Should You Close a Foreign Bank Account? A Guide to the Details and Options

Should You Close a Foreign Bank Account? An In-depth Look at the Hidden Factors and Choices

In today’s increasingly interconnected global economy, more and more people open bank accounts abroad for reasons such as work, study, investment, or immigration. However, as personal circumstances change over time, many begin to question whether these foreign bank accounts are still necessary - and whether they should be closed. This seemingly simple question actually involves a range of considerations, including financial planning, tax compliance, and cost management, with many hidden details and risks that are often overlooked.

1. The Hidden Costs of Inactive Accounts

Many individuals who opened bank accounts overseas eventually return home or stop using the accounts, turning them into dormant or sleeping accounts. While these accounts may appear harmless on the surface, they can pose several potential issues.

For example, some banks charge maintenance fees, annual fees, or minimum balance fees for inactive accounts. Although the fees may seem small, they can accumulate over time, becoming a significant financial burden. In the UK, major banks such as HSBC and Barclays impose account management fees, with some accounts triggering charges if they fail to meet certain balance or transaction requirements. Similarly, banks in the U.S., such as Citibank and Wells Fargo, often charge monthly fees for accounts that do not meet minimum deposit standards.

In addition, financial regulations in many countries have become increasingly strict. Banks may freeze or forcibly close long-dormant accounts, potentially leading to the loss of remaining funds. These actions can also affect personal credit records and, in some cases, trigger tax reporting obligations.

2. Tax Reporting Obligations Cannot Be Ignored

In recent years, global tax transparency has significantly increased, particularly with the implementation of the Common Reporting Standard CRS, which allows tax authorities to better track the overseas financial assets of their residents.

China fully joined the CRS in 2017, meaning that information about Chinese tax residents' overseas bank accounts may now be automatically shared with Chinese tax authorities. Even if an account holds only small amounts of money, account holders should still understand whether they have a reporting obligation to their local tax authority. If an account remains open for years without being declared, it could lead to back taxes, fines, or even legal consequences in the future.

In 2025, the Canada Revenue Agency CRA publicly reminded taxpayers that interest income and investment gains from overseas accounts must be declared. Similarly, countries like Australia and Singapore have also strengthened oversight of foreign accounts. In this environment, closing unused foreign accounts can be an effective way to simplify financial management and avoid potential risks.

3. Process and Considerations for Closing an Account

If you decide to close your foreign bank account, the general process typically includes the following steps

1. Clear the Account Balance Ensure the account has no remaining balance or that all funds have been transferred out. Some banks require the account to be emptied before closure.

2. Submit a Closure Request You can often submit the request through online banking, a mobile app, or by visiting a bank branch in person. Some banks allow remote closure, but may require identity verification or notarized documents.

3. Confirm the Closure is Completed After closing the account, retain any proof or confirmation emails to avoid future disputes.

It is important to note that the account closure process can be complex in some countries, especially for non-residents. For instance, some U.S. banks require a W-8BEN form to confirm that the account holder is not a U.S. tax resident, or they may withhold withholding taxes. Before closing an account, ensure there are no outstanding loans, credit cards, or automatic payment arrangements linked to it, to avoid unnecessary financial losses.

4. The Decision to Close Varies by Individual

There is no one-size-fits-all answer to whether you should close a foreign bank account. The decision depends on your personal circumstances, financial flows, tax status, and whether you anticipate needing the account again in the future.

The following groups may find it more practical to keep their foreign accounts

Long-term Investors If the account is used for overseas investments or holding foreign currency assets, keeping it open facilitates fund management and liquidity.

Cross-border Workers For those who frequently travel between countries, maintaining a foreign account can reduce remittance fees and currency exchange losses.

Immigrants or International Students Families living abroad or with children studying overseas often rely on these accounts for daily financial needs.

Conversely, the following individuals may find it more appropriate to close their accounts

Long-term Inactive Users Accounts that have not been used for years and are not expected to be used in the future should be closed to avoid hidden fees and compliance risks.

Those Who Have Returned Permanently If you no longer have frequent international financial needs after returning home, closing the account can simplify your financial structure.

Individuals with Changed Tax Status If you have become a tax resident of China and the account has no special purpose, it may be wise to clear overseas assets to reduce tax reporting burdens.

5. Conclusion

Maintaining or closing a foreign bank account is more than just a matter of personal finance - it also involves tax compliance and risk management. The decision should be based on your personal situation and long-term financial planning. As global financial regulation becomes increasingly stringent, it is essential to rationally evaluate the necessity of your foreign accounts and make timely decisions - ultimately achieving a form of financial decluttering that supports a more secure and organized financial life.