Good old U.S. greenbacks are great for such vacation spots as the Bahamas and Panama, but a move to Europe means there’s currency exchanges in your future. Doubly so if you’re going to be sending over funds to buy a house, a business, or rent an apartment. This post takes a look at what that involves.
If you think you can pop into your local U.S. bank branch, pull out a sizable stack of cash and then walk it through Customs into your new destination, do think again. You are required by law to declare any amount of cash over $10,000 when you cross borders and failure to do so can get you into a ton of trouble. The U.S. government is hardwired to look for money laundering and you toting twenty, thirty, fifty thousand dollars out of the U.S. in cash will trigger all sorts of alarms, and invite discussions with people who have zero sense of humor.
The best strategy is to open a bank account in your new home and transfer cash into that account. But even this method comes with certain gotchas. If you go to your US bank and ask them to transfer the cash to your new bank, you’ll be charged international wire fees along with a crummy exchange rate that can cost you 5% of your nest egg.
This leads us to money exchange companies such as World First, MoneyCorp, Currencies Direct and others. Their job is to move money from one country to the next, exchanging currencies as needed. Their rates are much better than a bank, but there are more steps in the process.
First, you’ll need to open, and fund, a domestic account with USD (or your local currency). Then call the company or go to their website and set up a transfer to your new bank or whoever else you owe money. When we were first setting up our move to Portugal, we sent money directly to our lawyers in Lisbon so they could handle any authorized expenditures. You can also do the same with your landlord or rental agent, or just about anyone else that you will have either one-time or recurring payments.
You will be given a fixed exchange rate and in 2 to 3 days the funds will show up in your payee’s account. There are no international wire fees — all the transfers are domestic — and the companies handle the domestic wire on the other end. The fees for this transaction are more reasonable compared to what you are likely to see at a bank. Your exchange is bundled with everyone else’s that day and the transfer costs kept to a minimum. In fact, the transfer fees are at a rate with only a bit of a premium to the Interbank rate, which is much better than you are ever going to get from your bank or American Express at the airport.
There are difficulties, however. If you currently reside in the United States, there is no problem sending money from your US bank to a foreign destination. Once you MOVE to the foreign destination, you can no longer fund the US based account, so you are stuck with an international wire fee. You can still wire US dollars and then have the money exchange company do the Euro conversion, but it is still a hassle. Transfer what money you will need before the move, because options evaporate after you make your foreign destination your home.
New on the scene are peer-to-peer money transfer firms such as CurrencyFair and TransferWise. These differ in that no money is actually transferred across the planet, but the company will locate someone who wants to buy your currency, for example buying U.S. Dollars with say Euros, and you essentially trade. The companies act like Uber: getting people who want X together with people who want Y and they take a small commission after that trade occurs. I’m not sure that I am completely comfortable with sending a lot of money like this, and there are reports that it can take a comparatively long time to settle an exchange, but we have used TransferWise for small exchanges. If I was sending over hundreds of thousands of dollars, no.
In the case of TransferWise they don’t always work well with your banking institution. We had been sending over small amounts of dollars from one of our banks and then TransferWise suddenly refused to deal with them even though they are a major bank. Such things happen.
Be prepared for a lot of arcane rules when dealing with the money exchange companies, especially those with a U.S. presence. The SEC and IRS keep a very tight rein on them, worrying about tax shelters and drug money. After the Panama Papers, they are hyper-vigilant to the point of being paranoid. I guess the thought of missing out on some tax revenue is keeping them up at night. Arcane rules aside, the rates offered are so much better than from your local bank or credit union that it can be well worth the hassle.
Harold is a former software engineer. Jana is an author. Together they're exploring their new life in Portugal.