Leaving the US

When leaving the US either temporarily or for good, I am often asked what you should do with your US bank accounts, credit cards and brokerage accounts. For the following reasons, I generally recommend to keep most of your free accounts open (where possible):

  • If you ever return to the US for work, you can save a lot of administrative hassle by already having an active account.

  • You can receive payments of friends/family or reimbursements (taxes, travel etc.) in local currency.

  • You can continue to build your US credit score, which can be beneficial if you ever returned and needed a loan.

  • You can keep using your US credit cards and benefit from high cashback, excellent insurances and other perks.

This guide will suggest several hacks on how to keep things organized and how you can keep using US financial services.

Introduction

Once you have left a country, it is often much more difficult to open a bank account, as many financial institutions require a current proof of address or you need to come to a branch in person. Therefore, it is best to open all the accounts that you intend to keep open after you leave the respective country.

There is no good reason to keep accounts open if they have a fee and you do not use them. Consequently, I recommend to close all unused accounts with regular fees. For credit cards with annual fees, you can call your bank and ask if you can downgrade the card in such a way that there is no fee anymore.

Preparation

Before you leaving the US, it makes sense to setup the following services, so that you are well prepared to leave without needing to give up accounts.

  • Use electronic statements wherever possible. Nowadays, customers can usually choose to receive almost all correspondence from their financial institution digitally. This mostly refers to monthly statements, but even important notices and letters. Note, however, that there may still be instances where the bank may choose to only send a physical letter - in particular, when they suspect fraud on your account and want to make sure to reach you directly.

  • Correspondence address. While many banks allow addresses abroad, some banks may close your account if you request a change of address. The reason is typically not that you are not allowed to live abroad, but that not even having a US correspondence address implies that you are cutting ties - in particular, if you are not a US citizen or green card holder. Consequently, I recommend to find a good friend or relative who is willing to be listed as correspondence address. It is usually ok, if you list the other name as C/O, but this is often not even necessary as your mail will usually be correctly delivered, even if your name is not the mailbox. As most correspondence will be digital anyway, your friend will rarely receive new mail pieces, so it typically not big hassle for him/her either.

  • Setup USPS Informed Delivery. If your friend/relative agrees to it, you could setup USPS Informed Delivery to see which mail pieces arrive at the respective address. Note that you may also see front images of mail pieces addressed to your friends or other people living there, so setting up USPS Informed Delivery is a small invasion in their privacy, which you should communicate transparently. Informed Delivery will allow you to see explicitly when relevant mail arrives for you, so it will help you to stay on top of things.

  • Setup Google Voice. Setting up a Google Voice with a free US phone number adds a lot of convenience for interacting with US financial institutions. Most banks support Google Voice Numbers as contact numbers and even as recipient of authentication text messages. Therefore, the bank can easily contact you if there are any urgent matters and you can take the calls on your smartphone (Google Voice App or Google Hangout Dialer) or your laptop (Google Hangout Chrome Extension). Moreover, if you need to contact customer service, you can use Google Voice to make free phone calls to the US and Canada.

  • Setup Mint. When keeping to use US accounts, it is imperative to stay on top of things and keep updated about unexpected events. In particular, you should keep an overview over all your account balances, so that you can quickly intervene if there is an unexpected fee (e.g., if the bank changes its terms and conditions) or if you need to pay off your credit cards (when you keep using some credit cards). Moreover, you may also receive warnings if an account becomes dormant or locked, so that you can intervene accordingly.

  • Setup creditkarma.com and credit.com. To keep track of your US credit score, it is a good idea to have accounts with the two services which should cover all three credit bureaus (creditkarma.com: Transunion+Equifax, credit.com: Experian). This is important if you ever want to return to the US (and buy a house) or if you want to continue to use US credit cards (see below). In order to access the accounts from abroad, you might need a US VPN, such as the free version of ProtonVPN.

  • Setup an Interactive Brokers Lite account. In my opinion, there is no cheaper and more convenient service to transfer and exchange money between the US and many other countries. You can open an open an Interactive Brokers Lite account, while you still live in the US and you can typically keep it, as long as you still have a correspondence address there, even if you update your tax residency to another country. Of course, if you already have and use a regular Interactive Brokers account, there is no need to open a second one. Having an Interactive Brokers account ensures that you can transfer money from and to the US almost for free, which allows you pay off your US credit cards (if you continue to use them abroad). You can read more about transferring and exchanging money here. Moreover, you can also use Interactive Brokers to invest on the stock market, as explained here. Also note the current promotion that gives a bonus of up to 1000 USD (maximally 1% of account deposit) if you use this link*.

  • Sign up for the free Curve Blue card* (5 GBP bonus using the link). This is some very useful hack if you receive a new US card to your US correspondence address that you would like to use immediately from abroad. The Curve card is essentially a physical credit card that you can use online or in shops, but when you make a purchase the respective cost gets directly charged to another credit card which you can select in the app. This allows you to use a new US card (Visa and Mastercard) immediately in a local store by just linking it with your Curve card. I particularly recommend Chase Freedom or Chase Freedom Unlimited*, which currently gives 5% cashback on grocery purchases even outside of the US (which can increase to 7.5% when combined with the Chase Sapphire Reserve). While these cards usually have a Foreign Transaction Fee of 3%, you can use Curve, so that they are charged in USD and you are not hit with the fee. Note that only the first 500 EUR of currency exchange per month is free (after which you are charged 1.5%, which is still much less than the Foreign Transaction Fee) and that the exchange rates are best during the week.
    There are some additional perks: You can change the currency, in which your card is charged. If you use a US card WITHOUT foreign transaction fee, it makes sense to always charge in the currency you are paying (i.e., you should switch the currency in your Curve app to the currency you are going to pay). If you have a US card WITH foreign transaction fee, you might be able to avoid this fee by being charged in USD (works for Chase, see above, but some other card issuers will still be charging the foreign transaction fee, even if you are charged in USD). Another perk is that you retrospectively change credit card a given purchase is charged to (but not the currency!), which allows you to change the timing of purchases to meet signup bonuses or to optimize the usage of bonus categories.

Tax implications

If you leave the US and move to another country, you should determine exactly what this implies for your tax situation:

  • If you are a US permanent resident / citizen, you will continue to be a US person, which means that you need to declare your worldwide income and may be taxed on it. However, there are many tax treaties, which try to ensure that you do not get taxed twice. Most important, you will need to declare foreign assets in bank accounts etc. under the FBAR regulation (with high penalties if you fail to do so) and you should be very careful not to invest in passive foreign investment company (PFIC), which will be punitively taxed in the US. Please read about the most important pitfalls on US foreign taxation.

  • If you cease to be a US person, i.e., you are not a US permanent resident / citizen and will leave the US completely, such that you will also not meet the substantial presence test anymore, you will only be a tax resident of the new country. However, if you still receive US income (such as dividends on US stocks), you still need to pay US taxes. This is particularly relevant if you still have US brokerage accounts, that assume that you are a US person and therefore do not withhold any tax. In this situation, you would still need to file US taxes every year or switch to a US brokerage account that allows you to declare your foreign tax residency and withhold the correct amount (usually 30% on dividends, which is often reduced to 15% based on a tax treaty, such as the US-German one). In this case, your US tax obligations for stock investments are satisfied and you do not need to file US taxes, while you may still need to declare this income in your new country of residence. There is no US tax on capital gains for non US persons living abroad.

  • In the year of the move, you are often considered part-time tax resident of two countries. This can only be avoided if you move directly between two years, but even this may not be possible because different countries have different tax years (such as Australia), so in this situation there is necessarily some overlap. The exact regulations depend on the specific case, but in most situation a double taxation agreement will at least partially prevent you from being taxed twice. In almost all cases, you will need to declare your worldwide income in both countries. You may then either be only taxed on the portion that you received during the time you were present in the respective country (though with a tax rate determined by your total income) or you may be able to claim the tax paid in one country as credit in the other (i.e., the actual tax paid in the latter country is lowered).

After leaving

Once you leave the US, you should take the following tips into account on how keep your US accounts active and benefit from them.

  • Keep using those cards with superior benefits. There may be very good reasons to keep using your US cards, even if you leave the US. Once of the most important reason is the generous cashback offered by many cards. While cards without foreign transaction fees (such as Capital One: Quicksilver, Capital One: Venture, Chase: Sapphire Reserve) may still cost small exchange fees (0-1%) when used in a different currency, this small fee is more than compensated by 1-5% cashback on your purchases. With the help of Interactive Brokers, you will also be able to exchange currency into USD to pay off your US credit cards.
    Note: Obviously, you should decide for yourself if the administrative hassle is worth it. This may not be the case, if you only buy groceries, but if you regularly book international flights, airbnbs and hotels, the additional insurances and the cashback may make it profitable.

  • Keep your credit cards active. If you want to keep your credit cards open, you should ensure some minimal amount of activity. For this, it typically suffices if you make a small charge, e.g., a dollar or less, every 6-12 months. For example, you can just reload your Amazon gift card balance (or similar) with a dollar from each of your cards. For cards with a foreign transaction fee, you should make sure to charge from a US company (such as Amazon US) to avoid any additional fees.

  • Keep some minimal account activity. You should check the exact conditions of each of your bank account - in particular, if there is a dormitory fee and if there are certain requirements to keep your account active (such a single transaction every 6-12 months). It will then make sense to set up reminders in your email or calendar to ensure that you do not forget to satisfy the requirements.
    Note: In most situations this requires a minimal amount of effort, such as logging into your account once every 6-12 months and make a small transfer to one of your other accounts or between your checking and saving account.

  • Keep all your US cards organized. As you will probably not use all your US cards on a regular basis, it makes sense to remove irregularly used cards from your wallet and keep them at a safe stop (such as business card folder). Moreover, it will be helpful to keep all card information (card numbers, expiration dates, security codes, PINs) in a securely stored digital document - for example, in an extra secured LastPass file.

  • Apply for new cards if you must. If you credit report reflects your new correspondence address, you should be able to apply for new credit cards without any problems. For this, it is imperative to carefully check your credit report on Creditkarma and Freecreditreport. With the help of the Curve card (see above), you will even be able to use your new card immediately.
    Note: When you apply for credit cards, you will need to report your annual income accurately. If you live abroad you need to convert correctly and if the bank requires proof, you will need to see if they accept foreign income statements.

  • Setup a yearly overview reminder. Roughly once a year, you should evaluate if all your accounts are active and working. For example, you could use the Christmas break every year to spend an hour to log into all of your accounts and see if something changed. When you are already on it, you could also download all relevant statements to have a backup for future use.

Further resources

  • FIRE across the Pond also has a very useful article on what to consider before you move (with specific focus on moving to the UK, but many tips are general).