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5 Common Financial Mistakes to Avoid as an Expat 

Moving to the U.S. brings exciting—and challenging—changes to almost every aspect of your life. With money matters, those challenges can seem especially complex when you’re relocating to America even as you remotely manage finances in your home country. 


But take heart: millions of others have succeeded, and you can too. Here’s how to avoid some of the most common “money traps” lying in wait for unwary expatriates.  

By Mike Faden

1. Overpaying for International Money Transfers

 

If you’re like most expats, you’ll need to move money between the U.S. and your home country from time to time after relocating to America. It may seem logical to ask one of those banks to transfer the money because many expats maintain bank accounts in both countries. However, banks often don’t offer the best foreign exchange rates, so it can pay to research the growing number of digital international money transfer services. To get a true picture of the total cost, compare transfer fees as well as the exchange rates on offer. 

2. Losing Track of Finances Back Home

 

As you focus your energy on your new life in the U.S., it’s easy to lose track of finances back home. If bills and debts go unpaid, you may be creating problems for yourself in the future. So, before relocating to America, take a few steps to make it easier to manage those accounts remotely: 

 

  • Set up online access for your bank, credit card account and any other financial institutions in your home country, including mortgages and utilities. 
  • Tell credit card companies you’ve moved abroad to avoid a block to transactions that they may deem fraudulent. 
  • Provide all accounts with your new mailing address. 

3. Misunderstanding the Role of Credit Cards in the USA

 
Credit cards are used more widely in the U.S. than in many other countries: the average American has four of them, according to one of the country’s top credit bureaus. If you’re moving to the U.S. from India, for example, you may be shocked that only 10 percent of payments worth $25 or more are paid in cash! Credit cards can be particularly useful for the “startup” expenses you may incur when you first relocate to the U.S., since they are essentially mini-loans that you pay off at the end of each month. 


Getting a credit card from a U.S. issuer is one of the best ways to build credit, which is extremely important for many aspects of everyday American life. Credit card companies report key data—such as whether you pay on time, your total debt level, and your credit limit—to credit bureaus (the biggest of which are Equifax, Experian and TransUnion). The bureaus incorporate that information into your credit report, which can be used to generate a credit score. Other prospective lenders—and, often, employers and landlords, among others—check your score as a measure of your financial and overall responsibility. U.S. law entitles you to a free copy of your credit report, and some financial institutions will let you check your credit score for free. 

 

Once you've obtained a credit card, you’ll need to manage it carefully to maintain a good credit score—and to avoid unnecessary costs. That means paying off the balance every month to avoid interest and late fees. And some credit cards charge fees of around 3 percent on foreign currency transactions, so look for a card with no foreign transaction fees if you expect to use the card to pay for things in your home country. 

4. Failing to Properly File U.S. Tax Returns


Even people who have lived in the U.S. all their lives find the tax system so complicated that many seek professional help to prepare their annual tax returns. If you’ve just relocated to the U.S., the picture will likely be even more complex. The following considerations can help you figure out your tax position:

 

  • Tax residency. If you’re in the U.S. for a prolonged period of time, you will likely be considered a resident for tax purposes—take the U.S. Internal Revenue Service’s “Substantial Presence Test” to find out. 
  • Filing here and at home. It’s important to determine if you need to file taxes both in the U.S. and your home country. Some countries have tax treaties with the U.S. that can reduce the likelihood you’ll be taxed twice on the same income.
  • Declaring accounts from home. Experts say one of the most common expat mistakes is failing to declare foreign bank and other financial accounts that are above a threshold amount, as required by the U.S.’s Foreign Account Tax Compliance Act (FATCA). 

5. Becoming a Victim of Identity Theft


Identity theft isn’t unique to the U.S.; nowadays, it may be almost as global as the internet. But identity theft—when criminals steal your personal information and use it to get loans or credit cards in your name—may be a bigger concern for expats than others for a few reasons. For example, many expats maintain financial accounts in multiple countries, giving criminals more possible points of entry. And it may take longer for you to find out if your accounts are compromised in your home country—particularly if you don’t check those accounts regularly or your financial institution notifies you by mail. 


To minimize the risks, experts suggest protecting your identity by:    

  • Frequently checking your accounts online,
  • Keeping mailing addresses up to date,
  • Regularly checking your credit reports,
  • Using strong passwords and two-factor authentication, and
  • Being extra-careful about giving out personal information. 

The Takeaway


There’s a lot to think about when you relocate to the U.S. As you focus on adapting to a new work environment, culture, and social life, it’s easy to overlook some of the complex details of managing your finances—especially if you’re doing it in two places at once. With care and some planning, you can avoid common expat money traps like failing to prepare for tax filings, misunderstanding local payment customs (especially credit cards), and overpaying for international money transfers. 

The Author

Mike Faden, a British expatriate living in the U.S., has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups, and established corporations. Mike also is a principal at Content Marketing Partners.


 “A Look at U.S. Consumer Credit Card Debt,” Experian; https://www.experian.com/blogs/ask-experian/state-of-credit-cards/ 
 2019 Findings from the Diary of Consumer Payment Choice, The Federal Reserve; https://www.frbsf.org/cash/files/2019-Findings-from-the-Diary-of-Consumer-Payment-Choice-June2019.pdf
 “Top Ten Investment and Tax Mistakes Made by Foreigners in America,” Thun Financial; https://thunfinancial.com/home/american-expat-financial-advice-research-articles/top-ten-investment-and-tax-mistakes-made-by-foreigners-in-america/   
 “Identity Theft, and What Expats Should Know About It Before It’s Too Late,” The Wall Street Journal; https://blogs.wsj.com/expat/2016/02/02/identity-theft-and-what-expats-should-know-about-it-before-its-too-late/