Online banks: The best option for expats?

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Published 2019-06-21 12:00

In the early 2000s, the banking sector experienced a small revolution: surfing the vibe of the internet boom, online banks started emerging. The most effective communication campaigns, ease of use, quick and efficient service, savings… what’s not to like? After courting the so-called traditional customers, expatriates have become a target of choice for online banks.

Where to look?

Online banks have completely changed the banking scene. So much so, that after the wake of online banks, traditional banks started creating their own branches of online banks and buying other smaller online banks. With the economic crisis, no one wanted to pay for services they are not using. Everyone wants value for money. Besides, moving abroad is no longer an issue for those who are looking for a better standard of living.

While it is advised to keep your home bank account, more and more banks are offering attractive options at discounted rates. Studies reveal that online banking is at least three times less costly than having a physical bank account. Procedures are more straightforward since you don't need to visit a branch or an agent, so you can easily get away on your own.

Online banking is a good deal in a way that maintenance fees are not required. Some banks even offer a debit card for free. Also, expect a gift like 80 to 100 euros on your account as a new client. Regarding obtaining credit, interest rates are rather competitive, ranging from to 1.5% to 5%, 12% being the maximum rate. But have you ever wondered about the cons of online banking?

Expats, in particular, can find it tricky to use their debit card abroad. In fact, the difference between reality and the bank's offer can be quite shocking.

The other side of the coin

It's worth noting that some banks apply a 2% fee on transactions outside the eurozone. What if you had to withdraw money on an ATM abroad? Expect a 2% commission here again!

If you are in their eurozone, there is nothing to worry about, however, make sure to inquire with your bank first and compare offers. Expats are usually familiar with overdrafts, investments and other more complex financial operations. Most virtual banks offer overdrafts with fees ranging between 7% and 8%, but if you exceed the authorised limit, the fee hike can reach up to 16%!

Loss and theft insurance is free of charge with some banks but strictly limited. It is best to subscribe to insurance providing real-time benefits, even if it's more expensive (around 30 euros per year).

The evolution of neobanks

Neobanks are 100% digital banks and are ahead of traditional online banking. These are smartphone-friendly and, therefore, expat-friendly as well. You just need to download the app to get anything done.

Most of these banks are free of charge during the first few months. Some of come with a classic offer including a MasterCard for free. Moreover, there are no transaction fees, even outside the eurozone.

On the minus side: don't expect an overdraft, credit, or a savings booklet. Even though these services have been suppressed voluntarily, neobanks still cater to the various needs of expats.

Security is another crucial issue, security breaches and money laundering having spared very few banks around the world. While it is true that scanned documents required for opening an account are verified, experts seem to worry about the whole process. In fact, it is not hard to create an account with fake documents, thus putting at risk client personal information, but this doesn't dissuade banks and their millions of users.

How to make the right choice?

Online banking has an undeniable amount of benefits, meeting the needs of customers wherever they may be. Why would you go to the bank or get a personal banker just to withdraw money or make some payments? However, online banking targets a specific part of the population: smartphone addicts!