Should you close your foreign bank account?

If you’ve previously lived overseas and have now moved on - back to the US or to another third country - you might be wondering about how to go about closing a foreign bank account.

This guide covers how to close a foreign bank account, even if you’ve moved to another country, and also touches on other important considerations, like the tax implications of closing a foreign bank account. Let’s jump right in.

Is it time to close your international bank account?

There may be some benefits of keeping a foreign bank account, so before you close your overseas account or accounts, it’s worth thinking through the following points:

Do you need access to local banking services?

Closing a foreign bank account likely means losing easy access to banking services in that country. If you still have bills to pay there, or if you frequently receive payments in the foreign currency, this could be inconvenient.

Take some time to think about any scenario when you may need to transact in the foreign country or currency before you decide to close your international bank account.

The good news is that there are alternatives to holding your foreign account open, even if you do need to manage your money across currencies, including multi currency accounts from providers like Wise. We’ll look at this and more later.

Are there currency exchange advantages?

If you’ve still got ties to the country your international bank account is in, you may find that maintaining the account offers currency exchange advantages.

Specifically, if you need to receive payments in the foreign currency, and also pay bills in that currency, maintaining an option to hold, receive and pay easily and without unnecessary currency exchange can be handy.

Let’s say you used to live in France but have now moved back to the US. You still receive payments for freelance work in euros which are paid into your French bank account, and you also use the account to continue paying for bills and subscriptions in euros.

In this case, by holding a facility to receive and spend EUR, you don’t need your incoming funds to be converted back to USD, only to be switched over to EUR again to pay your bills. This cuts the costs of currency conversion and avoids double handling of your money.

Once again here, maintaining your French bank account isn’t your only option - you could also open an account with a provider like Wise which has local EUR account details you can use to get paid, and allows you to hold and send payments in euros and many other currencies easily.

Are you paying high fees and maintenance costs for your foreign bank account?

Probably the key consideration for many people - if you’re paying for the privilege of leaving your overseas bank account open, the chances are that it’s time to wrap things up and move on.

Some banks overseas have high maintenance costs which you pay even if you don’t transact - or you might pay dormant fees if you leave a balance and don’t use your account.

In either case, the money you hold in the account is going to be eaten up in fees - making it a smart plan to close up and open a new international account from the US if you still need international money management services.

Closing a foreign account: step by step

The process to close your foreign bank account does depend on the country it’s held in - but the broad process usually looks like this:

Contact your bank

Before you close your foreign bank account, get in touch to check the process and your options for account closure.

In most cases you’re free to close your account as long as you don’t have any outstanding debts - such as a loan, overdraft or credit card. However, if you have any debts these should be covered before you try to close your account, to ensure the process is hassle free.

Handle the remaining funds

You’ll need to reduce your account to a zero balance to close it, taking into account any closure fee which may apply. This means squaring off any debts and withdrawing any funds you’ve left in the account.

Send any funds left in your account to your new account in the US or wherever you now call home - and remember to look out for high or hidden costs when you do this. Sending your money with a third party international money transfer service might be the most cost effective way to proceed.

Some banks also ask you to give them the details of your new account so they can send you any remaining balance, including any interest that's paid to you after you request for the account to close but before the process is completed.

See if you can sort everything online

It’s often possible to close your account entirely online, but you’ll need to check the protocol in your own bank. Rules might apply - for example, you may need to have the same phone number you used when you had the account, to receive a one time passcode when closing your account.

Some banks won’t allow you to close your account online - you may need to phone them, or even visit in person. If this is the case, get in touch with the bank directly to see what your options are, including having someone act as proxy to visit the bank for you to complete the required process.

Aspects to keep in mind when dealing with international account closure

Closing your foreign bank account does not change your foreign bank account disclosure requirements under FBAR¹. You’ll need to report to the IRS if you have overseas assets which in total amount to over 10,000 USD at any point in the tax year.

This requirement is still in place, even if you close the account during the course of the tax year, so do remember to complete your FBAR declaration to keep on the right side of the law and to avoid penalties.

Foreign bank account alternatives

As we've mentioned, closing your foreign bank account might not mean losing access to ways to manage your money in foreign currencies. Foreign bank account alternatives include non-bank providers like Wise, digital banks and other international service providers.

Wise

Wise is a money service business (MSB) that processes payments through its own network, meaning you pay locally, using local bank systems, like an ACH or wire, and the funds are then paid out locally in the recipient’s location too — which avoids those nasty international transfer fees.

To send money online with Wise, you will pay a small, flat fee and a percentage of the amount that’s converted.

All you’ll need is the local bank details of where you’re sending money to. Wise uses the mid-market exchange rate — the same one you see on Google — and simply charges a low, upfront fee*. No hidden charges. No unwelcome surprises.

If you regularly send money across borders, consider signing up for a Wise Account. You can store your money in dozens of different currencies and pay or get paid with local bank details in regions including the US, the UK, the EU, and Australia.

Get started with Wise

Did you know that Wise also offers a business account?

Discover the difference between
Wise Business vs Personal

Digital banks

Depending on where in the world you are, you may be able to open an account with a digital bank which lets you keep access to foreign and multi-currency account services. As digital banks don’t have branches, you can then manage your money entirely online or with your phone, in USD or whichever other currency you need.

Online international service providers

Non-bank services can also be useful when you need to manage your money in foreign currencies. Specialist providers may not offer all the same services a bank would, but online providers will usually have pretty low costs as they don’t have the overheads your bank might.

Check out the online international service providers which may work for you, based on the currency you need and where you’re living.

Closing your foreign bank account is often a smart plan, particularly if you have high maintenance costs which eat away at any balance left in your account.

The good news is that closing your account overseas doesn’t necessarily mean you lose the option to manage your money in a foreign currency or currencies.

Check out alternative options including digital banks and non-bank providers like Wise which can offer low cost, flexible ways to hold and manage USD and foreign currencies side by side.

Source:

1. IRS - FBAR