money in the local currency or receive money from a abroad when they realise that the costs of transactions start to mount, whether through international fees or currency conversions.

There is also is misconception that because their bank is international (such as Santander or Barclays) that there will be savings to be made. The banking world, while globalised, offers very few advantages to people living permanently in a new country.

If you are planning to move abroad, or already have moved abroad there are a number of options available to you when it comes to banking as an expat.

1. Keep your existing bank account

If you are moving abroad, but intend to keep some assets (such as property) in the UK, keeping your existing bank account is a sensible choice. Not only will you be able to keep your existing standing orders and direct debits, it ensures that if/when you return home you already have a bank account in place.

For expats who have been outside the UK for a period of time, re-opening an account can be a difficult process.

If you are intending to keep your existing bank account while you live abroad, your bank may offer special fee-free services such as free use of international ATMs and no currency transaction fees.

It's a good idea to speak to your bank and let them know your plans to see what options they present to you.

2. Open an international bank account

Many UK banks will also offer an international bank account which, depending on the bank, may allow you to manage foreign currency quickly and conveniently - although often with a monthly or annual fee.

Most banks will also offer online banking and telephone support to ensure that you maintain easy access to your finances as well as being able to get paid and withdraw money without the need for currency management. However, you will potentially still be exposed to exchange rate fluctuations as well as transfer fees between accounts.

This option will also offer peace of mind that you will be able to deal with people in your native language, although they often will not offer great rates of interest so for long term savings, this may not be the best option.

Different banks may offer a complimentary international savings account, so if that is a requirement always include this on your checklist when comparing different banks.

3. Open an online foreign exchange account

Some foreign exchange companies will enable you to use their personal or business online account pages as a normal bank account to receive and send payments. While this is not necessarily a perfect situation and some companies will not be willing to pay an account that is not in your name, it is worth checking with companies like Moneycorp whether you can open an account and use it in this way.

The major advantage for this approach is that you can open an account wherever you are and receive money into a local bank account, for example the UK, even if you are not resident in that country.

You will also be able to transfer money to different currencies without attracting any fees or charges as you would with banks and might even get access to a credit or debit card.

You will need to check with any companies or pension providers that they will allow you to receive money into these accounts, but in many cases it is considered OK and a great option if your bank has unexpectedly closed your account.

4. Open an offshore bank account

Most UK banks will also offer an offshore bank account which will typically be located in a tax haven, such as Jersey or the Isle of Man, where different tax rules apply.

Offshore bank accounts normally come at a price and also with a number of conditions, such as a minimum annual income as well as paying your income into the account.

With the account you may also receive a cheque book in local currency.

One of the key differences between offshore bank accounts and other types of bank accounts is that offshore bank accounts have increased confidentiality which increases the amount of security for money transfers.

5. Open a local bank account

If you are planning to relocate for a long period of time and you are confident in your language abilities, this option offers many advantages, the largest of which being that you become "more local". Doing so means that you begin to create a local credit profile which could increase your flexibility for borrowing locally in the future.

If you are considering changing your country of domicile, opening a local bank account helps to emphasise your commitment to leaving the UK permanently - especially when you close your UK bank accounts.

6. A combination of the above

For many expats there is not normally a correct single option and choosing a combination of the above is very common.

Making your decision

Depending on your circumstances, different factors should be considered including:

• Is your move permanent or temporary?
• Will you return to the UK?
  Opening a bank account after a long time away is not always as easy as you'd think. You may wish to keep yours open.
• Will you earn an income in a local currency or will you continue to earn an income in GBP?
• If not, you should consider a bank account which is managed in that currency.
• Are you maintaining assets in the UK and abroad?
  If so, keeping your UK bank account should be considered.
• Can you afford multiple bank accounts?
  Always include the costs of the accounts in any decision making and ensure you can afford each option.
• Can you afford to wait?
  It might make sense to keep your onshore bank account and evaluate once you arrive in your new country of residence to avoid any unnecessary costs.

Finally, don't make a snap decision. If you are in any doubt, check out our list of the best banks for expats and evaluate which might be the best one for you.