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After a European’s first or second vacation visit to Florida, the above question frequently arises. What can an American bank do that my house bank in Europe cannot? What are the advantages? What are the disadvantages?
If you as a foreign national expect frequently to vacation to the US, especially to the same area, if you expect to buy any type of real estate or make any substantial financial investment, or if you have any desire to regularly reside in the US more than four months out of the year requiring a non-tourist visa status, then it makes absolute sense to open that US banking account.
The American banking system is extremely competitive and is in the throes of some very dynamic changes. Over the last ten years the number of US chartered banks has reduced itself through mergers and acquisitions from 14,000 to now about 10,000. In the next 10 years the number of banks is very likely to be reduced to under 7,000. Moreover the character of a typical US bank is changing as quickly as the strict regulators and legislatures will allow.
Banks of any size are using technology and transforming themselves into full service financial institutions or “universal banks" with which you as a foreign national are probably more familiar. The vast market for financial services in the US is continually being divided and re-divided with all types of banks looking very closely at their markets and the costs of delivering those services to those markets. In most instances in the US convenience is usually “king.” Yet even in this environment it is often hard for an American to make the best choice.
Every foreign national will bring his or her unique circumstances to their US bank relationship manager, be it someone at the end of an 800 number or an experienced and multilingual private banker. Each foreign national will have their own objectives to fulfill but most will usually center on the following:
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The US banks have often a large demand for information from their prospective clients. Much of this is legally required from internationally enforced “know your customer” requirements or comes from sound banking policies practiced by prudent bankers anywhere. One has to grow familiar with these requirements, understand what is done with the information submitted and what the consequences are of submitting incorrect or incomplete information. |
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One must also understand just how US dollar accounts in the US work. Overdrafts are handled quite differently in the US and what a US bank offers as overdraft protection must be thoroughly understood. Nevertheless most people still write a check to pay each of their monthly bills. Writing a bad check can have very negative implications in the US and the risk and consequences of writing a bad check must be weighed in any account decision. |
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In general the larger the balance in your account the more interest you can expect and the fewer fees you should pay. Furthermore with very large balances one should expect a private relationship manager to advise and assist you in your US financial affairs. What is the ideal balance amount for you? |
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The US is noted as a credit based society. One should try to establish a US credit history as soon as possible. In the US a credit worthy person is one who has shown that he can assume debt, however modest, and properly service that debt. If you have never had any debt in the US, your creditworthiness is unknown which unavoidably classifies you in a high-risk category. Foreign nationals are often caught in a vicious circle. They cannot get credit because they have no credit rating. But they cannot get a credit rating without getting and using credit. Talk to your banker about this problem. Accounts with local department stores, utilities and phone companies can also help solve this irritating problem. |
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A regular visitor to the US should have a primary goal of matching his or her anticipated US dollar expenses to a source of US dollar income. Recurring and small foreign exchange requirements are too expensive regardless of the prevailing exchange rate. Thus one should first get familiar with the many investment opportunities in investing your liquid dollars and then start on a longer-term investment strategy. Naturally one has to consider your US and home country tax requirements for income as well as inheritance. |
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If you open an account at a chartered bank in the US and declare to that bank (with a mandatory form W-8) that your tax residence is outside of the US, you are likely to qualify for a special interest exemption. In these instances the IRS does not tax the bank interest that might accrue to your bank account. It is very important that this untaxed interest be classified as “bank” interest not dividends from a money market fund which are normally taxed. Moreover the amount of this untaxed interest is likely to be made available to your home country upon their request in accordance with the respective taxation treaty and taxed there. Consultation with an experienced international tax advisor is recommended. |
Anyone would need help to make the most appropriate financial decision in these matters. Misinformation is often the rule and not the exception. Language difficulties can further complicate matters. You must find reputable legal, tax and financial advisors who understand your unique international situation and on whom you can rely. |