Administrative Challenges Abroad

Move Abroad, Stay Abroad

American friends who live overseas fly back to the United States next month to do their taxes. Their tax adviser had filed an extension, so Oct. 15 became their new deadline.

Other friends had to go back the States to check on rental properties they own. Tenants had moved out, and our friends wanted to supervise the renovations.

Others had to go back to the U.S. to take care of banking problems. Their credit union had started prohibiting cash transfers abroad.

What do these friends have in common? They’re interrupting their lives, and spending money and time, to work on day-to-day problems in the United States.

My advice: Move abroad, stay abroad. Take care of your day-to-day problems from afar, instead of traveling back.

Admittedly, taking care of business from 4,000 miles away can prove difficult. Our friends who return to the U.S. for tax time have used the same tax adviser for years. They own residential property in three states and file various state tax returns for rental income. She’s German, he’s American, which complicates estate planning. I suspect they have a great deal of money. So perhaps their taxes have become so complicated they need face time with their adviser back in the States.

But most of us, most of the time, can improve our lives by attending to business from afar.

Here, following, are tips on how to do that, on how to save time and money by avoiding trips back “home.”

First: Get a Schwab One account.

In most cases you’ll want to fund your daily cash needs overseas via ATMs. A Schwab One brokerage account offers the best deal. The Schwab One cash card gets you cash on the spot from ATMs around the world, with a good exchange rate, and no foreign transaction fee. Schwab even reimburses the ATM fee charged by foreign banks, without adding fees of its own. (You can sometimes avoid that ATM fee by going into the foreign bank, rather than using the machine outside. But most countries, including France, Argentina, and Brazil, typically refuse to offer this service.)

In Thailand, for example, withdraw 10,000 baht from an ATM and Schwab charges you only US$320 at today’s rate. Plus, Schwab reimburses you for Thailand’s US$5 ATM charge. If you use a Bank of America (or Citibank or Chase or similar) cash card, Bank of America charges you the US$320, plus the US$5 Thailand ATM charge, plus a 3% foreign transaction fee, plus a Bank of America fee (sometimes). At a minimum you pay US$335 instead of US$320, or US$15 more. If you use your ATM card four times a month you’re paying US$60 more every month.

That’s more than US$700 a year. And you get nothing for it.

Fidelity’s Cash Management account offers the same deal as Schwab, although Fidelity may charge a 1% foreign transaction fee.

My advice: Set up both Schwab One and Fidelity Cash Management accounts before you move abroad. Close your dinosaur bank account at Wells Fargo or JP Morgan or wherever. Those big banks rip you off every time you use them.

Make sure you set up online access for your new Schwab and Fidelity accounts. That way you get to see your transactions right away. Online statements mean that much less paper getting lost in the mail.

Vicki and I prefer to withdraw cash from ATMs and use that cash rather than a credit card for daily needs. Using cash reduces our exposure to credit or debit card fraud. Which brings me to my next point…

Second: Forget credit cards.

These days credit cards expose you to so much risk, hassle, and cost, they’re rarely worth it.

Remember the difference between a credit card and the debit card (often called a cash card) you get with Schwab One or Fidelity Cash Management. A debit card charges your account directly. Use debit cards at ATMs. A credit card lets you pay at the end of the month, and you can pay only part of the balance if you wish to expose yourself to exorbitant interest rates. Never use credit cards at ATMs, your bank will really stick it to you.

To cut down on losses from fraud and theft, banks have changed the way they do business with credit cards. Cardholders like you and me are no longer valued customers. Now we’re viewed as potential losses. Forget customer needs, banks figure. Cut the losses.

So credit card issuers frequently cut you off either before or after using your credit card abroad. Even if you call in advance, even if you tell them you’re going to Malaysia, they’ll cut you off after you use the card in Malaysia. Or worse yet, they’ll fail to authorize payment at your restaurant in Malaysia.

If you’re in France and use your card online to order something from Amazon in the United States, they’ll cut you off. After all, you can’t be in France and the United States at the same time. Credit card software apparently has never heard of online purchasing.

In my experience credit cards oblige you to spend large amounts of your travel time trying to get through to their call centers. Forget it.

Virtually all credit cards, except some with high annual fees, charge a 3% foreign transaction charge. Capital One Bank has become famous as the only bank routinely waiving the fee. But in my experience Capital One requires that you call either before or after nearly every overseas charge. I’m exaggerating here. I know people who say that CapOne presents no problem as long as you call them every month or so. But I’m unwilling to call that often. I dislike calling from abroad, I believe Skype tends to be insecure when using public WiFi in a hotel, for example. Yet CapOne wants you to call, period.

Conclusion: Use cash from ATMs rather than credit cards when traveling abroad. That cuts down on exposure to fraud, hassles, and cost. Keep two credit cards for emergencies, for use online or when traveling in the United States or other country where the card was issued.

Third: Do your own tax return and file online.

If you must file a U.S. return, consider Turbo Tax, Tax Slayer, MyTax, TaxHawk, H&R Block’s free online tax return software, and so on. Ask a friend or adviser which might be best for you. If you’re unsure how to do your own returns or if your return is complicated, then, yes, you may need professional help. But try to get that help overseas from a tax professional who lives where you live, rather than in the United States.

By doing your return online you’re sure the math is correct. Make a small change at the last minute and the math gets updated automatically. You get free storage of your return, which means you never have to print the horrible thing. You get a confirmation that your return was filed and accepted by the IRS. (“Accepted” here means the IRS received your return and put it in the system, NOT that they’ve approved the substance of the return.)

Fourth: Arrange for automatic deposit of Social Security in the United States.

If you’re already receiving Social Security before moving abroad, you’re already getting your benefit deposited directly to your U.S. bank account. Keep it that way. If you apply while overseas, use a U.S. address and a U.S. bank account to insure automatic deposit. Getting those checks overseas means working through the local U.S. consulate, always a huge waste of time, energy, and mental well-being.

Once you confirm online that your Social Security benefit has hit your bank, use an ATM overseas to access the cash.

More on receiving Social Security abroad

Paul Terhorst

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