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When Do You Need an International Bank Account?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Whether you are planning to go abroad for a week or a year, international travel will challenge your assumptions about everyday life in ways you could never imagine. A journey abroad requires exhaustive research before you even leave your home, most importantly understanding how to handle banking tasks and access to money.

The good news for most casual travelers is that you probably won’t need to learn how to say “I’d like to open a bank account” in Mandarin. For a vacation abroad, you need to think carefully about how you intend to use your credit and debit cards to avoid paying high fees for normal transactions, both purchases and ATM withdrawals. And if you plan on staying in one place and putting down roots, renting an apartment, getting a job or engaging in even simple financial transactions, then you might look into banking with a local institution.

Whichever sort of journey you anticipate, we’ve assembled a basic primer on what you need to know about international bank accounts and international bank fees.

Consider your international payment options

Your banking needs when traveling beyond America’s shores will likely be minimal, as you’ll have more interesting things to do in Rome or Delhi than apply for a home loan. What you will require is a widely accepted payment method and convenient access to local currency to pay for your fantastic meals and buy replicas of the Great Pyramids.

Just like at home, you can cover almost any cost with credit cards, debit cards or cold, hard cash. But while paying for a pumpkin spice latte at your local Starbucks may happen with a simple swipe, things can get a little hairy when you whip out that Mastercard to pay for a bowl of street pad thai.

You can’t rely on everyone accepting plastic when abroad. Keep in mind that because credit card acceptance depends on individual merchants, there’s no guarantee the Parisian cafe where you had coffee and a croissant will accept your credit card, even if the boutique down the street does.

How much are international bank transaction fees?

Using your card — whether credit or debit — when traveling abroad will almost certainly invite a whole heap of fees. While certain travel cards allow you to avoid these charges, or provide such generous rewards as to make the fees worth it, you may end up paying an additional 3% of your transaction in total fees from both the credit/debit card issuer (your bank or credit union) and the card’s network (Visa, Mastercard, Discover, etc.) The exact structure of these fees varies from bank to bank and card to card, but they generally can be understood as consisting of:

  • The card network’s foreign transaction fee: This is the 1% Visa and Mastercard charge for each foreign transaction, separate of whatever your card issuer will charge you. Discover doesn’t charge a foreign transaction fee (though again, that doesn’t mean using your Discover card abroad won’t incur a foreign transaction fee with the card issuer). American Express is both a card network and a card issuer, and charges a fee of 2.7%.
  • The card issuer’s foreign transaction fee: Since you don’t get your credit cards directly from a credit card network (unless it’s American Express), your card issuer (the bank or credit union that approved your account) has a stake in your spending and will also charge you a foreign transaction fee. Some banks, such as Capital One, make it a point to charge no fees and will go so far as to pay the card network’s 1% fee if its linked to one of the bank’s 360 accounts. Most aren’t so generous, and tack on their own fee (of around 2% in most cases).

You might try to avoid international bank transaction fees by paying with cash, but unless you plan on bringing enough greenbacks from home to make airport security think you’re an arms dealer, you’ll have to withdrawal that money from a foreign ATM. And that comes with its own set of fees — usually a percentage of the total transaction, plus a flat per-transaction fee.

To give you a better idea of how much of a drag these fees can be on your wallet, here are the standard fees from the “Big Four” U.S banks (these fees may be waived if you are a customer with a premium account). Keep in mind these fees usually only apply when you are dealing with a third-party ATM while abroad — finding ATMs either owned by your bank or with a foreign bank in partnership with your domestic bank is a common way you can avoid the fees listed below.

International ATM fees charged by major banks

Chase

$5 flat fee per withdrawal, plus 3% of each transaction and whatever fee the ATM owner charges

Wells Fargo

$5 flat fee per withdrawal and whatever fee the ATM owner charges

Bank of America

$5 flat fee per withdrawal, plus 3% of each transaction and whatever fee the ATM owner charges

Citibank

$2.50 flat fee per withdrawal, plus 3% of each transaction and whatever fee the ATM owner charges

Avoid fees by finding your domestic bank ATMs while abroad

“Most large multinational banks have branches in large foreign cities,” said Rick Brooks, CFP and CPA at Blankinship & Foster in California. “For example, my daughter opened an account at CitiBank for her semester abroad in Hong Kong. She didn’t need a local bank account because Citi was sufficient for her needs.”

The easiest way to figure out if your domestic bank has a branch in a foreign country is to call them and ask, but Bank of America customers should note their bank participates in the international Global ATM Alliance, a deal brokered by select major banks around the world to allow their customers to use any of their ATMs while only paying minimal fees. You’ll notice the fees are “minimal” but still exist. You’ll still have to pay a 3% transaction fee, but that’s better than having to also pay BoA’s fee for using a third-party ATM and the third-party fee.

Global ATM Alliance bank

Coverage area

Barclays

United Kingdom: England, Northern Ireland, Scotland, Wales, Jersey, Guernsey and the Channel Islands

BNP Paribas

France

BNL D'Italia

Italy

UkrSibbank

Ukraine

TEB

Turkey

Deutsche Bank

Germany and Spain

Scotiabank

Canada, Mexico, Peru, Chile and the Caribbean including: Anguilla, Antigua & Barbuda, The Bahamas, Barbados, British Virgin Islands, Cayman Islands, Dominica, Dominican Republic, Grenada, Jamaica, Saint Maarten, Puerto Rico, Saint Kitts & Nevis, Saint Lucia, Saint Vincent & the Grenadines, Trinidad & Tobago, Turks & Caicos Islands and U.S. Virgin Islands

Westpac Bank

Australia and New Zealand

Even if your international location doesn’t have a branch of your bank back home, there’s still actions you can take to minimize the amount of fees you’ll pay during your trip. “You might want to limit your withdrawals in that case and “make them count” by taking out larger amounts and budgeting that cash over the month,” said Jessica O’Donnell, a CFP based in Massachusetts.

Do I need an international bank account?

Like being in love, knowing when you need an international bank account feels different for everyone. Some people judge it based on the amount of time you spend abroad. “The longer you plan to stay in a foreign country, the more attractive it is to open a bank account there,” said O’Donnell. “This is a necessity if you will be working or studying there for a year or more.”

Others place more importance on the type of financial transactions you plan on doing while abroad, rather than how long you’re staying. “When a person is working in a foreign country, or they own real estate, often it makes more sense at that point to open a local bank account to better handle expenses in the local currency,” said Daniel Tobias, a CFP based out of Charlotte, N.C.

What you’ll need to open your international bank account

Not all international banking is created equal when it comes to the paperwork you’ll need to prepare to open an account. From Beijing to Berlin, banks have to adhere to their own country’s regulations when it comes to opening accounts, and you may have to jump through some hoops you couldn’t anticipate beforehand. However, you should typically expect to bring:

  • Proof of residency
  • A letter of recommendation from a domestic bank
  • Photo identification
  • A professional reference

In some cases, opening a bank account may not be that much more complicated than it would at home — but you shouldn’t bet on it. “The biggest trouble is walking into a bank in a foreign country where you don’t speak the language, sitting down with your passport and not a local identity document, and the person across from you who has never dealt with a foreigner has no clue what to do,” said Tobias.

For tax purposes, it’s ideal to keep the amount in your foreign bank account less than $10,000 (USD) if possible. Otherwise the bank has to report your account to the IRS and you’ll have to file it as part of your American tax returns.

“In recent years, banks overseas serving American customers have had to provide the IRS with documentation on accounts held with them by U.S. citizens or dual citizens,” said Eileen Sharkey, a Denver-based CFP. “The banks generally cannot charge their customers for this compliance work, and are now generally reluctant to open accounts for Americans.”

The bottom line on international banking abroad

If you’re time abroad can be characterized as a trip or a vacation — even if it lasts a few months or more — chances are you don’t need to open an international bank account in a foreign country. If you’re fee-adverse, you can either apply for a credit card that doesn’t charge a foreign transaction fee or research what bank’s ATMs and branches are the most common at your destination and see if you can open a domestic account with a bank that allows you to take advantage of a low or no-fee network (like Bank of America).

Anyone who needs to do banking beyond facilitating simple spending money (such as buying property), opening a local account will almost certainly become a necessity. It may be a huge headache, but your alternative is potentially paying huge sums in currency exchange fees.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here

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Banking

Can You Still Get a Piece of the Wells Fargo Settlement?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The Wells Fargo settlement is still being distributed to eligible customers, but the deadline for customers to get a piece of the settlement passed as of July 2018. So the short answer is no, you cannot still get a piece of the Wells Fargo settlement.

That said, the Wells Fargo settlement is an important example of people working together to bring a big institution to justice for its bad actions. Studying it can provide lessons in case you ever find yourself eligible to take part in a similar class-action lawsuit.

“Class actions are an important tool to compensate harmed consumers and hold companies accountable,” said Matthew Preusch, attorney at Keller Rohrback LLP, part of the team that represented consumers in the Wells Fargo lawsuit. “You should always be on the lookout for official court-approved notices advising that you be entitled to compensation.”

What is the Wells Fargo settlement?

The Wells Fargo settlement exists to compensate current and former Wells Fargo customers who were victims of fraud when the bank’s employees opened up accounts in their names without consent. Some customers who purchased identity theft protection were also part of the suit.

“Wells Fargo employees opened unauthorized lines of credit, savings accounts and checking accounts for a lot of customers ,” explained Ken Tumin, founder and editor of DepositAccounts, a subsidiary of LendingTree. “They did it to meet their sales targets.”

All in all, Wells Fargo employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. Once it was discovered, a class-action lawsuit was launched to go after Wells Fargo on behalf of the customers affected. This means there are just a few plaintiffs who sued Wells Fargo, but additional “class members” can join the suit.

In July 2017, Wells Fargo settled the lawsuit, agreeing to pay $142 million to victims in the form of cash benefits. This amount was intended to reimburse any fees that people were charged for the unauthorized accounts, and compensation for any potential harm done to people’s credit related to the unauthorized accounts. Any leftover money will pay additional compensation on a per-account basis.

In addition to the settlement for the victims, Wells Fargo was also hit with a $100 million fine to the Consumer Financial Protection Bureau’s (CFPB) Civil Penalty Fund; an additional $35 million penalty to the Office of the Comptroller of the Currency; and another $50 million to the city and county of Los Angeles.

Besides the troubles stemming from the fraudulent accounts scandal, in December 2018, Wells Fargo also agreed to pay a $575 million settlement with the attorneys general of all 50 states and Washington, D.C. for tricky practices with their auto loan and mortgage products.

Who was covered by the Wells Fargo settlement?

According to the official Wells Fargo settlement website, there are three main qualifications for people to be a part of the settlement:

  • If you had one or more unauthorized Wells Fargo accounts opened in your name between May 1, 2002, and April 20, 2017.
  • If you had one or more unauthorized Wells Fargo accounts applied for in your name between May 1, 2002, and April 20, 2017, regardless of whether that account was opened.
  • Or, if you obtained identity theft protection services from Wells Fargo between May 1, 2002, and April 20, 2017.

How do you get restitution under the Wells Fargo settlement?

The deadline to file a claim was July 7, 2018, so only those who are already signed up will be part of the settlement. If Wells Fargo had a record of a complaint about Unauthorized Accounts that you made to Wells Fargo, the Office of the Comptroller of the Currency or the CFPB, you might have been automatically enrolled in the class-action settlement. (If you’re not sure if you were included in the settlement, you can request more information by calling 1-866-431-8549.)

“For this case, Wells Fargo did send out letters to many that were affected with instructions about how to file claims,” said Tumin. The lesson here is that “[….] it makes sense to pay attention to what you receive from your institutions,” he added.
For those who did pay attention to their mail, or for those who were automatically enrolled, getting cash in hand from the settlements is expected to take a very long time. “There won’t be anything paid out until appeals have been exhausted, and that can take many years,” said Tumin.

What’s more, payment to class members can be made only after class members’ damages are calculated in accordance with the settlement. Then, the claims have to be processed and the damages must be determined based on credit bureau data analysis. At that point, checks can begin to go out to all eligible class members at the same time.

Do I need to hire a lawyer to participate in the Wells Fargo settlement?

The courts have already appointed Keller Rohrback LLP to represent all class members as “Class Counsel.” Anyone who is part of the lawsuit will not be charged a fee. If you did participate in the settlement, however, that also means you gave up your right to sue Wells Fargo and related parties on your own for related claims.

Those who opt to hire their own lawyers or pursue their own lawsuits will be treated separately from the class-action suit.

Lessons learned from the Wells Fargo settlement

Whether or not you’re involved in the Wells Fargo settlement, it’s a good reminder that keeping tabs on your financial life is important. “It shows how beneficial it can be to get online access to your accounts and keep track of them,” said Tumin. That way, you can quickly spot anything that is amiss, such as an additional, unauthorized account with one of your banking institutions.

The other big takeaway is that when your consumer rights are on the line, there are protections in place and by going through the appropriate channels, there will be consequences for the offending institution.

Should you ever find yourself in the situation of receiving a notice that you may be eligible for a class-action lawsuit, take the time to review it carefully, says Tumin. “Claims forms can be a hassle and the benefit is often small in terms of money victims sometimes see,” he said. “But, you can look at it as an indication that a megabank did something wrong and you were able to have a little bit of justice.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Dawn Papandrea |

Dawn Papandrea is a writer at MagnifyMoney. You can email Dawn here

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Annuity vs. CD: What’s the Difference?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Saving money for the future while growing your nest egg is the core of all financial planning. Developing a portfolio of investments that ensures a strong financial future can be complex, however. Between savings accounts, stock options, bonds, individual retirement accounts (IRAs) and 401(k)s, there’s a lot to consider.

Among these great options are also annuities and certificates of deposit (CDs). Let’s take a closer look at these two products, define how they function and help you decide which one you should choose as part of a solid savings plan.

Annuity vs. CD: What is an annuity?

An annuity is a financial contract between you and an insurance company, primarily used to save for retirement. Annuities assure retirees a fixed stream of income. When working with annuities, you make contributions in a lump sum or through a series of payments. From there, the insurance company will disburse periodic payments beginning at a predetermined date, whether immediately or years down the line.

Annuities are usually sold by an insurance company, which takes your money and invests it for you. Your funds accrue interest over time and grow tax-free, which means you won’t have to pay any taxes on gains from the investment until you withdraw the funds. When you take distributions from an annuity, they are taxed as regular income.

There are three types of annuities — fixed, indexed and variable — and two ways to receive distributions — immediate annuities and deferred annuities. Immediate annuities begin paying you benefits as soon as you fund them, while deferred annuities don’t begin distributing benefits until a future date. Both varieties pay out on a regular basis, and some offer death benefits. If you die before the total annuity has been paid out, a beneficiary may continue to receive payments.

Fixed annuities

Fixed annuities guarantee a minimum interest rate and a fixed number of payments over time. The annuity provider is required to make these payments in a specific dollar amount. You’ll be able to agree to receive payments over an agreed-upon amount of time — 15 years, for example — or for the duration of your lifetime or a beneficiary’s lifetime. Fixed annuities are regulated by state insurance commissioners.

Indexed annuities

Indexed annuities distribute payments to you based on the performance of a stock market index, typically the S&P 500. The annuity provider delivers a payout minimum determined at the time investment, no matter the performance of the stock index over the course of the investment period, plus additional amounts when the index performs well. When the index doesn’t perform well, all you get is the minimum payout. Indexed annuities are regulated by state insurance commissioners.

Variable annuities

Variable annuities offer greater flexibility than fixed or indexed annuities. You may choose to invest your payment into a range of investments, most typically mutual funds. Your payouts and payment periods will differ based on the size of your investment, expenses incurred and investment option’s performance over the course of the investment period. These are regulated by the Securities and Exchange Commission.

Annuity vs. CD: What is a CD?

CDs are offered by banks and credit unions, primarily to save money for short- and medium-term goals. With a CD, you agree to place a fixed amount of money into an account for a set amount of time, called a term, lasting from three months to 10 years. Each financial institution offers different rates for CDs, and the interest paid out generally compounds over the term of the CD. The financial institution pays interest on the CD principal, but the interest is only accessible and paid out to you once the term of the CD is complete.

After the term of the CD ends, you withdraw your funds plus the interest that has accrued. You can purchase CDs through federally insured banks, which insure the investments up to $250,000. This Federal Deposit Insurance Corporation (FDIC) insurance combined with the steady interest growth make CDs one of the safest options for those looking to save for their future.

Annuity vs. CD: What are the differences?

There are key differences between annuities and CDs. First and foremost, these two financial instruments pay out very different amounts on very different payment schedules. When investing using annuities, you’ll have the option to receive regular payments over time, which may include part of the principal investment as well as interest earned. In all but a few cases, CDs pay out principal and earned interest only at the end of the term, once the CD matures.

CDs and annuities are insured differently. The FDIC insures CDs up to $250,000, while fixed and indexed annuities are regulated by state insurance commissions. When buying an annuity, you must research whether your state has a guarantee association that provides some level of protection for when an insurance company in that state fails. Also note that variable annuities are considered to be a security, and as such, are regulated by the SEC. Variable annuities are covered by the Securities Investor Protection Corporation (SIPC).

You need to consider the differing tax treatment of annuities versus CDs. While interest from both investment vehicles are taxed as regular income, the principal from a CD is never taxed. However, with annuities, both the principal and interest are taxed, even when purchased with pretax funds out of an IRA. A set amount of an annuity’s payout that was purchased with after-tax dollars is taxed as regular income, while another portion is not subject to taxes. Annuities offer tax-deferred growth, however, which means you won’t have to pay any taxes on growth until you withdraw the money.

Breaking Down Annuities vs. CDs

AnnuitiesCDs

Payment

Receive portion of principal investment and interest in regular payments over time.Receive a single payment of principal and interest once the CD has matured.

Insurance

Varies on a state-by-state basis, depending on the rules of each state’s guaranty association.Insured by FDIC up to $250,000.

Taxation

Portions of both interest and principal may be taxed as regular income.Interest is taxed as regular income. Principal is never taxed.

Annuity vs. CD: Which should you choose?

Because individuals usually use CDs for terms ranging from six months to 10 years, CDs are a strong option for those who are pursuing short- or medium-term savings goals. People making longer-term plans for retirement down the line, however, may want to do more research on investing in annuities. Because these investments give you the option to receive steady payments for a fixed amount of time, say 20 years or until you pass away, they can act as a good option for retirees who would like to receive regular income payments throughout their retirement. Annuities can act as a partial substitute for income once you’ve retired from the workforce.

Bottom line

When planning for your financial future, you’ll want to consider a variety of investment opportunities, including both annuities and CDs. Everybody’s financial situation and saving goals are unique. Are you looking to invest now to receive fixed payments over the course of 20 years once you’ve retired? Or are you hoping to earn some interest over the course of a year or five in a more secure fashion? Perhaps you’re looking to do a bit of both.

Most importantly, keep doing research. When evaluating your investment portfolio, think through the pros and cons of annuities and CDs, what they have to offer and how they fit into your long-term goals.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Anne Bouleanu
Anne Bouleanu |

Anne Bouleanu is a writer at MagnifyMoney. You can email Anne here