French bank account for U.S. student

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RanranChun
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Joined: Thu Jul 11, 2019 1:45 am

French bank account for U.S. student

Post by RanranChun » Thu Jul 25, 2019 11:37 pm

My son (U.S. citizen) will be starting at the American University of Paris next month. AUP has a relationship with a French bank with a branch near campus and offers to help foreign students open an account there prior to arrival. I know my son can use his U.S. bank debit card for purchases (no international transaction fees!) but we are thinking it would also be wise for him to have a French bank account for withdrawing cash from the ATM.

Say my son finishes at AUP and returns to the States but wants to retain his French account, mainly for convenience because he plans to travel frequently to France as a young adult for leisure or for work. If we leave just the minimum required balance on deposit, 100 Euros or whatever it is, what will be the ramifications of that on his future U.S. tax returns? If the account pays interest, will he have to claim those couple of Euros as foreign income? What about if the account does not pay interest? Thanks Bogleheads!

danielbird193
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Re: French bank account for U.S. student

Post by danielbird193 » Fri Jul 26, 2019 1:36 am

Be aware that most French banks impose a monthly charge for a simple current account. If he wants to keep the account long-term, he may be better off opening a multi-currency account with someone like Revolut or TransferWise. He will definitely be able to open the account when he gets to France, I'm not sure if he can do it from the US before he gets there.

I'm afraid I'm not knowledgeable enough about US taxes to answer the specific tax question.

fujiters
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Re: French bank account for U.S. student

Post by fujiters » Fri Jul 26, 2019 2:22 am

Why not just use a Transferwise Borderless account?

https://transferwise.com/us/borderless/

For ATM withdrawals, a no foreign transaction fee (FTF) ATM card that reimburses ATM fees, like Schwab offers, is also a good option. I use this when I withdraw cash abroad (and also within the US). In most developed countries, you can make most purchases with a credit card though, so more important would be to make sure he has a Visa or Mastercard without FTF that ideally gets a good rate of cash back. Bonus: it's way better to have one's credit card stolen than cash.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

AlohaJoe
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Re: French bank account for U.S. student

Post by AlohaJoe » Fri Jul 26, 2019 2:44 am

RanranChun wrote:
Thu Jul 25, 2019 11:37 pm
If we leave just the minimum required balance on deposit, 100 Euros or whatever it is, what will be the ramifications of that on his future U.S. tax returns?
He will possibly also have to file a French tax return, since he has French-sourced income.
"Non-residents usually pay tax on their France-sourced income at a minimum French tax rate of 30%"
Then, yes, he would also include the foreign income on his US tax return -- and use the foreign tax credit to offset the amount owed.

jminv
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Re: French bank account for U.S. student

Post by jminv » Fri Jul 26, 2019 4:48 am

RanranChun wrote:
Thu Jul 25, 2019 11:37 pm
My son (U.S. citizen) will be starting at the American University of Paris next month. AUP has a relationship with a French bank with a branch near campus and offers to help foreign students open an account there prior to arrival. I know my son can use his U.S. bank debit card for purchases (no international transaction fees!) but we are thinking it would also be wise for him to have a French bank account for withdrawing cash from the ATM.

Say my son finishes at AUP and returns to the States but wants to retain his French account, mainly for convenience because he plans to travel frequently to France as a young adult for leisure or for work. If we leave just the minimum required balance on deposit, 100 Euros or whatever it is, what will be the ramifications of that on his future U.S. tax returns? If the account pays interest, will he have to claim those couple of Euros as foreign income? What about if the account does not pay interest? Thanks Bogleheads!
He absolutely has to have a French bank account to do pretty much anything in France that involves the state (eg free health insurance after month 3 in country) and signing private contracts (eg cheap cell phone plans, electricity, internet). It's not just for the ATM (which, btw, you can withdraw from any French ATM with any French bank card for free). This is because you need to provide the RIB (French bank account detail sheet) for many administrative tasks. The electricity and internet won't be applicable if he's staying in student housing where utilities are provided but if he's not, he has to have the French account to open an electricity account. If he's not in student housing, the electricity contract is the standard proof of address demanded by the government for every interaction. Apply for the health insurance at the 3 month mark to save yourself money on having to pay for his private cover - every legal resident is entitled to it but you can't do it if you don't have the French bank account RIB to mail in with the application and you won't get reimbursed without it either. It's also basically free money for students and parents. Same with the housing assistance he will also be eligible for which requires a French bank account. Not having a French bank accounts make's ones life in France more difficult and more expensive.

It is true, as another poster mentioned, that banks in France generally charge monthly fees and I'd also mention that the free internet banks won't take American customers. Luckily for your kid, the student accounts of the banks that open accounts on campus or prior to arrival typically have no fees. Another benefit of opening a student account is they typically give you one free year of student housing + private liability insurance which is mandatory in France, so saves you around 100 euros immediately. If one of the partners offers that, I would take it. You should look at the fee schedule for the account and hopefully the student one has no debit card fee and no monthly fee.

For example, BNP Paribas has the following promotion for international students:
https://mabanque.bnpparibas/rsc/contrib ... age=ETUD19
3 years of free debit card and no account fees

BNP might also have a tailored offer of free housing and private liability insurance depending on what their deal with AUP is. BNP is typically the most american friendly bank.

After your kid leaves France, the bank will transfer him to the non-resident section. I would keep the account given that you think he will travel frequently to France for work and leisure so he might move back. Assuming he can't transfer himself to one of the free accounts banks, it will cost around 30 euros for the debit card and 24 euros a year for the account. They charge these fees because there's not much money to be made lending out given the interest rate environment while operating a branch network. The branchless internet networks that are free typically deny Americans.

The Transferwise borderless account, which another poster mentioned, is not a solution because it does not have a French RIB. It's a great account but not for what you need administratively in France.

If the account is under 10k dollars it you won't have to report it with the FBAR at US tax time so it doesn't complicate things. You would have to pay report interest but luckily for you French checking accounts don't pay any interest given the interest situation in the EU.

Topic Author
RanranChun
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Re: French bank account for U.S. student

Post by RanranChun » Fri Jul 26, 2019 4:12 pm

@jminv - thank you very much for the thorough information. Looks like getting a local French bank account is essential so my son will work on getting that set up ASAP.

Do you know if French bank ATMs also allow use of a U.S. bank or credit union debit card to withdraw cash without a fee? Doing a little research online seems to indicate that is the case, but when I ask our bank and credit union they won't say definitively. They do warn against using private ATM machines (not affiliated with a bank), as they will almost certainly charge fees. But in your experience do most major French banks allow American tourists to pull cash from their ATMs, and if so do they typically charge fees? I'm referring to an ATM fee, not a foreign transaction fee that the home bank may charge. Thanks again.

jminv
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Re: French bank account for U.S. student

Post by jminv » Fri Jul 26, 2019 4:43 pm

RanranChun wrote:
Fri Jul 26, 2019 4:12 pm
@jminv - thank you very much for the thorough information. Looks like getting a local French bank account is essential so my son will work on getting that set up ASAP.

Do you know if French bank ATMs also allow use of a U.S. bank or credit union debit card to withdraw cash without a fee? Doing a little research online seems to indicate that is the case, but when I ask our bank and credit union they won't say definitively. They do warn against using private ATM machines (not affiliated with a bank), as they will almost certainly charge fees. But in your experience do most major French banks allow American tourists to pull cash from their ATMs, and if so do they typically charge fees? I'm referring to an ATM fee, not a foreign transaction fee that the home bank may charge. Thanks again.
French ATMs do take USA debit cards. It will be no fee only if your USA debit card has international atm refund (Schwab, others). He will be able to deposit physical euros into his French bank account at one of the bill collector ATMS inside the bank branches (no tellers), ie, if you want to use the ATM as a way for him to take out euros for his expenses. Keep in mind that recently some French ATMs machines are doing dynamic currency conversion with USA dollar cards very sneakily where it will appear that you have to select accept to get the cash (you don't, you can decline the conversion that's not really labeled as a conversion). The spread is 5% and it's the sneakiest DCC I've seen. Usually, DCC is just something you see in stores, hotels, etc, not at ATMs and is clear ('pay in EUR' or 'pay in USD').

USA debit cards do not work for some specific things in France. This most often occurs when it's a self checkout option such as a train (although often you can), reloading funds on a card (such as his student ID card), McDonalds self checkout, some grocery self checkouts, etc.

If you want to send him money periodically, I would suggest using transferwise to send him money to his French bank account. It's simple, fast, and generally has the best rates.

Edit: Once he has his French bank account, he will need to change the default withdrawal limits on his French debit card since they are set absurdly low by default. Not doing so will result in frustration. He will need to set how much money he's allowed to withdraw at an ATM in one week and how much he can charge to the card. It's a security measure. He can also set the geographical zones that his card will function in (ie, France, Europe, the USA and exclude all others). He will also have to enable online purchasing if he wants and setup a two factor authentication for it. He will be able to get his RIB on the online banking portal and use it to open a cell phone plan (Red by SFR is the cheapest, and one of their plans includes roaming in the USA plus unlimited calling to the USA). There's some oddities in French banking versus the USA but it does make sense.

criticalmass
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Re: French bank account for U.S. student

Post by criticalmass » Fri Jul 26, 2019 5:18 pm

Banking in France can be frustrating if you are used to free everything offered by some US banks, but it is essential for many basic domestic tasks. Despite a school relationship with one bank, I'd still shop around, although to be honest there aren't too many banks in France compared to the USA. ING Direct can be a good low fee option, as ING Direct doesn't charge all the fees that other banks do. And expect a hassle and a long time needed to open an account in the land of cheese and bureaucracy. Or if you need a full service bank, Crédit Agricole may offer lower fees than BNP.

Also note that France doesn't have credit cards. The closest approximation if the deferred debit card (débit différé) that delays debiting your current account (checking) for purchases until the end of the month--you generally pay a higher fee for the privilege.

Debit cards can also have higher fees (but still relatively modest) than checks, even in the land of smart cards.

Also, services like XE.com and OANDA can make moving money between euros in France and dollars in USA easy, quick, and very low cost without fees and good rates.

Topic Author
RanranChun
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Joined: Thu Jul 11, 2019 1:45 am

Re: French bank account for U.S. student

Post by RanranChun » Fri Jul 26, 2019 8:17 pm

Thanks @jminv and @criticalmass!

Another question (sorry, hopefully the last one :?): is it typical in France to be able to get cash back when making purchases using your debit card, say while buying groceries at the supermarket? Here in the States, it's easy to get $40 back while paying for the goods. If this is also the custom in France, any drawbacks to doing so? Would any sneaky fees apply if cash were obtained this way, rather than pulling it from a bank ATM? My question applies for BOTH using a French bank debit card as well as the debit card from his US home credit union. Thank you.

HawkeyePierce
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Re: French bank account for U.S. student

Post by HawkeyePierce » Fri Jul 26, 2019 10:11 pm

I used BNP Paribas when I studied at the University of Strasbourg and I don't recall a maintenance fee. Sounds similar to AUP's setup as it was a student account.

I wouldn't bother keeping the account around afterwards unless he actually plans to live and work in France. Far easier to just get a Schwab account and use their debit card to withdraw money for free if you're just traveling.

IIRC cash-back wasn't a thing there but I could be wrong. Just use ATMs.

I would do the following:

1) Open the BNP Paribas account. You'll need a real French account.

2) Schwab debit card. Use this to withdraw Euros at any ATM with no fees. First Tech FCU is also a good alternative and their card is true chip-and-PIN but they charge a 1% conversion fee. They also offer chip-and-PIN credit cards.

3) Transferwise for moving large amounts of dollars and Euros back and forth. You would use Transferwise to pull dollars from your US account and push them as Euros into BNP Paribas. Transferwise also now offers a multi-currency debit card.

4) A credit card with no foreign transaction fee. Again, First Tech is a good option here since they offer true chip-and-PIN cards with no annual fee. Barclay's Arrival card is also solid on that front. Beyond that there are dozens of options from all the usual suspects (Chase, Citi, Cap One, etc).

jminv
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Re: French bank account for U.S. student

Post by jminv » Sat Jul 27, 2019 3:24 am

RanranChun wrote:
Fri Jul 26, 2019 8:17 pm
Thanks @jminv and @criticalmass!

Another question (sorry, hopefully the last one :?): is it typical in France to be able to get cash back when making purchases using your debit card, say while buying groceries at the supermarket? Here in the States, it's easy to get $40 back while paying for the goods. If this is also the custom in France, any drawbacks to doing so? Would any sneaky fees apply if cash were obtained this way, rather than pulling it from a bank ATM? My question applies for BOTH using a French bank debit card as well as the debit card from his US home credit union. Thank you.
Cash back at grocery stores was not allowed by law until last year. Currently, only the Casino chain offers it at their Géant stores but there’s not much uptake. They’re allowed to charge a fee but I don’t think Casino does. The maximum you can get back is 50 euros at Géant. In any case, there’s only one Géant in Paris and it’s not anywhere near AUP. I don’t think the other casino chains offer it yet (casino, Franprix, leader price). Don’t know whether you can use American debit card or not for that. I think you might be able to since they don’t treat it as cash back really but as an extra purchase (I read Le Parisien article and they say that you have to ask the cashier to scan a barcode). Who knows though.

Just stick to ATMs for cash, it’s way simpler and there are lots more of them.

Johnfmh
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Re: French bank account for U.S. student

Post by Johnfmh » Sat Jul 27, 2019 5:40 am

HawkeyePierce wrote:
Fri Jul 26, 2019 10:11 pm
I used BNP Paribas when I studied at the University of Strasbourg and I don't recall a maintenance fee. Sounds similar to AUP's setup as it was a student account.

I wouldn't bother keeping the account around afterwards unless he actually plans to live and work in France. Far easier to just get a Schwab account and use their debit card to withdraw money for free if you're just traveling.

IIRC cash-back wasn't a thing there but I could be wrong. Just use ATMs.

I would do the following:

1) Open the BNP Paribas account. You'll need a real French account.

2) Schwab debit card. Use this to withdraw Euros at any ATM with no fees. First Tech FCU is also a good alternative and their card is true chip-and-PIN but they charge a 1% conversion fee. They also offer chip-and-PIN credit cards.

3) Transferwise for moving large amounts of dollars and Euros back and forth. You would use Transferwise to pull dollars from your US account and push them as Euros into BNP Paribas. Transferwise also now offers a multi-currency debit card.

4) A credit card with no foreign transaction fee. Again, First Tech is a good option here since they offer true chip-and-PIN cards with no annual fee. Barclay's Arrival card is also solid on that front. Beyond that there are dozens of options from all the usual suspects (Chase, Citi, Cap One, etc).
Agree with everything but the money transfer methodology. I found it much cheaper to convert USD to EUR in a Fidelity account, wire it to my EUR denominated Transferwise account, and then do an IBAN transfer to a local bank account via Transferwise. This way you get pretty close to the interbank rate on the conversion and the Fidelity wire and incoming EUR to TW were free. The only hassle was having to visit a Fidelity branch to secure a Gold Medallion signature for the wire but you can setup standing wire instructions, making regular branch visits unnecessary.

PS: As a side note, the TW debit card is great for store transactions but as an ATM card it has its limitations.
1. There is a €250 per month cash limit for withdrawals. If you exceed this amount, you get charged 2% per withdrawal.
2. TW does not have an ATM network so the user is liable for any ATM fees charged by a bank. Fidelity/Schwab reimburses these fees.

HawkeyePierce
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Location: Colorado

Re: French bank account for U.S. student

Post by HawkeyePierce » Sat Jul 27, 2019 5:56 pm

What does Fido charge for outgoing wires? I looked into doing the same with Schwab but the wire fee is $25 which was much more than Transferwise.

Right now I push money from Schwab to Transferwise which avoids Transferwise's ACH fee. I added my Transferwise USD account as a linked bank account from the Schwab side and Transferwise doesn't charge for incoming ACH transfers initiated from the sending bank.

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