4 Pros and Cons of Online Offshore Banking
There are a lot of advantages to living abroad. However, being physically far from your home country can pose some disadvantages. The major disadvantage would have to be the access you have, or in most cases, don’t have, to your home bank.
Online banks for expats and digital nomads help to remedy that situation…mostly. Join us as we weigh on the pros and cons of using an online bank for both business and living while abroad.
Advantages of Online Banking Abroad
We live in a digital world. You consider yourself a digital nomad, perhaps. It makes sense to convert your finances completely digital. We’re in an age where online offshore banking is a reality and can absolutely support your nomadic lifestyle.
Most people think of offshore banking as something involved in tax evasion and asset protection in locations considered as tax havens (Belize, Cayman Islands, Mauritius, Cyprus, Switzerland, and Hong Kong are the major locations).
While offshore private banking can be used for these reasons, it can more importantly for you be used to open a foreign account where you don’t have residency or citizenship. Some providers might require registering an offshore company, others can be used more as a savings account. Either way, the benefits of using an online offshore bank serves expats and digital nomads now more than ever (including tax benefits and wealth management options).
Here are the advantages.
Online Banks Are Perfect When You Don’t Have a Permanent Address
If you’re going to be moving around frequently and won’t have a permanent address abroad, an online bank will probably make it easier to transition between countries.
If you don’t need to open an account locally, consider opening an offshore bank account instead. This can be easier to set up than a local bank account, and some even offer lower fees and better exchange rates than their American counterparts.
You can find dozens of international banks that offer free accounts online. Some are easier to use than others — for example, Lloyds Bank offers no-fee banking but requires you to visit its branches in person if you want to deposit a check by mail or transfer money between accounts.
And if you’re planning to live in a region like the EU where currency is shared, an online bank travels with you. You can open a single account and use it essentially everywhere without worrying about exchange rates, changing address, or other annoyances.
While it’s possible to open an account without leaving your home country, most financial institutions will ask for proof of identity before they accept an application. If you’re traveling abroad anyway, however, this shouldn’t be much of an issue — just take your passport or driver’s license with you when applying for an account at the branch location of your chosen bank.
Free ATMs and Lower Fees with Online Banks
As an expat, you may be interested in opening a bank account with an online or offshore bank. There are many benefits to choosing an online or offshore bank account while living abroad, such as:
Free ATM withdrawals. Some online banks allow you to withdraw cash and use ATM services for free. This can be especially helpful if you don’t want to pay the high fees typically charged by local banks for foreign withdrawals.
No monthly service fees. Many US-based banks charge monthly maintenance fees for maintaining accounts that are not used frequently enough to justify the cost of maintaining them. However, many offshore banks do not charge these types of fees on their accounts unless there is a specific reason (such as having insufficient funds), so you can avoid paying these unnecessary fees by keeping your account active and using it regularly.
Lower credit card interest rates. If you have a credit or debit card with an international bank, then you may be able to negotiate lower interest rates on your credit card debt than those offered by homeland banks.
Limitations of Online Offshore Banking
Online banking offshore is convenient and efficient. You can do everything from your computer or mobile device, including check balances and pay bills. And if you have a credit card linked to your account, you can even make purchases online.
However, if you plan to live or work abroad for several years and open a local bank account, a traditional bank may be a better option.
Online Banks Have Limited Payment Options
Just like traditional banks, online banks have their limitations. They may not be able to provide you with the financial services you need, and they may not have the same flexibility as a traditional bank.
Online banking allows you to access your money from anywhere in the world, whether you’re in the office or on vacation. There are no branches to visit and no tellers to deal with — all you need is an internet connection.
Traditional banks generally offer more payment options than online banks. For example, if you want to pay bills through a traditional bank, you can do so by writing a check or using an automatic bill pay feature. But most online banks don’t offer those options; they only provide direct debits and electronic payments. And that doesn’t account for payments in different currencies.
Also, traditional banks often have more ATM locations than online banks do. If you frequently travel abroad, this can be a big advantage because it means having access to cash whenever you need it — even if your online bank doesn’t have a branch there.
It’s also possible to have multi-currency accounts with offshore banks where you can hold multiple foreign currencies to make transactions in different countries.
It Can Be Difficult to Bank in Local Currency
When you’re living abroad, you need a bank that can handle your financial needs.
Many expats find that it’s difficult to bank in the local currency of their host country. While some online banks offer this option, many do not. If you’re moving abroad, you’ll want to make sure that your bank offers this service before opening an account with them.
You may not be able to transfer money internationally with ease. Many banks offer free transfers within their own network of countries (such as SWIFT), but charge high fees for international transfers that aren’t processed within their network (for example, Western Union). This can add up quickly if you want to send money regularly overseas or make large deposits into your account from another country.
Maybe you are paid in USD if you’re an American expat or GBP if you’re from the United Kingdom but you live in Spain. Every paycheck needs to be converted to EUR so you can spend it locally. Having a bank account that can accommodate this is helpful, but also difficult to find. Though without one, you’ll drown in conversion fees.
Online Offshore Banking Is Great for Travel, But May Not Be the Best Solution for More Permanent Stays
For many, online banking service is the easiest way to manage financial obligations while they are traveling or living abroad. Unfortunately, there are also limitations to using it in this capacity as well.
For example, someone living in another country where English is not widely spoken might find it difficult to navigate through bank accounts or payment systems.
The solution to that problem—and others like it—may lie in one of the growing number of banks specializing in serving expatriates. Or opening an offshore account with online banking capabilities.