Don't Want To Keep 800,000 Baht In A Thai Bank?

[mahjongguy]

It's apparently a fact that more than half of those on retirement visas use the bank balance + income method. Let's talk about that. Not about the current hassles and verification requirements and "Thailand doesn't want us", but simply why does this method appeal to so many.

Fact: If you bring in a million baht three months before your renewal date, have 800k on the renewal date, and drain it down for the next nine months, you will earn (only) about 5,000 to 6,000 baht non-taxable interest.

Fact: If you use the income method and only keep 400,000 baht here, presumably this allows you to keep the other 400,000 baht equivalent in your home country, earning (at most) 5% there. That's 20,000 baht equivalent, on which you will presumably pay home country taxes.

Fact: If you use your home country credit card for purchases in Thailand, you will be charged an additional 2% to 3% by the card issuer, on top of a discretely biased exchange rate.

Fact: If you use your home country bank's ATM card here, you will lose at least 1% for the currency exchange, plus pay a fee for one or both ends of the transaction. The ATM fee(s), the currency exchange fee, and the biased exchange rate may be itemized or they may be hidden but they are definitely there.

I guess you can see where I'm going with this. It doesn't matter whether you are rich or merely a pensioner, the fact remains that while the income method prevents the loss of a useful several hundred dollars in interest, it may encourage the use of credit cards and overseas ATM cards that may more than offset the difference in interest rates.

I do not use my US credit card nor my US ATM card. I make wire transfers into K-bank 2 or 3 times a year. I use my K-card to make debit purchases at places like Central and BNH Hospital. Otherwise I take cash from their ATM machines (and I can use any other bank's machines 3 times a month). I use their online banking to pay my rent, my DSL bill, my partner's allowance, and top up my 1-2-Call SIM card.

It's simple to manage and avoids the whole can of worms involved in income verification.

So, tell me folks, what am I missing here?

[Jingthing]

The other cool thing about it is currency hedging. We care about baht and we care about our home country currency. By holding a million in baht, there is an element of hedging to that.

Edited August 3, 2007 by Jingthing

[mahjongguy]

The other cool thing about it is currency hedging. We care about baht and we care about our home country currency. By holding a million in baht, there is an element of hedging to that.

Well, for simplicity's sake I avoided the discussion of exchange rates, but yes, it's part of the equation.

My last transfer was US$10,000 at 34.70. Minus US$27 for the transfer out and 500 baht for the transfer in. Certainly better than today's 33.65. If and when the baht starts to slide, I may make fewer smaller transfers, hoping to work the upside of the curve, but in the end it's a gambler's game.

On another note, I have asked myself, here I am alone in a far country. Is it a bad thing to have 800,000 baht in a local bank? What if there is a big earthquake in California? The banks could, with no great imagination, take two weeks to come back online. Won't I be glad to be a little bit independent of system problems in the US?

Edited August 3, 2007 by mahjongguy

[endure]

Fact: If you use your home country credit card for purchases in Thailand, you will be charged an additional 2% to 3% by the card issuer, on top of a discretely biased exchange rate.

Fact: If you use your home country bank's ATM card here, you will lose at least 1% for the currency exchange, plus pay a fee for one or both ends of the transaction. The ATM fee(s), the currency exchange fee, and the biased exchange rate may be itemized or they may be hidden but they are definitely there.

If you come from the UK and have the right ATM & credit cards (Nationwide ATM/credit card and Post Office credit card) neither of the above are true.

[mahjongguy]

Fact: If you use your home country credit card for purchases in Thailand, you will be charged an additional 2% to 3% by the card issuer, on top of a discretely biased exchange rate.

Fact: If you use your home country bank's ATM card here, you will lose at least 1% for the currency exchange, plus pay a fee for one or both ends of the transaction. The ATM fee(s), the currency exchange fee, and the biased exchange rate may be itemized or they may be hidden but they are definitely there.

If you come from the UK and have the right ATM & credit cards (Nationwide ATM/credit card and Post Office credit card) neither of the above are true.

Details, please.

Are you convinced, through a close scrutiny of the day's rates, that you can get something close to the published onshore baht rates through either of those vehicles? I'm not doubting your word, but I do know that every interloper gets a slice, and the particulars can be very difficult to suss out. I agree that some banks waive their own foreign ATM fees (but not the originating bank's fee, even if not itemized) and some credit card issuers only add 1% to the 1% exchange fee rather than 2%, but to my knowledge you can't beat a direct bank-to-bank dollars/pounds/euros to baht wire transfer.

[JetsetBkk]

It's apparently a fact that more than half of those on retirement visas use the bank balance + income method. Let's talk about that. Not about the current hassles and verification requirements and "Thailand doesn't want us", but simply why does this method appeal to so many.

Fact: If you bring in a million baht three months before your renewal date, have 800k on the renewal date, and drain it down for the next nine months, you will earn (only) about 5,000 to 6,000 baht non-taxable interest.

I don't get any interest. What bank are you with?

Fact: If you use the income method and only keep 400,000 baht here, presumably this allows you to keep the other 400,000 baht equivalent in your home country, earning (at most) 5% there. That's 20,000 baht equivalent, on which you will presumably pay home country taxes.

If you've got 400,000 in a Thai bank and 400,000 equivalent at home, where does your income come from? If it comes from the money at home, your earned interest will be reduced as it gets depleted - you'd get 5% of 200,000 (the average amount) = 10,000 baht.

Fact: If you use your home country credit card for purchases in Thailand, you will be charged an additional 2% to 3% by the card issuer, on top of a discretely biased exchange rate.

I pay cash for everything here. I never use a credit card for cash withdrawals here and never did when I lived in my home country. The charges are crazy.

Fact: If you use your home country bank's ATM card here, you will lose at least 1% for the currency exchange, plus pay a fee for one or both ends of the transaction. The ATM fee(s), the currency exchange fee, and the biased exchange rate may be itemized or they may be hidden but they are definitely there.

Not true for all "home country credit cards". Nationwide bank: 0% charge, 'unbiased' exchange rate.

I guess you can see where I'm going with this. It doesn't matter whether you are rich or merely a pensioner, the fact remains that while the income method prevents the loss of a useful several hundred dollars in interest, it may encourage the use of credit cards and overseas ATM cards that may more than offset the difference in interest rates.

I do not use my US credit card nor my US ATM card. I make wire transfers into K-bank 2 or 3 times a year. I use my K-card to make debit purchases at places like Central and BNH Hospital. Otherwise I take cash from their ATM machines (and I can use any other bank's machines 3 times a month).

Same here - but different bank.

I use their online banking to pay my rent, my DSL bill, my partner's allowance, and top up my 1-2-Call SIM card.

Or you could pay at a 7/11 - 10 baht.

It's simple to manage and avoids the whole can of worms involved in income verification.

So, tell me folks, what am I missing here?

Short answer: not a lot!

If you have 1,000,000 in a Thai bank and spend it all over one year you lose about 5% of 500,000 (the mean value over the year) = 25,000 baht, compared with having that money at home.

Plus the annual home bank to Thai bank transfer fee, equivalent to ~ 1,500 baht.

Total: 26,500

Compare this to an exchange rate fluctuation of 1 baht per dollar.

$30,000 @ 33baht/$ = 990,000 baht

$30,000 @ 32baht/$ = 960,000 baht - loss of 30,000 baht.

I think you've got (and me) more to worry about with the currency fluctuations!

It helps to do the annual transfer when your home currency is at a "peak" vs. the baht. But that's often just luck!

Edit:

Just seen a lot of new posts while I was writing this that have covered some of my points. Sorry!

Edit 2:

Oops - don't know why I wrote "National Westminster" - should've been "Nationwide".

Edited August 3, 2007 by JetsetBkk

[endure]

Do a search on "Nationwide Flexaccount" on Thaivisa for plenty of evidence that they pay as near to the interbank rate as an ordinary punter is likely to get when drawing sterling from a Thai ATM. Both the Nationwide and the Post Office credit cards make no charge on foreign currency purchases.

[JetsetBkk]

On another note, I have asked myself, here I am alone in a far country. Is it a bad thing to have 800,000 baht in a local bank? What if there is a big earthquake in California? The banks could, with no great imagination, take two weeks to come back online.

A bit unlikely!! But anyway, this is where the "don't invest more than you can afford to lose" clause comes into play!

[cali4995]

I never have fully understood where all the point shaving takes place. I used to think you got a pretty good deal withdrawing Thai currency from the local ATM using your overseas debit card. For example on 7-31 I withdrew 10k THB. My online banking shows this was 300.35 USD. My home bank does charge a 1.50$ foreign atm withdrawal fee. Before the fee, that comes out to an exchange of 33.29 baht/$. On Krung Thai's currency exchange page for that day, they're buying bank notes at 33.39 baht/$. I'm sure Mahjongguy is probably right, with all the chances for people to take a slice of the pie I must be missing something or not completely understanding how this all works. Is that really a bad rate?

http://www.cb.ktb.co.th/prod/bishis.nsf (bank exchange page)

[mahjongguy]

I used to think you got a pretty good deal withdrawing Thai currency from the local ATM using your overseas debit card. For example on 7-31 I withdrew 10k THB. My online banking shows this was 300.35 USD. My home bank does charge a 1.50$ foreign atm withdrawal fee. Before the fee, that comes out to an exchange of 33.29 baht/$. On Krung Thai's currency exchange page for that day, they're buying bank notes at 33.39 baht/$. ...Is that really a bad rate?

I agree that using a home country ATM card is pretty fair deal, plenty good for a tourist, but not so great for an expat.

Look at your bank's TT rate, not the $100 note rate. The TT rate is the rate you get for wire transfers and it's the best you and I as individuals will get.

The TT rate for that day was 33.65. So, you missed out on 1%. If you withdrew $200, then your $1.50 fee was an additional 0.75%, for a total loss of 1.75%. Do that all year long for 800,000 baht and you've lost 14,000 baht. It's not a huge loss but it eats up a lot of the interest that your money earned sitting back home.

And, generally ATM withdrawals come out of accounts that only earn 1% to 3% interest, so in order to actually earn 5% you must constantly be moving money out of higher-paying vehicles like CD's and Treasury bills into the ATM account.

The British expats in this forum are convinced that Nationwide is providing foreign exchange services for free on their ATM and credit cards. If that is true then they are indeed fortunate to be customers of such a generous institution.

[khunphilip]

Fact: If you use your home country credit card for purchases in Thailand, you will be charged an additional 2% to 3% by the card issuer, on top of a discretely biased exchange rate.

Fact: If you use your home country bank's ATM card here, you will lose at least 1% for the currency exchange, plus pay a fee for one or both ends of the transaction. The ATM fee(s), the currency exchange fee, and the biased exchange rate may be itemized or they may be hidden but they are definitely there.

If you come from the UK and have the right ATM & credit cards (Nationwide ATM/credit card and Post Office credit card) neither of the above are true.

Glad to hear you are not charge by nationwide for atm use howevever you get alot lower rate of exchange than telex transfers i.e. checked nationwide todays rate 6 bath per uk poundlower than the F.T.T. TRANSFER so carry on with the no charge service

Edited August 4, 2007 by khunphilip

[mahjongguy]

On another note, I have asked myself, here I am alone in a far country. Is it a bad thing to have 800,000 baht in a local bank? What if there is a big earthquake in California? The banks could, with no great imagination, take two weeks to come back online.

A bit unlikely!! But anyway, this is where the "don't invest more than you can afford to lose" clause comes into play!

Monster earthquakes aren't the only concern. Here's a more realistic one:

Last year a hacker got ahold of several million ATM PINs. BofA, Wells Fargo, Citibank and others locked out all foreign use of the affected ATM cards. No warning, no explanation, just cut off. Each holder had to request a new card, which would only be mailed to their US address.

I was one of those people. Happily, I wasn't using the card in Thailand, so I just picked up the replacement on my next annual trip back.

But, I use that card when I travel to HK, Singapore, Bali, so I upgraded my K-bank card to one that is usable worldwide via Cirrus and other networks.

[Naam]

generally ATM withdrawals come out of accounts that only earn 1% to 3% interest, so in order to actually earn 5% you must constantly be moving money out of higher-paying vehicles like CD's and Treasury bills into the ATM account.

it doesn't make too much sense to generalise and focus on the procedure of british or american banks as well as their interest rates.

e.g. my [swiss] bank in Singapore pays 5.25% on overnight USD and 4.025% on €UR.

[cali4995]

Mahjongguy thanks for the explanation. Yes, I see now what you're saying there is a wire transfer rate and then

.3 -.4 tenths lower is the bank note / debit card rate. With all the different fees, charges and conversions you really have to pay attention. It's helpful to understand a little more about the swift transfer method.

[bkk_mike]

Fact: If you use your home country credit card for purchases in Thailand, you will be charged an additional 2% to 3% by the card issuer, on top of a discretely biased exchange rate.

Fact: If you use your home country bank's ATM card here, you will lose at least 1% for the currency exchange, plus pay a fee for one or both ends of the transaction. The ATM fee(s), the currency exchange fee, and the biased exchange rate may be itemized or they may be hidden but they are definitely there.

If you come from the UK and have the right ATM & credit cards (Nationwide ATM/credit card and Post Office credit card) neither of the above are true.

Glad to hear you are not charge by nationwide for atm use howevever you get alot lower rate of exchange than telex transfers i.e. checked nationwide todays rate 6 bath per uk poundlower than the F.T.T. TRANSFER so carry on with the no charge service

Where did you see that rate? - 6 baht difference can't be true - or I wouldn't be able to take out 20K in one shot (as UK banks have a £300 daily ATM withdrawal limit).

If you're comparing the Nationwide's foreign currency rate (i.e. buying baht notes in the UK), then yes, those rates are really awful. But that's not the rate you pay when you take money out at an ATM in Thailand. (You're paying for them getting the physical Notes to you).

Nationwide has NO spread on FX rate (or to be more precise - didn't have a spread until the Thai government introduced their bloody stupid transfer limits last year - now there's an artificial onshore/offshore spread because of that - because it's affected the REAL FX market directly.)

However, it is nothing even approaching 0.6 baht, let alone 6 baht per £1

Nationwide also swallows the 1% that visa charges them on ex-EU cash advances.

Check out - moneysavingexpert.com if you don't believe what we're saying.

The reason why it's so cheap - Nationwide is NOT a bank. It's a Building Society (which in the US would be called a Savings & Loan), has no shareholders, and is run for the benefit of customers...

There are things it can't do because it's not a bank, and if you transfer money to the card it's often more than a week before you can actually use it, so it's far from perfect, but it IS cheap.

[Fred Sanford]

I have a gold account in Fidelity Investments and pay no ATM fees and grab the same exchange rate as a wire transfer and I earn 5% on top of that. Been banking like this for a few years and keep zero in a Thai bank. Works for me quite nicely.

[mahjongguy]

The reason why it's so cheap - Nationwide is NOT a bank. It's a Building Society (which in the US would be called a Savings & Loan), has no shareholders, and is run for the benefit of customers...

There are things it can't do because it's not a bank, and if you transfer money to the card it's often more than a week before you can actually use it, so it's far from perfect, but it IS cheap.

I'm glad to hear it. It means that for UK folks the equation works out differently. The interest savings are not much eroded by cc and ATM card fees and poor rates. Still, given the current tightening and other factors, it seems to me that the 800k method is well worth the lost interest, even for expat Brits.

[JetsetBkk]

Glad to hear you are not charge by nationwide for atm use howevever you get alot lower rate of exchange than telex transfers i.e. checked nationwide todays rate 6 bath per uk poundlower than the F.T.T. TRANSFER so carry on with the no charge service

Nonsense.

[mahjongguy]

I have a gold account in Fidelity Investments and pay no ATM fees and grab the same exchange rate as a wire transfer and I earn 5% on top of that. Been banking like this for a few years and keep zero in a Thai bank. Works for me quite nicely.

Yup, that is an excellent benefit. Your lost interest at 400k and especially at 800k would be a useful chunk of dough.

I guess that means you are on a "100% income, no bank balance" method. I know someone who got that (at Suan Phlu) for his first retirement visa a few months back, but I doubt that it will work on his next renewal.

[lopburi3]

Why would it not work next year? If you have confirmation of 65k pension you do not need to maintain any set bank account balance.

[mahjongguy]

Why would it not work next year? If you have confirmation of 65k pension you do not need to maintain any set bank account balance.

Is the "100% income, no bank balance" method an official option for retirement visas? It's not mentioned in Police Order 606/2549.

If so, and if it is still an official policy on October 1st, then great.

[mahjongguy]

I'm glad I started this thread. In less than a day it's already brought out some interesting info, and it's clearer to me now why more than half use the 400k method.

For myself, though, regardless of Immigration's requirements, I am happy to keep something close to a million baht in a Thai bank. It simplifies my financial activity quite a bit, and it serves as a diversification of my assets.

With the baht killing me and the sudden pullback in the stock markets, I just can't get excited about saving 4% (taxable) interest on US$12,000, not if it means any extra hassles.

[lopburi3]

It most surly is mentioned in 606/2006 para 7.21 (3) as below:

(1) Foreigner shall obtains VISA for

temporary stay and,

(2) Shall not be younger than 50

years old and,

(3) Having evidence showing the

monthly income not less than

65,000 Baht or,

(4) Having the records of saving

money in the latest 3 months of

account book of any Bank in

Thailand not less than 800,000

Baht or,

(5) Having annual income

combined with the saving

money in the Bank not less than

800,000 Baht from on the date

submitting the application.

[Fred Sanford]

I have a gold account in Fidelity Investments and pay no ATM fees and grab the same exchange rate as a wire transfer and I earn 5% on top of that. Been banking like this for a few years and keep zero in a Thai bank. Works for me quite nicely.

Yup, that is an excellent benefit. Your lost interest at 400k and especially at 800k would be a useful chunk of dough.

I guess that means you are on a "100% income, no bank balance" method. I know someone who got that (at Suan Phlu) for his first retirement visa a few months back, but I doubt that it will work on his next renewal.

ouch, dont tell that to Lovedablues

[mahjongguy]

It most surly is mentioned in 606/2006 para 7.21 (3) as below:

(1) Foreigner shall obtains VISA for

temporary stay and,

(2) Shall not be younger than 50

years old and,

(3) Having evidence showing the

monthly income not less than

65,000 Baht or,

(4) Having the records of saving

money in the latest 3 months of

account book of any Bank in

Thailand not less than 800,000

Baht or,

(5) Having annual income

combined with the saving

money in the Bank not less than

800,000 Baht from on the date

submitting the application.

Thanks for the quote, Lopburi3. My bad. Specifically, my bad old eyes.

So, then, all should be well going forward, except for the MFA hassle.

[lopburi3]

Can highly recommend Firefox. Use "CTRL" key and scroll wheel to make font larger or smaller. Works great on the forum. And unlike IE7 keeps the same page size (although perhaps IE7 can be changed to do that) so you don't have to scroll across the screen to read everything.

[JetsetBkk]

Can highly recommend Firefox. Use "CTRL" key and scroll wheel to make font larger or smaller. Works great on the forum. And unlike IE7 keeps the same page size (although perhaps IE7 can be changed to do that) so you don't have to scroll across the screen to read everything.

Or you can do what I did (in Firefox): Menu / Tools / Options / Content / Fonts & Colors Advanced / Minimum font size / ... change as appropriate. (Mine's on 16, although 18 is beginning to look better these days. )

[JimGant]

Fact: If you bring in a million baht three months before your renewal date, have 800k on the renewal date, and drain it down for the next nine months, you will earn (only) about 5,000 to 6,000 baht non-taxable interest.

Yes, that wonderful .75% interest rate on savings acccounts (at least at Bangkok Bank). But, as I note you're a Yank, this 6000 baht *is* taxable on your Federal return. Not that this does anything to change your argument here, nor would you probably be found-out, as there are no 1099-INT forms involved. But, since you mentioned wiring amounts of "$10,000," you're supposed to file a Form TD F 90-22.1, "Report of Foreign Bank and Financial Accounts," since you've now crossed the magical 10k threshhold. Does this info go to the IRS? Dunno (the form is sent to another Treasury shop). But it's not too much of a stretch to think the Feds are joining their databases to check on compliance. Anyway, point being, next step is IRS involvement, so maybe paying taxes on your nitnoy Thailand interest earnings might be prudent. (At least file your TD F 90 blah blah, as the penalties for not doing so sound serious.)

Back to the subject: As pointed out, some plastic (notably Nationwide) makes ATM and credit/debit purchases in Thailand superior (because you get the Interbank Exchange Rate) to wiring funds (which gets the Telex rate, about 15 satang less) and then using your local ATM and credit/debit card. Even card companies like mine (USAA Federal Savings), which passes on the Cirrus 1% foreign transaction fee, but doesn't add anything to it, comes out ahead for credit charges, as they have a 1% rebate for all charges, thus nullifying the foreign transaction fee. Others out there, primarily credit unions and the like, are similar.

However, there's no rebate for ATM use, so here's where I come out ahead by wiring money in excess of $5000 in order to amortize front and back end fees, and thus break even with an ATM withdrawal at the Interbank Exchange Rate, less 1%.

Sure, the more I wire, the better I come out against a similar ATM withdrawal. But, if I then start plugging in figures based on opportunity cost (lost interest on wired money), lost tax deferred values (if I wired IRA/401k cashouts), blah blah blah, it all starts to become convoluted -- especially, as one poster points out, when the only game really worth watching is the exchange rate charade.

Yeah, if I'd wired all my expected expense money a year ago, I'd be a genius. If the baht had gone the other way, ........

So, looks like how we now do our annual extension might just depend on: Will it be a bigger pain in the butt to journey to Bangkok for an MFA income certifcation; or will keeping 800k in the bank, along with additional, annoying paperwork (and, oh yeah, opportunity costs) be the way to go.

At least a choice for those of us who have both options.

[bkk_mike]

Fact: If you bring in a million baht three months before your renewal date, have 800k on the renewal date, and drain it down for the next nine months, you will earn (only) about 5,000 to 6,000 baht non-taxable interest.

Yes, that wonderful .75% interest rate on savings acccounts (at least at Bangkok Bank). But, as I note you're a Yank, this 6000 baht *is* taxable on your Federal return. Not that this does anything to change your argument here, nor would you probably be found-out, as there are no 1099-INT forms involved. But, since you mentioned wiring amounts of "$10,000," you're supposed to file a Form TD F 90-22.1, "Report of Foreign Bank and Financial Accounts," since you've now crossed the magical 10k threshhold. Does this info go to the IRS? Dunno (the form is sent to another Treasury shop). But it's not too much of a stretch to think the Feds are joining their databases to check on compliance. Anyway, point being, next step is IRS involvement, so maybe paying taxes on your nitnoy Thailand interest earnings might be prudent. (At least file your TD F 90 blah blah, as the penalties for not doing so sound serious.)

Thailand and the US have a double taxation agreement, so assuming the Thai government has taxed the money, it's probably not liable to tax in the US.

Add in that Americans get an $85K (a few years ago - maybe it's gone up) allowance before tax when not living in the country (in addition to any other allowances they may have), and it's highly unlikely that the tax on the ¾% interest on 800,000 baht is even liable to Federal tax, unless you're at an income level where you probably use an accountant. (I have no idea about State taxes - the whole US tax system looks like a giant mess to anyone that didn't grow up with it... That's why most people above a certain income need an accountant to file their tax return.)

(Admittedly it's a lot simpler if you're not American - most other countries don't tax you when you don't live there...)

However, there's no rebate for ATM use, so here's where I come out ahead by wiring money in excess of $5000 in order to amortize front and back end fees, and thus break even with an ATM withdrawal at the Interbank Exchange Rate, less 1%.

Sure, the more I wire, the better I come out against a similar ATM withdrawal.

There's no charge for using an ATM in Thailand. If your US bank is charging, that's your US bank doing the charging. (Nationwide works out cheaper - if using a debit card, not a credit card on ATM withdrawals - as there's no charge anywhere. So it's even cheaper than a Telegraphic Transfer... - the only issue is the £300 daily withdrawal limit from an ATM, but that's a UK bank thing...)

Edited August 4, 2007 by bkk_mike

[Naam]

I have a gold account in Fidelity Investments and pay no ATM fees and grab the same exchange rate as a wire transfer and I earn 5% on top of that. Been banking like this for a few years and keep zero in a Thai bank. Works for me quite nicely.

and how much did you lose because of Baht appreciation? Fidelity indicates that you are american. look at USD/THB.