Offshore Banking & Bank Account Terms Made Easy

Choosing the right account for you isn’t always a straight forward decision. There’s so much choice on the market and accounts can vary widely. For expats, the choice can be even harder.

Given the wide range of products available, it is important for expats to understand exactly what terms are relating to their account. You don’t need to become an expert instantly, but just by learning a handful of these terms you can save yourself time and often unnecessary confusion or worry.

Access Accounts

These products generally give you immediate access to your money upon request, without penalties. These are also known as Demand Accounts.

Annual Equivalent Rate (AER)

The amount you will be given for any money held in a savings account is presented to you as a percentage Annual Equivalent Rate (%AER). The AER is given to demonstrate what your interest return would be if the interest was compounded and paid annually instead of any other period (e.g. monthly).

Documentation

In order to facilitate the opening of regular or offshore savings accounts, banks are required to have completed the necessary Due Diligence on the applicant in order to confirm their identity. Therefore the banks are legally obliged to request documentation of proof of identification (such as a passport) and up to two separate items that prove your address. Typically, this proof of address can be a utility bill or a bank statement.

Fixed Interest Accounts

The Interest rate offered or advertised is fixed for the term of your account. The interest rate offered is generally higher than that available on a variable rate Notice or Access Account.

Gross

This term generally means before deductions, when banks are promoting their products you will often see the interest rate followed by the term “gross”. This will generally mean the rate of interest earned on a deposit account before the deduction of tax.

Multi-Currency

When a bank is offering their products in more than one currency. The most popular currencies are the United States Dollar (USD), the British Pound (GBP) and the Euro (EUR).

Notice Accounts

A savings account on which the customer is contracted to give a specified notice period before making a withdrawal, usually in return for higher interest rates. A penalty may be imposed by the bank if a withdrawal is made prior to or without the agreed notice period being undertaken.

Retention Tax

A mandatory tax placed on income (interest) that is earned on savings accounts in a country that is not the resident's home country. This only applies to countries that are members of the European Union (EU). This is deducted at source by the bank providing the savings account and is currently at a rate of 20% p.a.

Variable Rate Accounts

As the name suggests the interest payable on these accounts is not fixed, and can be changed at any time by the bank providing them.