10 Reasons To Open An Offshore Bank Account — SelfKey
Services like Transferwise and Revolut have become increasingly popular for fast currency conversion and low transaction fees. These services advertise themselves as digital bank accounts that drag an archaic banking system into the 21st century.
The truth is that for short trips or small transactions these services work well. For longer stays or more sophisticated usage however both fall short, as many ordinary banking services are not included. Neither for example provide interest rates, loans or even safety guarantees.
That’s just the tip of the iceberg, here are ten excellent reasons to open an Offshore Bank Account:
1. Maximise Your Freedom
We should be free to live our lives without being dependent on faceless corporations and governments that do not have our best interests at heart. This belief is why SelfKey’s mission is to empower individuals.
That being said, Banks still hold a position of power in modern society and can make life difficult. Therefore it makes sense to maximize your freedom by opening a bank account abroad. This will significantly reduce your dependence on your local bank, and gives you much more flexibility in the long-term.
In addition to an offshore bank account, it also makes sense to look at digital assets as an added solution. Cryptocurrency represents a significant shift which allows everyone with an internet connection to operate as their own bank. By creating a SelfKey wallet for example, you can send and receive payments almost for free, without having to worry if your Bank might shut down your account or your government might enact a nonsensical piece of legislation.
The more freedom you have the better — which is why a foreign bank account and digital asset wallet makes a lot of sense.
2. Earn Interest On Your Deposits
Europe and many other socio-economic regions have experienced a low-interest environment for years. Individuals are punished for holding money and instead are incentivized to spend. The interest rates offered by a typical savings account do not beat inflation making it unattractive to save.
Of course, this is not guaranteed and you need to do your own research. Undoubtedly however, many foreign countries offer more attractive interest rates than those found in the Western World.
3. Access A More Stable Banking System
The stability and strength of your banking system depends on many factors — not all of which are clearly discernible. Two things to keep in mind are:
- The track record of local banks
- The risk from immediate threats
The first point refers to the infrastructure and history of your local banking system. Newly created institutions are more likely to make mistakes and fold, than banks with a strong track record.
4. Reduce Your Risk
The global financial crisis taught us that the international banking system is frail. All it takes is for one bank — like Lehman Brothers — to collapse for the entire network to be imperiled.
In 2007, the crisis began with the collapse of the subprime mortgage market, something that nobody saw coming. In the following years the western banking system was in grave difficulty and only survived by the skin of its teeth.
Clearly not all banks are created equal and a foreign bank account allows you to hedge against a collapsing local economy.
Instead, open a bank account abroad to reduce risk and minimise your dependence on one financial institution.
6. Diversify Your Currencies
Limiting your personal wealth to one currency is risky. Prices are not stable and are typically volatile in times of economic or political turmoil. Below you can see the GBP/EUR exchange rate over the last five years, which clearly shows the significant losses the Pound has had to endure.
To mitigate risk, it makes sense to open an offshore bank account which allows you to store some percentage of your wealth in another currency.
7. Rent Or Buy A Local Property
Another advantage of a foreign bank account is that it can be used to rent or buy property. Most countries require a tenant or landlord to have a local bank account. In Germany for example, it is not possible to rent property without a comprehensive credit check which requires a bank account within Germany.
In order to maximise freedom, it is essential that we are not bound to one geographic location. Instead, a foreign bank account allows you to take a meaningful step towards moving and living wherever you choose.
8. Get Paid More Quickly
If your selling goods and services it doesn’t make sense to wait 5 business days until the money has reached your account. Such a delay ruins your customer experience and clients will surely look elsewhere.
Instead, think about where the bulk of your customers are based and register for a bank account in that jurisdiction. Not only will it significantly boost your cash flow but it will also reduce fees.
9. Avoid Costly Transaction Fees
In a time of cryptocurrency and the world wide web, sending and receiving money should be no more expensive than sending an email. Unfortunately, digital assets have not reached the mainstream yet so a foreign bank account is often the best alternative.
Domestic wire transfers cost roughly half of the international equivalent, which can amount to a significant sum of money for businesses servicing a global client base. Open a bank account abroad to cut down on fees.
10. Guarantee Your Money’s Safety
Banks typically operate under a national scheme which guarantees the safety of your money. In the UK for example, the Financial Services Compensation Scheme (FSCS) ensures that bank account holders are guaranteed to receive up to 75–85k GBP even if the bank collapses.
Using online banks, like Transferwise, this is not the case. These are regulated as Electronic Money Institutions and act as middlemen between the customer and the bank. In the event that the bank folds, the customer’s money is not protected.
Additional Reporting For US Residents
Opening a bank account abroad often requires additional reporting, especially if the account holds a significant amount of funds.
Therefore, a US resident with a foreign bank account holding more than $10,000 is required to report it to the US government. Additionally, income tax needs to be paid on earnings generated by the account. Keep that in mind if you earn interest for example, on a deposit in an offshore bank account — you will also have to pay federal income taxes.
Conclusion — Open An Offshore Bank Account
As you can see from the extensive list provided above there are a number of excellent reasons to open an offshore bank account.
Not only does it provide a greater level of freedom, by reducing your dependence on corporations and governments, but it also reduces your risk. Currency, economies and political situations have a tendency to deteriorate and a bank account abroad is an excellent way to hedge against such catastrophes.
To learn more about opening a bank account abroad, make sure to download the SelfKey Wallet and visit the bank accounts marketplace.
Originally published at https://selfkey.org on July 22, 2019.
