European law dictates that banks must open an account for an EU citizen, but things are trickier for those from outside of the European Union moving into it and for EU citizens moving outside.
The biggest challenge when it comes to opening a bank account overseas is that the expat’s credit score will not be travelling with them so it means a bank in their new country does not know anything about their creditworthiness.Fortunately, most banks overseas do not require a credit check before opening an account.
The next biggest challenge for an expat moving overseas is that their credit rating will not be available for them when they return home either. This may cause problems accessing credit.
A good credit rating establishes an expat’s creditworthiness and determines the potential of the customer defaulting on a debt. The credit score will take into account a person’s payment history, their credit account history as well as recent enquiries, outstanding debt and types of credit.
Credit ratings vary from country to country, which means that when the expat moves overseas, they do not have a credit rating.
This means an expat must then build their credit score in their new country. In the case of the UK, a consumer credit report is held for three years, so an expat returning after this time may be surprised that they have no previous financial history whatsoever.
The best way to establish a good score is to take out credit and maintain regular repayments so that potential lenders can see how the borrower handles money and, more importantly for them, how they repay it.
For those moving to the UK, and in many other EU countries, the big banks now offer basic bank accounts which have a limited function but do enable the payment of salaries and the paying of bills. Again, these accounts do not require a satisfactory credit rating.
For an expat without a credit rating moving overseas, it’s worth carrying out some research because there may be a basic bank account available in their new country and also the option of having an account with more functionality. The expat may, however, need to make a fairly large initial deposit to access this type of account.
It’s also worth checking with banks that have a presence in the UK that are based in the expat’s new country since the staff there will be able to offer more information and help to set-up a new account which will be active before the expat moves abroad.
More importantly, the bank will be able to conduct a credit check and produce a credit report on the expat’s creditworthiness in their home country before they actually leave. This may enable them to access a bank account with more functionality and which has lower charges because their credit rating has been established.
For example, an expat moving to Spain could access most of Santander’s credit products if the bank had access to the expat’s UK credit report. This isn’t always a guaranteed process and expats planning to move there should not rely on it.
It’s important when moving overseas to set up a bank account as soon as possible to receive and pay money but also to reduce the amount being spent in foreign exchange transaction costs when it comes to transferring cash to and from a UK bank.
For expats moving to Australia, a popular destination for Brits, then they need identification to open an account such as a passport or driver’s license, proof of address and it would help to have a reference from their UK bank.
The major banks in Australia are interested in attracting new customers and offer a wide range of services and assistance to expats. Some banks will also need bank statements from the previous three months – while this doesn’t establish an expat’s credit rating, it will show a bank how they handle money.
However, expats in most countries will struggle to get a credit card soon after they arrive because they don’t have a credit history, though this can be overcome by establishing various transactions to build a credit score, which will take a few months.
One attraction for moving to Australia is that it is possible to get a credit card without a credit rating, particularly if the expat already has a job arranged since an application may be judged against the expat’s proof of income.
For expats moving to Spain there are non-resident as well as resident bank accounts to choose from, and again the expat should do their research and provide the necessary documentation when opening an account, which is basically offering their passport and proof of address.
The difference with many countries offering resident and non-resident bank accounts is that the charges can vary significantly. This means their bank service becomes more expensive than the expat has come to expect; some accounts may incur a monthly fee and still have additional transaction charges.
Expats heading to the Middle East will also find they can open a bank account without a credit rating. For instance, in Saudi Arabia they will be able to open an account with their passport, their Iqama residency permit and a letter from their employer stating what their job is and their salary.
It should also be appreciated that the banks in the Middle East do not pay interest on credit balances and they don’t allow customers to accumulate debt since non-repayment is a criminal offence which could lead to imprisonment.
For expats working in Islamic countries looking to earn interest on their balances, it’s a good idea to have an international or offshore bank account that will pay interest and the expat should transfer money to these accounts on a regular basis.
Offshore bank accounts are a sound choice for expats, particularly for those who move around regularly, and these are available as either savings or current accounts.
There aren’t that many accounts to choose from and they are based outside of the UK and usually located in the Isle of Man or the Channel Islands. They are covered by a financial compensation scheme so the expat’s money will be safe up to a set limit and money can be transferred to another bank account easily.
It also helps that an expat maintains their current bank account in the UK and makes payments from it often to maintain their credit history and ensure that when they need to access credit, such as getting a new mortgage, their credit score will fairly reflect their financial activity while they lived and worked overseas.
One important aspect is to remain on the UK’s electoral roll, which has a big implication on a credit score, so remaining as a registered voter could prove crucial.
US expats will find similar problems when they return home. A lack of credit activity and not having a registered address means it will be difficult to obtain loans or new credit cards. It may also be very difficult to open a bank account.
For those moving to the UK, the banks have created a one stop shop to help create a bank account that will meet most expats’ needs, though the better services tend to be for higher earners.
Some countries enable bank accounts to be opened online ahead of time, so that they are in place when the expat moves to their new country. Expats moving to Belgium, for instance, will find their banking system is particularly good in this regard.
Also, the Bank of New Zealand allows this online opening process for those expats who can meet the criteria and they can deposit money before actually moving there. Once in the country, the expat will need to go into a branch to access their funds and to obtain a bank card for use at cashpoints or ATMs.
When an expat moves overseas they really need to consider whether they want an international bank account or a local one instead. There are advantages and disadvantages to both and the potential will be down to the expat’s own personal circumstances.
On the one hand, international banks will be carrying out credit checks since the account is created in their home country and there will be the usual offering of current, savings and investment accounts for expats regardless of where they live in the world.
For anybody interested in an international bank account then the likes of Barclays, HSBC and Citigroup offer a range of banking services and branches around the world along with an impressive range of services and products tailored for expat needs.
One of the big advantages for running an international bank account is the expat will not be running up large transaction and transfer fees when transferring funds between their current and foreign bank accounts. It should be appreciated that the expat will probably be paid in foreign currency which will need to be exchanged into their home currency.
It’s for this reason that most international bank providers will offer a savings account to be held in a different currency than the one the expat is paid in. For example, the expat could be working in the UAE and be paid in dirhams, then transfer money into a dollar or sterling account to help protect against currency fluctuations.
Also, all the transfers will be carried out instantly if the accounts are with the same bank without taking several days for money to clear between accounts. Another attraction is having access to free ATMs and not having to pay charges for using cash machines that are ‘out of network’.
Perhaps the biggest downside for having an international bank account is most banks will require a minimum balance or holdings which vary hugely so careful research needs to be undertaken.
There are benefits to opening a local bank account and while many banks will not be looking for a credit rating it’s always worth checking that the bank is well established and is not going to go bust at any point in the future.
Also, expats should check that their new overseas bank account enables international transfers to their home country and does not charge excessive amounts for doing so. An account with access to internet banking will also be of major benefit, as will the use of a Visa or MasterCard to buy goods and withdraw cash from ATMs.
Essentially, for expats wanting to know how to open a bank account abroad without a credit rating it should be appreciated that most countries do not expect to carry out credit checks. However, they do require that the new client has a link to the country which is why they need proof of address, identification and it helps to have a letter from an employer and also previous bank statements.
Expats also need to research carefully the various bank accounts on offer and the charges they will incur when using them to find a reliable and low cost banking solution while living and working overseas.