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Top 3 banks and credit cards for US expats

John Ohe / Hola Expat

Tired of racking up transaction fees when withdrawing money abroad? Take a look at this quick list for US expats living or traveling abroad.

Top 3 banks and credit cards for US expats

(Photo: Getty Images / El Comercio)

As a tax accountant to US expats, I am regularly asked about bank accounts and credit cards. Most often, the main discussion point has to do with the foreign transaction fees that comes into play when using a US debit or credit card. Many banks charge a fee when you withdraw local currency at an ATM. It can range from US$ 1 to US$ 5 per transaction, and sometimes 1%-3% on top of the fixed dollar amount. Similarly, foreign transaction fees are assessed when using a debit or credit card to make purchases at a store or restaurant. As a result, one can rack up hundreds of dollars in fees per year.

Needless to say, choosing the right bank can mean big savings for full-time expats and people traveling abroad over an extended period. Aside from foreign transaction fees, there are additional factors to consider when evaluating a bank, including:

Exchange rate used to convert foreign transactions to USD;
Wire transfer charges;
Monthly account maintenance fee;
Minimum balance requirement

Our research has identified three banks that clearly stand above the crowd.

Top 3 Banks for US Expats

1. Capital One 360: The best features of this bank account is no foreign transaction fee when using an ATM overseas (however, the local bank may charge a fee). Capital One utilizes very competitive exchange rates, much better than changing money at a local bank. There is no account maintenance fee and no minimum balance requirement. Capital One credit cards have similar benefits (read below).

2. Charles Schwab Bank: Like Capital One, Schwab does not charge a fee when using a foreign ATM. Almost incredibly, Charles Schwab Bank offers reimbursement for ATM fees charged by the local bank. There is no account maintenance fee and no minimum balance requirement. To open a Schwab bank account, however, one also needs to open a brokerage account – so there is an additional step involved. The only negative is that international wire transfers are not allowed.

3. HSBC Bank: This bank’s value proposition is quite different. Whereas Capital One and Schwab are basically online banks, HSBC has a huge global footprint. Therefore, it can offer its international-oriented customers the ability to open bank accounts in multiple countries. Wire transfers between HSBC accounts are free. In short, HSBC is a good pick if one needs a bank account in a foreign country where HSBC operates.
*In 2013 HSBC in Peru changed their name to Banco GNB.

Now let’s move onto credit cards. The criteria that we used in our assessment include:

Foreign transaction fee;
Exchange rate;
Account maintenance fee;
Rewards

In our opinion, there are three credit cards that are definitely worth considering.

Top 3 Credit Cards for US Expats

1. Chase Sapphire Preferred: The best feature of this credit card is the rewards program. Kiplinger’s Personal Finance named Chase Sapphire the best credit card for flexible travel redemption (July 2016). There are a lot of bonus points one can earn within the first 3 months of opening an account. Importantly, there are no foreign transaction fees. The big negative with this card is the annual fee. There is none during the first year. However, Chase Sapphire charges $95 per year thereafter.

2. Capital One Quicksilver: No foreign transaction fee. No annual fee. The rewards program is quite good (although not as good as Chase Sapphire). Fraud coverage is excellent (zero liability if the card is ever stolen or lost). The Quicksilver card is available only as a MasterCard.

3. Capital One VentureOne: The pros are basically the same as with the Quicksilver card. The VentureOne card is available only as a Visa.

To recap, choosing the right bank and credit card relationships can translate into big savings. For the average expat, Capital One seems to be a good choice for both banking and credit card. Depending on an individual’s particular situation, however, it may be more advantageous to mix and match (e.g., Schwab Bank with Chase Sapphire).

For information on personal finance and tax-related topics, visit us at: holaexpat.com.

This article was written by John Ohe – IRS Enrolled Agent and CFA. John is a partner at Hola Expat, a firm that specializes in tax services for U.S. expats.

If you would like to submit a question, email: info@holaexpat.com.

Disclaimer: The answers provided in this article are for general information, and should not be construed as personal tax advice. Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved.

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