Often, when expatriates want to do financially complicated things they find that they are charged expensive fees and commissions in their home country. When they travel abroad, or engage in international business deals, international payments can involve substantial barriers to getting your payments processed. Offshore bank accounts help with this problem by enabling the recipient or the country where you’re living to pay their fees in their local currency, rather than their home currency.
Many people find that their home country requires them to make payments in their national currency. This can cause problems and delays, especially when you’re sending money more than once.
Offshore bank accounts can be opened with minimal documentation or “no documentation” mode. This means that absolutely no paperwork is required to establish your bank account.
When you’re considering opening offshore accounts it’s important to ask yourself the following questions:
1. With what currencies will I be making payments and for how long will it take?
2. What countries does your home country, say Canada, feature a currency exchange rate with?
3. How much does a pip cost on the average?
4. Do you earn advantageously in your home currency?
5. Do you want to maintain your current bank account business relationship (I’ll share how to do this later in the article with the resources for finding a quality Canadian Dollar online)?
The next questions are more significant if you plan to make international payments regularly. Comparing the price and exchange rate to what’s available in your home country can make a big difference here. For example, say you live in Europe and you know that the Canadian dollar is equivalent to 1.20 USD. If you make a $100,000 (GBP) transfer when you transfer to the US, you could expect a spread of just under 1 pip to obtain the same value of USD as you send. Say you buy a Canadian dollar at 1 USD = 1.40 JPY, and know that the USD is falling fast. You might want, say, 150,000 USD. With 1 pip in a buying capacity, you could be able to earn USD$15,000.
So, all of that and many more questions can help you choose the best options to organize and manage your money abroad.
The next question to ask is: Is currency conversion as reliable in your home country as it is overseas? In the last decade many people have found themselves in a situation where they’re living overseas for years, and now they find the currency conversion ratios are so much lower than they had expected, it can end up being a nightmare. For example, say the JPY went from 1.06 USD to 1.03 USD after your bank closed down. Suddenly you find yourself in a situation where you’re dependent, or can even stay in, the home country for a long period of time if you have to since the exchange rate was so much worse.
A lot of people who make international payments have a large family, work overseas, or’re educating their children. They need to know that there’s a minimum and maximum order that they’re expected to make to keep their home currency, in this case JPY, stable. For example, fresh graduates making payments to their home country at 1 USD = 1 JPY would be wise to set their order at say 1 USD = 1 JPY with a limit of say 70,000 JPY (Just in case you didn’t figure it out from the tables above).
Finally, if the currency conversion isn’t w legalized, what can you do? Well for one you don’t send payments now. Just wait until the rates begin to stabilize.
This can cause major headaches when international business transactions are done, especially if you live in a country with a floating currency rate. The only way for a company or agent to guarantee to be able to get a conversion rate is if they assume the exchange rate will fluctuate of course. Then they’re essentially using a guess. That’s not an optimal situation. If you live in a location with a strong government, it should be easy for you to fix the exchange rate based on news reports or government press releases. We’re just not there yet.
Focus on international airports or shipping companies to help you simply use currency conversion to lower your risk in international transactions.