Blog Article

Bringing Your International Earnings Home


By Geoff Curran, Wealth Advisor CPA/ABV, CFA®, CFP®
Published On 05/16/2018

Many U.S. citizens live abroad for a period during their schooling, career or retirement. Foreign countries, even ones sharing borders with the United States, have different currencies than the U.S. dollar. When you exchange or otherwise convert U.S. dollars into a foreign currency, you may be able to buy more or fewer dollars in the local currency, depending on that day’s exchange rate movements. These currency fluctuations in relation to the U.S. dollar can be substantial. As a result, it’s important that you develop a plan when converting large sums of money from one currency to another to reduce your chances of losing a lot of value.

The following charts demonstrate just how much the value of different currencies has fluctuated in relation to the U.S. dollar over the past five years (as of May 15, 2018).

In addition to being subject to fluctuations in the exchange rate, you should also be aware of the costs involved in moving and converting the funds. These costs can include wire fees from foreign banks and the costs for financial institutions to exchange one currency into another.

While wire fees per transfer don’t generally exceed $50 regardless of the amount, the fees to exchange one currency for another can end up costing several thousand dollars, or more. The larger the amount exchanged, the lower the fee is that financial institutions charge on the transaction. For example, a financial institution may quote you $0.740 per 1 Australian dollar versus receiving the full $0.748 per 1 Australian dollar. This represents a 1% foreign exchange conversion fee. As you’ll see below, these fees can range from 0.50% to 3%, or more.

Here are some options to consider:

  • Traditional banks – Large banks like Bank of America, Chase, and many others have their foreign exchange fee built into the conversion rate. For consumers, most banks don’t have a trade desk or professional you can contact to ask for a quote or determine true costs of the conversion, but they can tell you whether you’ll be subject to normal bank fees, such as an incoming international wire fee. Like other financial institutions, traditional banks’ fees that are built into the conversion rate are lower if you’re converting larger sums of money. As a result, conversions of $15,000 or less have a 3% fee, then 2% up to $60,000, then 1% for sums higher than that. The costs decline below 1% to 0.75% only after reaching a much higher breakpoint.
  • Financial custodians – You can also use investment companies like Fidelity and Charles Schwab to hold and convert foreign currency. For example, Fidelity (depending on your agreement with them) charges 1% for conversions less than $100,000, 0.75% for conversions between $100,000 to $250,000 and 0.50% for conversions greater than $250,000. They charge a flat rate using these tiers and base it off the U.S. dollar notional value. Often these custodians require that you add “international trading” to your account to permit you to hold foreign currency. By moving the currency in-kind then converting it to your desired currency later, you avoid the steep 3% FOREX cost that custodians charge to convert the currency mid-transfer like bank wires into traditional banks.
  • Online facilitators – Websites like facilitate these money movements. If you want to use a service like, you can open an account with them, and then contact one of their agents to discuss the best way to move your money. If you plan on moving a set amount but want to avoid higher costs and fees throughout the course of a year, they’ll give you a fixed rate for the transfers. From there you can transfer the funds in the amount and frequency of your choice. The costs are in line with or possibly lower than most financial custodians.

Note: Money transmitters like MoneyGram and Western Union have restrictive transfer limits and charge much higher fees than the options listed above. We wouldn’t suggest using services like theirs for large money movements.

Case study

John’s U.S.-based employer transferred him to London for a five-year stint. At the end of the five years, John was transferred back to the United States. He sold his London flat and received 500,000 pounds as the net proceeds, which he kept in a UK bank. Outside of trips here and there, he didn’t plan on living in the UK in the future, and therefore didn’t need to keep his cash there in the local currency. He did need the cash to be exchanged into U.S. dollars in the year after his lease ended so he could put a down payment on a new place in San Francisco.

Since this was a large sum of money and the British pound fluctuates on a daily basis with the U.S. dollar, John had to evaluate the best way to move these resources.

John decided to use Fidelity because he already had an account there and found the terms to be like the online facilitator, but more convenient for his needs. He added international trading to his Fidelity account and moved all 500,000 pounds over at one time. The British bank charged a one-time $40 wire fee. Once the funds arrived, John converted 1/12 of the sum from pounds to dollars each month. By doing this, John reduced his exchange-rate risk and conversion costs, and incurred only one wire fee.

Please contact Merriman if you want to discuss how to plan for currency transfers or for any of your other financial planning needs.

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By Geoff Curran, Wealth Advisor CPA/ABV, CFA®, CFP®

Geoff has always enjoyed talking with people about finance, learning about their investments, financial strategy, and business sense. His interest only deepened with time, and what began as a hobby has now become a life-long passion, with an unparalleled passion for continuing education that makes him an expert in many subjects from traditional taxes and investments to business succession planning and executive compensation negotiations.

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