One thing I may have slightly miscalculated in planning for our Family Gap Year in South America is just how important it is have a plan to access your money. And to have a back-up plan, and also a back-up to the back-up. It’s not easy to move cash to the far corners of the planet. But it sure is exciting! Whoever said banking is boring? Here are our adventures in banking abroad:
To be honest, I don’t think we had much of an initial plan. We have traveled to South America frequently, and we never had big problems accessing money. You bring plenty of cash, and then you charge as much as you can on your credit card, and pay the bill when you get back home. If we ran out of cash, we would withdraw from an ATM, or in a worse-case scenario, get a cash advance on our credit card. No big deal.
But travelling for a few weeks is completely different from spending a whole year abroad. We’re certainly not going to carry a whole years’ worth of cash on us.
And Bolivia is not like other places. Credit cards are only accepted at a few places, like high-end restaurants. Here, cash is king.
If you travel through Europe or major international hubs, you can find branches to large megabanks, like Citibank or HSBC. If you open an account at one of these banks in the U.S. before you leave, you can then access your money at many locations during your travels.
But, in the rest of the world (Latin America, Africa, or most of Asia), that doesn’t work. Large international banks are virtually non-existent, outside of the major cities. The closest Citibank to our location is about two days away, by bus. And you need a passport.
The ATM Solution
So, long-term travelers often access their stash back home by withdrawing from local ATMs as they go. As long as you can find an ATM that participates in the large international networks (Plus, Cirrus, Maestro), you should be good to go. The good news is that ATMs are fairly common throughout the world.
Of course, ATMs have limits. And they also can carry massive fees – especially for an international withdrawal – and even more so for an international withdrawal in a foreign currency.
When we first started withdrawing from ATMs, we saw our withdrawals were costing us about 3% in fees. Ouch! As a frugal living lover, I object to that on principal. Over a whole year abroad, we could easily spend a thousand dollars just in ATM fees!
Opening A Foreign Bank Account
If ATM fees are outrageous, international money transfers like Western Union are even worse. So, the obvious solution then is to open a local bank account where we’re staying in Bolivia. If you have a local bank account, you should in theory be able to wire yourself money from your U.S. bank.
But believe it or not, foreign banks around the world don’t fall over themselves to open accounts for American expats. I’m sure there are exceptions, and it mostly would depend on what country you are in. But, many banks in Latin America refuse to open accounts for Americans.
That’s in part thanks to a whopper of a law the U.S. Congress passed several years ago – the FATCA.
The FATCA: Uncle Sam’s Gift To Expats
The FATCA law basically subjects foreign banks to massively burdensome reporting to the IRS, if they open accounts for Americans. Large international megabanks like Citi have the resources to handle the reporting, and they are not going to walk away from their American customers.
But small foreign banks are different. It’s much easier for them to simply refuse to do business with Americans, and thus avoid the reporting. And that’s what they do. FATCA has closed a lot of doors for Americans banking abroad. Thank you, Congress!
Don’t Be American
Our work around? Don’t be American. My wife is a dual citizen. She was born in Bolivia, and retained her Bolivian citizenship when she became a naturalized US citizen. As a Bolivian citizen, she was able to open a local bank account using her Bolivian identity. FATCA: BTFO!
Without my wife’s Bolivian citizenship, we would be in a bind. We’d probably be stuck paying 3% ATM fees.
Life Pro Tip: Find a bank that charges no international ATM fees before embarking on long-term travel
But opening a local bank account was only half the battle. Before we could receive a wire transfer, we had to deal with a spicy mix of poor communication, incomplete websites, general incompetence, and bureaucratic red tape at our new Bolivian bank. Just getting international wire instructions from them was a journey.
When banking abroad, if you’re expecting the same level of customer service you might get at a U.S. bank, you’re probably smoking several illegal substances.
Wiring Money From The U.S.
When we finally got international wiring instructions from our Bolivian bank, the next step was to send funds from our U.S. bank. Unfortunately, I hadn’t had the foresight to find a U.S. bank that allows international wires to be sent via the internet.
It turns out that most U.S. banks wont allow you to send an international wire transfer without signing something in person. Yeah, that’s kinda not going to work if you’re thousands of miles away in another hemisphere.
Life Pro Tip: Before leaving on long-term travel, open an account at a U.S. bank that allows international wires to be sent via internet
At this point, we had already been in Bolivia for several weeks, and were starting to run out of cash. Not good.
I then learned that Vanguard allows international wires to be processed over the internet – sort of. And they do it without charging any wire transfer fee if you have enough money invested with them. I keep most of my money at Vanguard, and so I qualified for the free wires. So that was downright awesome. Is there anything Vanguard doesn’t kick ass at?
There was only one (very large) caveat: Vanguard needed an original notarized signature on the bank set-up form. Once you get the bank set up, you can send as many wires as you want via the internet. The trick is setting it up.
Of course, when you’re in a foreign country, you can’t exactly get a U.S. notarized signature. But, there is an alternative solution: You can essentially have your signature notarized by the U.S. embassy. It’s technically not a “notary”, but it legally serves the same purpose.
A Trip To The Capital
In my case, the U.S. Embassy in Bolivia is only a short 12 hour overnight bus ride away from our town. No big deal, right? Who doesn’t mind twelve hours on a rocking bus just to get some papers signed?
Well, we were planning to go to the capital for other reasons at that time anyway. So, we went. While we were there, we took a couple of trips to the embassy.
At first, the embassy staff didn’t know what to do with the Vanguard form. They insisted they couldn’t help me. But after speaking to Vanguard again, and returning to the embassy, I finally got my form notarized.
We then dropped about $75 on DHL to send the document to Valley Forge, and within a few days, after a few more phone calls with Vanguard, my wire transfers were all set up. Yay!
Things went swimmingly for several months. We wired ourselves money from Vanguard to my wife’s Bolivian bank account, just a few thousand dollars at a time to cover our monthly costs.
If you can avoid it, never keep more than $10,000 in a foreign bank account, because if you do, you will have to report it to the IRS, and there are serious consequences for failing to report.
You’ll Never Guess What Happened Next
Banking abroad can be full of surprises too. Well, it turns out there were Bolivian elections in December, which my wife did not participate in. She wasn’t even registered to vote, because she wasn’t in the country when registrations closed. But, the elections happened nevertheless, and my wife did not vote.
Here’s where it gets weird. Voting is mandatory by law in Bolivia, and the government is zealous in enforcing it. In fact, in order to use any banking services at a Bolivian bank, you must show proof that you voted. My wife has no proof, and so she is now effectively shut off from banking services for three months! She can’t even withdraw her own money!
How do you like them apples? Can you imagine if your bank did that to you? So you see, banking abroad can be a bit like a ride on a hot-blooded horse. You’ve got to hold on tight.
We have one saving grace – my wife is allowed to withdraw from an ATM, but only with strict limits. Specifically, we can only get about $200 per day, and we can only withdraw four times per month. So that means about $800 per month.
And to top it all off, for some reason our ATM cards from our U.S. bank are no longer working. I have no idea why. Maybe they issued us new cards, which are now waiting for us back in California.
A Mandatory Spending Freeze
So, since we can only access about $800 per month, that puts us on a bit of a mandatory spending freeze until March. That’s OK, because we were already planning on spending the next couple of months in our village, where the cost of living is extremely low. We should be able to get by on $800 per month. Anyway, we’ve got a great excuse to be frugal!
And that leads me to the most important piece of advice I’d have for anyone planning on banking abroad: be flexible!