Welcome to BW’s Smart Money podcast, where we answer your real-world money questions. In this episode: Learn actionable strategies to tackle credit card debt and ways to manage your money while traveling or living abroad.
How can you manage your money while living abroad? What are the best strategies to pay off credit card debt? Hosts Sean Pyles and Sara Rathner discuss managing finances while living outside the US and practical tips for tackling credit card debt to help you make smarter financial decisions. They begin with a discussion of credit card debt trends in the US, with tips on understanding why debt is rising, exploring repayment strategies, and avoiding common pitfalls like high interest rates and emotional overspending.
Then, host Elizabeth Ayoola joins Sara to discuss some of the challenges of managing money abroad. They’re joined by BW writer Craig Joseph and producer Tess Vigeland, who share their experiences living abroad and the things they wish they’d known before moving to another country. They discuss navigating international banking fees, using tools like Wise and multi-currency accounts, and finding credit cards and banks that suit expat needs. They also cover what to keep in mind when filing taxes while living overseas, ensuring you’re prepared for IRS requirements and making the most of your money while enjoying life abroad.
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sara, have you ever lived in another country?
I haven’t, but maybe I’ll retire to whatever the hot American expat destination will be in the 2050s. Well, okay, maybe hot’s the wrong word, given, you know… climate change.
Yeah, by then hot might mean Vancouver, British Columbia. Well, in this episode, we’ll help folks understand how to manage their money while living outside the US. Welcome to BW’s Smart Money Podcast. I’m Sean Pyles.
And I’m Sara Rathner. In this episode, I’m joined by our co-host Elizabeth Ayoola to answer one of your money questions about managing your money while moving and living abroad.
But first, we will chat about something that’s a little closer to home, as in the debt that US households carry. BW’s annual household credit card debt study just published, and it has some interesting findings that can help us understand the state of credit card debt in the US, including why folks have it, how they can pay it off, and how our emotions complicate the process. Sara, I know you’ve been digging into this study, what’s the top-line takeaway?
Debt totals are up compared to last year, but not by a lot. All told, debt in general is up just under 4%. Mortgages and auto loans are both up by more than 3%, while credit card debt is up just 1.5%.
So credit card debt is up just slightly year over year. What’s driving the increase in debt right now? We know expenses like food and utilities have gotten more costly for folks. Are people using credit cards to cover necessities?
They are, and that’s in part because over the past five years, incomes just haven’t kept up with the costs of those necessities, like food, housing, and transportation. And we found that nearly half of Americans who currently have revolving credit card debt say that paying for those necessities are
what contributed to those balances.
And let’s talk about how expensive credit card debt is right now. What does the study tell us about how much people are paying in interest to carry this debt?
According to the Federal Reserve, the average credit card interest rate is just over 23% as of August 2024. And yes, that is a couple of months ago, but that is the most recent data available. So for somebody carrying the average amount of credit card debt, which is about $10,500, making just the minimum payments means that that debt actually costs close to $29,000, which is nearly triple the amount owed.
Ouch. And that makes it pretty easy to see how it can be hard to get out of credit card debt. And with that in mind, let’s talk about a few ways to pay it off. The way I see it, there are three main routes: first, you could use a strategy to pay it off gradually, like the debt snowball or avalanche method; next is deploying some kind of financial product, like a balance transfer credit card; and finally, you could tap professional help, like a nonprofit credit counseling agency, or maybe even bankruptcy. Sara, can you talk us through a couple of these options?
Let’s start with
debt repayment strategies
, and we’ve talked about them on the podcast before, but a little repetition’s a good thing. Basically, you make a list prioritizing your debts, and then you make the minimum payment on every debt on your list, but then you put any extra money you have in your budget toward the debt at the top. And once you pay that debt off, you move on to the second item on the list. And so, with debt avalanche, you prioritize debts from highest to lowest interest rate, and with debt snowball, you list your debts from smallest to largest amounts owed. But, this was really interesting: the survey revealed another way that people prioritize debt repayment.
By how much stress each kind of debt creates for you.
Here’s an example: If you have debt on two credit cards with around 25% interest each and also borrowed interest-free money from a family member, you might want to prioritize paying off the family debt first to avoid any awkward encounters. This decision is not just about the numbers but also the emotional side of managing money.
One way to tackle credit card debt without facing judgment from people you know is by using balance transfer credit cards that offer 0% interest for a certain period. Personal loans with lower interest rates than credit cards can also help save money on interest. If you feel overwhelmed by debt, consider working with a financial professional or credit counseling agency for guidance.
It’s important to address the emotional aspect of debt, as many people delay paying it off until they earn more money, even if it causes stress. Paying off high-interest credit card debt should be a priority, regardless of income level. Waiting for a future increase in income may prolong the debt repayment process.
Just like with other goals in life, there’s never a perfect time to start paying off debt. Making it a priority can open up opportunities for achieving other financial goals, such as saving for retirement or buying a house. Credit cards can be useful tools but can also hinder progress towards life goals if not managed properly.
If you’re facing debt and feeling restricted from pursuing other desires, take the time to list out your debts and create a plan for making changes. Utilize resources on the BW website to help you navigate the process and work towards financial freedom. Shifting gears, if you’ve been envisioning yourself living in another country, we’re here to equip you with the necessary tools to turn those dreams into reality. However, it’s important to address any credit card debt you may have before embarking on this journey. Additionally, it’s crucial to devise a financial plan for managing your money while living abroad, as it can be more complex than anticipated. Through the stories we’re about to share, you’ll gain valuable insights and knowledge on this topic.
Before delving into the details, we invite you to reflect on where you may need financial guidance. Whether you’re struggling to set financial goals, break bad habits, or have any money-related queries, the Nerds are here to assist you. Feel free to reach out to us via voicemail or text on the Nerd hotline at 901-730-6373. We aim to engage with more listeners live on the podcast this year to provide personalized advice and support.
Now, let’s address a listener’s question regarding transferring money to a Spanish bank account while working remotely for a US company. To shed light on this topic, we’ll engage in a roundtable discussion with individuals who have firsthand experience living abroad. Our guests, Craig Joseph, a BW writer specializing in credit cards and travel, and Tess Vigeland, our producer with experience living in Southeast Asia, will share their insights. I’ll also share my experiences living and working in London while based in the US. Stay tuned for valuable tips and advice on managing finances while living abroad.
As we delve into this episode’s money question segment, we encourage you to submit your queries and seek guidance on financial matters. Our diverse panel of experts is here to address your concerns and help you make informed decisions about your money. Let’s dive into the listener’s question about moving to Spain and navigating financial transactions seamlessly. Stay tuned for expert advice and real-world insights to support your financial journey. I resided in Saigon for approximately four months before relocating to Bangkok, Thailand, where I stayed for two and a half years. During my time in Bangkok, I used it as a base to travel to and explore 20 countries across Asia, the Middle East, and Australia. I was able to open a multi-currency deposit account that allowed me to receive payments in US dollars, convert them to New Zealand dollars at a mid-market exchange rate within the same account, and spend the money with a debit card without having to manually select a currency during transactions. Additionally, I could transfer New Zealand dollars to my roommate’s account to cover rent and utilities with a fee of around 3/10ths of a percent per transaction.
Craig mentioned that he used ATMs with debit cards that had no foreign transaction fees or credit cards while abroad. He also utilized a website called The Currency Fair to transfer money between his US and UK accounts, which had low fees compared to wire transfers or Western Union.
In terms of international banks, options like Deutsche Bank, HSBC, BBVA, and Santander have a presence in both the US and Spain. It’s recommended to contact customer service to explore suitable banking options before moving. When it comes to credit cards, applying for one with a US address and opting for paperless statements can be beneficial for those planning to move abroad.
For financial redundancy while traveling, having multiple cards from different banks without foreign transaction fees is essential. It’s also wise to carry cards operating on independent transaction networks like Visa and MasterCard for backup options. Additionally, credit cards offering rewards and consumer protections like trip delay insurance can be valuable assets while abroad. Lastly, using a VPN for online banking during travel is crucial to avoid potential fraud alerts from banks. If you wish to utilize a VPN to connect to a US server for online banking, be cautious as some banks may flag your account due to suspicions of fraudulent activity from overseas. It’s essential to be aware of this potential issue.
If you require assistance in comparing different credit cards, BW offers a free credit card comparison tool that can be accessed through our show notes or by searching online for “BW compare credit cards.”
For individuals planning to work while residing abroad, tax implications should be considered. It is advisable to hire a tax accountant to handle your US tax filings while living overseas to avoid any errors or oversights. Disclosing foreign bank accounts to the IRS is a crucial requirement, so ensure all relevant information is accurately reported.
To the listener moving to Spain, thank you for your question, and best of luck with your relocation. Spain is a beautiful country, and we are envious of your upcoming experience. Enjoy every moment of your time there.
We appreciate Tess and Craig for sharing their insights today. Happy travels to all!
Remember, we are here to address your financial inquiries. Feel free to contact us via phone at 901-730-6373 or email us at [email protected] Visit nerdwallet.com/podcast for additional episode details and follow us on popular podcast platforms like Spotify, Apple Podcasts, and iHeartRadio.
Disclaimer: We are not financial or investment advisors. The information provided is for educational and entertainment purposes and may not be applicable to your specific situation.
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