Tips & Tricks: Develop Bank Redundancy

Earlier this month, I woke up to an email that said my bank had frozen my account due to “suspicious activity.” I couldn’t withdraw funds, I couldn’t pay my bills, I couldn’t transfer money, I couldn’t deposit checks, I couldn’t receive bank transfers, nothing. Two weeks later, despite providing a ridiculously intrusive amount of private information to the bank, they just unilaterally closed my account.

Unfortunately, this experience isn’t uncommon as an expat, but there’s good ways to minimize the disruption to your life by this possibility (eventuality?); as always, The Prepared Expat is here to equip you to survive and thrive as an expat, even if your bank account gets frozen.

This week’s expat tip: Open and develop redundant bank accounts.

Read more: Tips & Tricks: Develop Bank Redundancy

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Why you need redundant bank accounts

You need multiple bank accounts because there’s no telling when one of your will be shut down, because the consequences are severe, and because unfreezing an account when you’re an expat can be incredibly difficult.

The reality is that an expat’s bank account is more likely to be frozen or closed than a “normal” person’s bank account. Just living a normal expat life looks suspicious to a bank’s algorithm; as I’ve talked with my friends, they all had similar horrors to share with me–and after I published this article, even more horror stories from expats flooded in. Yikes; banks do not like expats.

So if your account hasn’t been frozen or closed yet, then consider yourself lucky…and it’s probably just a matter of time. You don’t have to be doing anything particularly odd, you just have to live your normal expat life: make an ATM withdraw in multiple countries, transfer funds between countries, or just log into your account from around the world–your activity will look suspicious to bank algorithms that are used to people living in one country their whole life.

And if your account is frozen, it’s a massive disruption to your life. My experience is typical: I couldn’t login to my account, couldn’t transfer funds, couldn’t pay my bills, couldn’t receive payments, and couldn’t make ATM withdrawals…for an entire two weeks. Just imagine what that could do to your life (or credit score) if you didn’t have another bank you could use to live and pay bills.

To make matters worse for expats, unfreezing a bank as an expat can be horrendous; some banks will require that you physically bring your ID to a bank branch in order to verify your identity; if your bank has this requirement, you’d have to travel back to your host country in order to un-freeze your account. If you can’t, then the bank will just close your account and send a check to your address on file; if you don’t have bank redundancy, your money will just be stuck in a check until you can return home to open a new bank and deposit it. Not good.

Bank redundancy will reduce the consequences of all of the above. Set up accounts at a diversity of banks so that, if one is closed or frozen, you’ve created backups to continue your financial life (without having to return to your host country).

How to develop bank redundancy

The simple answer is to open up several different accounts at several different banks. I recommend three, but you could get two or ten if you like; just know that if you only have two and one is frozen, then you have no backup (why “triple redundancy” is a standard principle for backups).

In addition to just opening accounts at multiple banks, here’s some considerations to build in some more diversity, redundancy, and resiliency into your financial life.

  • Get multiple accounts in both your host country and in your home country; you should be able to sustain your life no matter what happens
  • Get accounts at traditional brick-and-mortar bank AND online-only banks; the former have more stability but the latter are more likely to verify your identity online
  • Get accounts at local credit unions and large national banks; the former often have better service but the latter may have better online access options
  • Get accounts that are for just you and accounts that have joint ownership with a spouse or trusted friend; the former are easier to verify but the latter should need to verify identity less often as they assume more than one person is using the account.
  • If possible, get accounts in countries other than your host and home countries; this creates options for you in extreme scenarios (like if your host and home country go to war and seize each others assets)

After you open up multiple bank accounts, you’re mostly done, but you’ll want to take a few more steps to reduce problems you may encounter down the road:

  • Put an amount of money in each bank account; not so much that it’s a headache or hardship, but enough to pay your bills and live for a few weeks if your main account gets frozen
  • Enable all bank accounts to pay your bills; this way, if your main account gets frozen, you can make sure your bills get paid with just a few clicks
  • Make sure you have an active ATM card for each account that you can use overseas. Make sure to set “traveling notifications” at each bank if they allow those.

Personally, I like to keep one bank as my “main” bank out of which all my US bills get paid and which I don’t withdraw from in my host country; instead, I transfer funds from that bank to a different bank account and use the latter for my international withdrawals. I can’t prove this, but my theory is that one account gets used to paying US bills and the other account gets used to international transfers and thus each banks’ activities look less suspicious to the algorithm.

Bank Recommendations and Dis-recommendations

Here’s some quick notes about banks that I’d recommend and not recommend for expats. If you have other experience with banks, please email me and let me know and I’ll update this list so we can help everyone.

Recommended Banks

  • Schwab Bank – While usually thought of as an investment bank (which it is), they also have a checking account available that has fee-free international ATM withdrawals. Use this link to get a free $100 when you sign up (I don’t get anything).
  • Capital One – I’ve been happy with them, though you’ll need a US phone number (or VOIP number like Google Voice) to sign up. Good interest rate too, at time of writing. Sign up with this link and we both get a free $50. Note: Multiple readers have had positive experiences with Capital One, including that you can call them and have them add notes to your account that make a freeze less likely.
  • HSBC is another internationals-focused bank, but they tend to cater to high net-worth individuals and opening an account can be difficult (I and my parents were all denied).
  • Citizens Bank. Mentioned by a reader as being expat-friendly, though I don’t have personal experience with them.
  • Delta Community Credit Union – Another bank mentioned by a reader as being expat-friendly, though I don’t have personal experience with them.

Be cautious

  • USAA – I originally listed this as a “recommended bank” because my experience was very good. However, I used this about 10 years ago and multiple readers commented that their more recent experience was negative because of the difficulty of making international transfers with USAA.

Not Recommended (Banks of Shame)

  • Chase. Ugh, I can’t tell you all the horror story here, but the end result is that they required me to travel to the US to unlock my account. No thank you. One of the few companies I’ve promised I would never give my business to again.
  • Empower Bank. Same as the above; they froze my account without even an apology and then closed it despite prying into details of my financial life. Do NOT recommend.
  • Bank of America. Multiple readers commented that Bank of America freezes your account just for trying an international withdrawal and that unfreezing the account is quite difficult, including require you to visit a branch in the US to unfreeze your account. This was a clear “do not use” bank among my readers.
  • US Bank. A reader commented that their bar for flagging a transaction as “suspicious” is quite low.
  • Citi Bank – Their “fraud” filter is pretty low but, more than that, the effort it takes to life a freeze is quite annoying (lots of phone calls). Don’t recommend.

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