Tracy and my retirement system requires pension payments be made into an US bank, so we have a logistical issue of how we get funds to France. Also, being on a fixed-income, we want to get money to us in France in the most cost-effective manner possible. Everyone has seen bank service charges and ATM fees quickly add-up over time, bleeding funds from bank accounts that we would rather keep for ourselves.

Contrary to my original expectations before we moved overseas, there are no “global banks” in the US.  There are international banks like Barclays, HSBC, Halifax, UBS, and Deutsche Bank with branches in the US, but you cannot deposit money in an US branch of an international bank and simply withdraw funds in another country without fees. Banks in the US are state and federally regulated and are separate legal entities from their European home branches.

1.) Currency exchange before leaving. When we still lived in the US and would travel internationally, we would pre-order foreign currency ahead of time so we would have the local money when we arrived at our destination. Our US bank is Bank of America and its online banking web site has a link to easily order foreign currency.  Larger orders of foreign currency would be shipped and held for pick-up at the local bank branch. The exchange rate is good and a request took just a couple of days to fill.  Doing the exchange before leaving let us have the local currency in our pocket for immediate needs like eating and transportation. Carrying more than $10,000 by a family into or out of the US has to be reported to US Customs and Border Protection. (Currency / Monetary Instruments – Amount that can be brought into or leave the U.S.)

2.) ATM.  If you are already in Europe, one of the easiest way to obtain local currency is at a bank’s ATM machine.  (Make sure before to leave on your trip you give your bank a travel notification that will be making purchases abroad so the bank won’t disallow foreign transactions because of “suspicious activity.”  Also be aware that many international ATMs accept only a four digit PIN, the PIN may not be able to start with “zero,” and often the keypads will not have letters – only numbers.) Most US banks have specific “partner institutions” abroad that if you use their ATMs you can minimize fees.  For example, Bank of America’s current partner institution in France is BNP Paribas.  Bank of America’s foreign transaction webpage explains costs in greater detail:

“When you use a foreign ATM, you could be charged a variety of fees, including non-bank ATM usage fees, ATM operator access fees, and international transaction fees for conversion to U.S. dollars. One way to limit such fees is to use your Bank of America ATM or debit card at one of our international partner ATMs. This enables you to avoid the Non-Bank of America ATM $5 usage fee for each withdrawal, transfer or balance inquiry as well as the ATM operator access fee. Keep in mind that when you use your debit card to withdraw money from an international ATM, Bank of America will assess an international transaction fee of 3% of the converted U.S. dollar amount. Foreign ATM operators may offer to do your currency conversion for you, but they may charge a higher fee for conversion. You can refuse the foreign ATM conversion and be assessed the 3% Bank of America international transaction fee instead.”

ATM fees at a non-partner institution can add-up, but are still much more cost-effective than the rates at currency-exchange businesses or exchanging cash at a hotel desk. The currency-exchange businesses are notorious for poor exchange rates, handling fees, and very expensive commissions. A loss of up to a 1/3 of the value of your US money at a currency-exchange business is not unusual. Do not bring US cash to Europe with the intention of exchanging it at a local bank. When our son Casey recently arrived in Paris with US cash, he attempted to exchange US dollars at a couple of local banks.  The banks all referred Casey to currency-exchange businesses (with the resulting loss of value due to poor exchange rates and high commissions.)  The Paris banks only exchange foreign currency for their account holders. Even when I took the US dollars to a Paris branch of Tracy and my French bank we were told we had to go to a specific bank branch to exchange the funds. Once at that branch we learned the US cash had to be deposited into our French bank account and would be unavailable for withdrawal for week. I wondered if we could have exchanged the US currency at all if we weren’t in a major city like Paris.

3.) Credit and debit cards. Major credit and debit cards are generally accepted throughout Europe, while not always at small shops and cafes which may be “cash only” businesses.  It’s always smart to keep some cash in your pocket to avoid embarrassment. US credit card companies often impose a surcharges on foreign transactions and conversation fees for purchases made abroad.

While US cards nearly always work in European ATM machines, there is sometimes the issue of whether or not a business can accept an US “swipe and sign” credit card because the “chip and PIN” “smart” EMV cards have been the norm in France for 20 years and the rest of Europe for almost as long. Some European businesses point-of-sale devices, lack the ability to “swipe” a current US credit or debit card. Tracy and I will normally use our French cards for European purchases and US cards for US businesses to minimize foreign transaction fees. US banks and credit card issuers have started to issue “chip and sign” “smart” debit and credit cards at the customer’s request.  We have updated all our US credit and debit cards (Visa, MasterCard, American Express) to “chip and sign” “smart” cards to broaden where our cards can be accepted in Europe. The European “chip and PIN” cards from US issuers will be coming several years in the future as US businesses have to first upgrade their infrastructure to accept “chip and PIN” cards.

4.) PayPal.  We have occasionally used PayPal to transfer money “person-to-person” to our adult children in the US.  We have found it convenient to send money by PayPal so that an adult child can access funds almost immediately.  (i.e. Payday is tomorrow, but a car tire needs to be replaced today.)  It is simple for the recipient to transfer cash from a PayPal account over into their checking account.  There is no delay compared to mailing a check from France to the US or waiting more than a week for a bank transfer to process.  There are zero fees for us to send money using PayPal, but the fees for receiving money from one US account to another US account, up to $3,000, is 3.4% plus $0.30.  So sending $100 on our end will be $96.30 when it arrives at its destination.  We have also used PayPal to transfer a “first month” deposit to a landlord in France. 5.) International Wire Transfer.  Tracy and I have been using wire transfers to move more substantial funds from our US bank to our French bank account.  (Getting A French Bank Account.) International bank wire transfers are reliable, safe, and in our experience they takes 7 to 10 days to process.  Bank of America’s Online Banking web site has all the links to transfer money by wire to an oversea bank account. To set up the first wire transfer we had to request from our French bank its “Society for Worldwide Interbank Financial Telecommunication – Bank Identifier Code” (its SWIFT-BIC number) and “International Bank Account Number (its IBAN number)” to correctly receive the money in our French bank account.  After the initial wire transfer our Bank of America web site retained the SWIFT-BIC and IBAN information for future transfers. As additional security for transfers larger that $1,000, Bank of America will also provide two-factor authentication with a SafePass card.  The SafePass card will generate a six-digit one time use code number that is used to authorize an online wire transfer request over $1,000.  With Bank of America there is a fee of $35 to send a wire transfer.  At the “other end of the wire,” BNP Paribas will charge us €18 to accept the wire.  Depending on transfer rates, there is a cost of about $55 to send yourself money with a wire transfer. Built into the wire transfer is an additional cost because the bank uses the premium currency exchange rate which is much less advantageous than the mid-market, interbank exchange rate you see posted to currency exchange rate sites like XE or on Google.  That can add up to a 5% additional cost to a transaction because of the bank’s premium “adjusted exchange rate.”  Our goal was not to have transfers every month so we can minimize the transfer fees.  Like visiting the ATM machine, it is better to pay for only 4 or 6 transfer fees a year rather than paying for a monthly wire transfer.

6.) Peer-to-Peer Transfer  While we have had no problems with the wire transfer, we are always looking for ways to reduce our transfer costs further. We have started using London-based financial company TransferWise as our P2P money transfer service in the place of a bank wire transfer.  The process is simple to perform online and funds have been available for us within five days rather than the 7 to 10 we previously had with bank wire transfers. TransferWise is sometimes referred to as “the Skype of money transfers” because one of its founders, TaavetHinrikus, who was one of the original members of the Skype development team. TransferWise has been providing Peer-to-Peer money transfer services since January 2011. TransferWise is a registered money service business with the British Revenue and Customs department and fully authorized by the UK Financial Conduct Authority (FCA) as a payments institution.

UK newspaper the Guardian named TransferWise as a “A Foreign Currency Exchange Service With A Twist – It Doesn’t Exchange Any Money” and a top innovator for 2015.

“TransferWise is making inroads as a foreign exchange service, with a twist: it doesn’t exchange any money. Instead, it pairs people who want to get rid of a currency with those who want to get hold of it. If Alice in the UK sends £10 to Bob in Ireland and at the same time Charlie in Ireland sends €12 to Diane in the UK, then the money doesn’t cross any borders at all; Charlie just sends his money to Bob, and Alice sends hers to Diane. That lets the firm slim its fees down to a minimal level, charging less than £5 to send £1,000 overseas.”

TransferWise eliminates currency conversion fees and international transfer fees for clients.  The start-up company has $58 million in investors as of January 2015.  In its first four years of operations, TransferWise has transferred roughly $4.5 billion through its platform saving users about $200 million in banking fees usually incurred when moving money abroad.

With a $2,000 transfer we save the $35 fee sending a wire transfer from our US bank account, the € 18 fee receiving the wire into our French bank account (about a $55 saving), and we get the midrange exchange rate from TransferWise rather than the lower “bank adjusted” exchange rate which is a hidden cost to sending a traditional wire transfer.  TransferWise charges €1 or 0.5% (whichever is larger) in an equivalent amount in the customer’s currency. TransferWise makes its profits with exchange volume, reduced infrastructure, and avoiding the fees inherent in international transfers. And it is a growing business model, there are now other P2P currency exchange companies including CurrencyFair, MidPoint, Kantox, and PeerFX.

Any other issues?

Traveler Cheques.  Traveler Cheques are pretty much obsolete and it’s difficult to find businesses that want to accept them.  ATMs and debit cards have replaced the Traveler Cheque in Europe.  I understand Traveler Cheques can still be useful in visiting China.

We keep a close eye on Foreign Account Tax Compliance Act (FATCA) issues. Congress passed FATCA in 2010 to deter tax evasion by making it more difficult for U.S. taxpayers to conceal assets held in offshore accounts by international shell corporations.  The law requires foreign financial institutions to report to the Internal Revenue Service about their US clients’ accounts.  The unintentional side effect of the law has been that rather than deal with the costs, additional paperwork, and potential penalties by the US government, many European banks have elected to close the accounts of US expats. (Time Magazine: Swiss Banks Tell American Expats to Empty Their Accounts, The Guardian: ‘I was terrified we’d lose all our money’: banks tell US customers they won’t work with Americans, Forbes: 10 Facts About FATCA, America’s Manifest Destiny Law Changing Banking Worldwide.) So far BNP Paribus is keeping us as customers and providing good service for us.

Recently, there has been several major international banking scandals which may impact us and other expats with the resulting new banking regulations. (The Guardian: HSBC files show how Swiss bank helped clients dodge taxes and hide millions.  Business Insider: Now RBS employees need to be worried about the Swiss tax evasion probe.)

That is a peek at the complexity of our financial lives as expats.  It’s a “moving target” for us trying to stay on top of the rapidly evolving global financial picture.