When Do You Need an International Bank Account?

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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.
  • 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.

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James Ellis
James Ellis |

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

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