I am often asked how I manage my banking when I have no fixed home. It has been something of a non-issue for me. It seemed simple and straightforward, so much in fact that I wasn’t going to write an article about it at all. But after speaking to some friends, I realized that banking depends heavily on where you have your bank, and that I have been fortunate to have Swedish and UK banks. Other countries are harder to deal with.
So here is what I want to do with this article. I will outline the important things to look for when setting up your international banking solution, and I will use some personal examples to illustrate how I’ve implemented my own advice. Then you can complement the article with your own solutions for gaining access to your funds when abroad in the comments. Together, we can map out the best way to do nomadic banking, no matter where you are from.
Credit cards should be your primary way to pay for stuff, even if you have no need for the actual credit. Most cards charge no interest on your credit as long as you pay your balance each month, something you can set up to happen automatically, drawing from your bank account.
What you get in return is a buffer between your bank account and potential thieves and other scoundrels. If your card is stolen or cloned, then you can challenge these charges. This is much harder to do if they’ve used a debit card and the money has left your account already, not to mention that you will be out of pocket until the fraud has been resolved.
You also get a better credit rating by having and using a credit card than a debit card. The credit agencies need to be able to see a history of you gaining and clearing debt. Then they like you. If you never rack up any debt, then you have no history, and your rating will fall short.
Credit card transaction can also earn you air miles and thus buy you cheaper flights. There is a whole science to this which I have never bothered reading into since I fly via my Airline Patron’s stand-by tickets. But please share your air miles collecting tips in the comments!
The major traps with credit cards are the fees. Not all cards are created equal! As a nomad, you do not want a card that is going to slap any kind of extra fees for using it abroad. (Once, I bought a coffee abroad and found out later that the fee was more expensive than the coffee!) These fees rack up quickly, and there is no need to accept a card like that. Shop around and you are bound to find one that does not screw you over.
Another trap is the ubiquitous travel insurance that comes with most credit cards. Read the fine print! Most of these insurances are valid for shorter trips only, usually up to forty days. For nomads, these travel insurances are next to useless.
Personally, I use a Swedish Nordea Gold card. No fees, no hassle.
Gone are the days when you had to exchange travel money before you left home. And please don’t embarrass yourself with traveller cheques. Today, the first thing you do as you arrive at an airport is to track down an ATM and simply withdraw some cash.
To do this, you need a debit card linked to your bank account at home. Withdrawing money from ATMs is the only thing for which you should use this card! Unless you are going to the ATM, leave the card safely at home. Credit cards are much safer to use as they have better protection against fraud (See above) and losing your debit card means losing access to your cash. Cash is king, so don’t get de-throned by some pocket-fingering trick in a club!
Most debit cards will rob you blind every time you use it to withdraw money abroad. As international law stands today, you can’t sue the banks for this. (Vote for me as your world tyrant and I’ll change that!) So don’t bank with robbers. There are debit cards out there that will not charge you any fees for using foreign ATMs.
Personally, I had to switch bank to find a debit card with no foreign transaction fees. I now use a UK Santander Zero Account debit card. If you know of a debit cards with zero fees for withdrawal abroad, let us know in the comments!
Even if your debit or credit card have no fees for foreign transactions, they will still do a currency exchange every time you use it. Each such exchange is an opportunity for the bank to screw you on the exchange rate, and they will. It is not a huge amount, but still, the fewer currency exchanges your money goes through, the better.
There is no good way to get around this, however. If you hold your funds in British Pounds, and you live in the US, at some point, you will have to exchange it, be it through a credit card purchase or an ATM withdrawal.
If you spend a lot of time in a country, then it is worth opening up a bank account there. If you earn money in that country, or if you are given money in that currency, then you can save it away in this new bank account and draw upon it later, saving your money the expensive round-trip to your ‘home’ country and thus two currency exchanges.
My personal example of this is the United States. I love the US, and I go back there two-three times a year. My Airline Patron lives in the US, and I often pay him money, in US dollars. I also have US clients who pay me US dollars. As much as possible, I keep all my dollar activities within the US borders, and thus save money by not having to convert them to British Pounds or Swedish Crowns. This is all possible because I opened a Bank of America account in the states.
Your ability to open a bank account varies wildly by country. Some countries (such as the US) only requires that you have a domestic address (which can be a friend’s address) while other countries are much stricter.
Does your country invite foreigners to open bank accounts, or is it prohibitively difficult? Let us know in the comments.
PayPal has become something of the de-facto standard of internet banking. PayPal allows you to hold multiple currencies under one account, so this is a way to avoid making currency exchanges when you are paid or sent money in a foreign currency, and later pay or send some money to someone else, in the same currency.
However, PayPal comes with their own fees, and they can be difficult to understand. They also have a bad reputation of freezing assets for the flimsiest of reasons and without you having any say. There is a large mob of angry customers brandishing grievances against PayPal for seizing their money.
I still use PayPal when accepting payments from people in countries where I don’t have a bank account, but I try to keep as few of my eggs in this particular basket as I can.
PayPal is not the only internet ‘bank’ out there. (It is not actually a bank; it is registered as a ‘money service’.) Lately, there have been several companies popping up stating that they want to end the tyranny of plastic cards (and their expensive transaction fees) and instead create an internet currency which transcends borders. The most famous right now is BitCoin.
To me, this sounds like an interesting idea, but none of these services have given me reasons to believe that they are not fully staffed by unicorn-riding hippies. For now, I’m not putting a single egg in any of those baskets.
Keep track of when your cards expires!
When I was geo-static, I would normally notice that my old debit card was about to expire only when the new card arrived in the mail. As a nomad, you need to be more mindful. I’ll assume that when you left your home, you changed your mailing address to a friend. And I will also assume that you return there once in a while? Well when you do, check your cards from that country. If they expire before you think you’ll return, ask for another card to be sent to you!
Remember that these cards are your lifeline to your funds. You don’t want them to expire while you are living in another country. Neither do you want to lose your card or have them stolen! I have not had to replace a card while abroad, but I can imagine that it is a serious hassle. If you have experience in replacing a credit or debit card while abroad, please tell us about it in the comments.
Another kind of renewal that you’ll need to keep an eye on when living nomadically (nomadionic?) is the “please don’t block my card for suspected foreign use” status. Different cards have different rules for when it’s flagged (and therefore blocked) when used abroad, and it is up to you to find out how to deal with it. Call you credit card’s customer services!
Some cards are blocked if they are suddenly used in a different country. A simple trick to keep your cards from being flagged by these rules is to buy something at the airports both before and after your flight.
Other cards require you to call the card’s customer services and state in advance that you intend to visit another country. Usually you can only log trips a few months ahead. Ask them when you’ll need to call them back to extend your trip clearance and make a note in your Getting Things Done system to remind you to make that call, or risk standing at the grocery store with bags full of food you can’t pay for.