Banking
Please note that this in not financial advise but merely a reflection of my experience. It’s very important that you seek expert advice from an appropriate financial advisor.
The Foreign exchange department at your bank is of great help and a good place to start. Important is that you sketch your financial plan and needs especially around the upfront capital needed to buy vehicles, and your ongoing monthly living expenses.
The foreign exchange is a tightly controlled and regulated environment, which is subject to changes in legislation and charges. Please use this as a guide to flush out all the correct answers as it apply to your specific situation.
When I started to investigate my financial banking options some 7 months before my retirement, I contacted Citibank by email and I got the assurance that, to open an USA bank account is a quick and easy process and can be set up through the internet. That left me comfortable, maybe too comfortable. When I talked to people about the banking plans, I could see some sceptical looks, but the penny did not drop that this will not so be quick and easy as I thought. Please start early, as this is stressful, will cause many sleepless nights, but it is a very important activity to properly plan and your plan should have contingencies and backups in place.
My ultimate goal is to end up having an USA checking account, as I believe it will just make life in the USA much easier and more credit worthy in dealing with USA suppliers and especially short term insurance suppliers. I will keep you posted on this development.
The various options available to you are explained below. For a short vacation abroad the normal Cheque / Debit and Credit cards will do the trick. It is not very suitable for the upfront capital needed for an adventure like this, as dealers are reluctant to be paid by credit card because the card companies usually charge the dealership other fees for the transaction. They prefer cash or bank cheques, and as you will see below the card option is also not the cheapest to effect such transactions. A combination of these financial tools are probably your best bet.
Cheque / Debit and Credit cards
This is very bank dependent and you should discuss and agree with your bank to get a handle on this. Use the table below as a guide.
These cards are very convenient but very expensive to use abroad. It has a place on shorter vacations and it certainly provides you with an excellent backup facility. As you plan to be away for an extended period, you do have the risk that cards may get lost or stolen and you maybe stuck without money if your bank cannot courier you a replacement to your destination abroad.
Cheque / Debit cards are viewed as credit cards, which mean the merchants abroad are also charged and fee for each transaction and that is not acceptable for car and RV dealers.
Using your bank online facility means that you can easily manage and transfer funds locally to where it maybe need between your accounts and also to and from your spouses accounts. This is the reason why I also obtained a Credit card for my wife as a further backup plan, but also to ensure that she will not be completely stuck should I suddenly die.
Please also understand your local cheque or savings account fee structure. Cheque accounts include a number of ATM transactions and payments per month as part of the base monthly fee you have negotiated with your bank. I was told that withdrawals abroad counts as a local withdrawal Savings / cheque account withdrawals count as if in SA, provided you stick to your banks partners abroad. For FNB City bank and Chase Manhattan bank ATMs fall in this category. Credit Card companies may make additional charges for foreign transactions.
Please check and ensure your card does not expire during your travel and VERY IMPORTANT these cards must be activated for usage abroad. This activation is for 6 months at a time so you may need to reactivate them if you stay longer by phoning the bank or card forex department.
Prepaid currency cards
At time of writing I found two brands providing these ”Prepaid foreign exchange” cards e.g. American Express.co.za with Nedbank as an authorized reseller and Cashpassport.com with FNB, ABSA and others as their authorized reseller. Other banks have other names for their cards, with subtle differences between them but in essence they are the same. Please enquire at your bank. These prepaid cards have to be bought and recharged in South Africa.
Benefits are:
- Withdraw cash from any ATM displaying the Visa/Master card logo;
- Swipe at any point of sales displaying the Visa/Master card logo;
- Accepted around the globe;
- It provides excellent 24x7 emergency support in case of stolen and lost cards;
- It is preloaded with your travel money before your trip, making it easy to stay within your budget.
It is cheap to use for most day to day expenses but certainly not practical and it is very expensive to use to buy the vehicles from. In fact I considered 2% of R600k as a rip off and since the RV and Car dealers are not accepting these cards it is also creating a security risk as you need to withdraw cash from ATMs, see daily limits below, and then pay the dealership when you have enough cash. The Investment option, see below, is much cheaper, convenient and less of a risk.
If you choose The American Express pre paid card it is best is to deal directly with American Express for better rates. In my experience the banks charge slightly more but the money are more easily transferred than dealing with American Express. American Express also has an arrangement with Flight Center whereby the commission is reduced to 1.5%, therefore negotiate the commission especially if you used Flight Center as you travel agent.
Foreign Investment Option
I checked with potential dealers in USA and none accepts credit card payments due to card companies that levy additional costs to the merchant. That caused me a nights sleep as I was really worried how to facilitate Cash or Bank Cheque payments given the card scenarios above.
I consulted with my bank and explained my problem and they suggested the Foreign Investment route. You need to get TAX clearance from SARS for investment, sign some 2 or 3 MP1423 forms upfront and when you know the detail of your vehicle purchase and the dealers bank account, you merely start the process through the Forex section on your online banking by completing the online form and submit it, send an email to your banks foreign exchange department, who will duly do the necessary, and 3 days later the money can be EFT transferred at a nominal fee R 850 per transaction, which very convenient, is MUCH cheaper than the card options and much more secure.
To affect this you will need your passports, Tickets, an ID document certificate, “TAX clearance for foreign investment” and your SARS Tax reference number. It is very important to note that you currently cannot apply for this tax clearance clearance for foreign investment on e-filing and you need to obtain the form from SARS. This Tax clearance must stipulate “tax clearance for foreign investment” and specify the amount. You will have to complete a SARS FIA001 form, provide SARS a 3 months of bank statements and a balance sheet of you assets with this application. A maximum of R4,000,000.00 per calendar year per person is allowed under this option. Such and application requires a 5 to 21 working days processing time from SARS. Should you run out of time, you can speed this process up by making a special request in person with supporting documents like your plane ticket. I was in this stressfull situation and once I had all the proof of leaving shortly, I received the tax clearance in one day.
The reserve bank and foreign exchange departments will track all you foreign exchange dealings no matter which card, bank or EFT and or other payment methods you use. Be aware Big Daddy is monitoring this closely, so carefully managed and track your spend not to exceed the R 4M Forex investment allowance per person.
There are many other foreign exchange currency tools to meet you needs.
Foreign currency e.g. Euros and Dollars in hard cash. It is recommended to buy at least some, not more than 2 months before you leave. Don’t delay this till the last day as not all banks sufficient carry foreign exchange and the transaction may take a couple of days to complete. This is ideal to cover some minor expenses for the first couple of days.
Travelers Cheques which is also prepaid currency cheques similar to the prepaid cards above. Again please do this with some time to spare as not all banks carry sufficient foreign exchange on a daily basis and it may also take a couple of days to provide you with foreign exchange.
Foreign currency - If you manage to open a bank account in the USA, this facility will allow you to transfer money from your account in SA to your account in the USA.
Paypal - which is a secure way for you to buy, sell, send and receive foreign currency world wide.
In summary
Morale of story is Cards and even prepaid cards is good for smaller day to day transactions, but to buy big ticket items, you need the Foreign Exchange investment to be agreed and set up.
The prepaid cards are much cheaper to use than the normal cheque/ debit / credit cards, if you have enough funds to transfer money upfront for the length of your stay.
Avoid funding the upfront capital buys from any card and use the investment option as the preferred tool.
VERY IMPORTANT: If you get a new cell phone number SIM Card in the USA to avoid the roaming costs, REMEMBER to change the SMS and Cell phone number on your banks online settings, else you will not receive your OTP and other critical messages. This is critical else you maybe stuck.
Ensure right now that your notifications are send to both SMS and email.
A combination of all of these makes sense and will probably be the answer for you.
Do document all the telephone numbers and email addresses of your contacts and at the bank and card departments. As it will be a great help if you need to speak to someone from abroad. Also test that you have them recorded correctly beforehand.
Emergency plan
From the above it is clear that relying on a single tool, is risky. You also need to consider what will happen in case you pass on. This is not a nice thought but it could leave your partner stranded when your funds are frozen.
It makes sense to split all funds and cash between you and your spouse. The spouse also need her own set of accounts and Credit card as backup.
When these basics are in place you or your spouse can easily manage the local accounts with online banking, and move funds as and where it is needed.
One card may not be accepted at certain merchants and hopefully the other card can rescue the situation.
Have I over engineered my emergency plan? Probably, but I will refine this based on experiences gained over the next 12 months
Comparison table
| Description of service | American Express global Travel | Cashpassport | Credit Card |
| Buy the card | R150 per card but Free at time of writing | R110 per card | N/A |
| ATM withdrawals per transaction | $2.00 | $2.00 | R25.70 plus 1.6% per ATM transaction |
| Commission exchange rate conversion. | 1.5% - 2% | 1.875% with a minimum of R55.00 | 2.75% |
| Maximum balance | $40k | $60K | Unlimited |
| Point Of Sale Limit / day | Up to credit balance | $7500.00 | Unlimited |
| Maximum withdrawal at ATM per day | $ 1500 | $2500 | |
| Interest earned on positive balance | 0% | 0% | Refer to your contract |
| Exchange rate fixed | At day of recharge | At day of recharge | At day of transaction |
| Emergency replacement | Yes- backup card and courier where ever you are in 5 business days | Yes- backup card and courier where ever you are in 24 hours | No but confirm with your bank |
| Reloadable | Many times BUT In person in South Africa | Can arrange for monthly recharges in remaining of calendar year, even though you not present in person at the place of purchase. For the next calendar year reactivate the reload at the place of purchase once more. | Normal like Online transfers |
| Remaining credit payback | Yes | Yes | n/a |
| Validity period | Card has an expiry date which means it needs to be replaced but funds are not lost at expiry | Card has an expiry date which means it needs to be replaced but funds are not lost at expiry | See dates on your cards |
| Exchange rate sell rates | Not the same as the daily exchange rate you see on TV. It is higher or lower depending if you buy or sell sample TV=R9.08:$1 Bank was R9.29 | Not the same as the daily exchange rate you see on TV. It is higher or lower depending if you buy or sell sample TV=R9.08:$1 Bank was R9.29 | Not the same as the daily exchange rate you see on TV. It is higher or lower depending if you buy or sell sample TV=R9.08:$1 Bank was R9.29 |
Please note that this is not financial advice but merely a reflection of my experience. It’s very important that you seek expert advice from an appropriate accredited financial advisor. Maybe it comes easy for financial experts but for the majority of us this is a mine field and somewhat of a grey area.
