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Offshore Credit Cards

Updated on July 29, 2012

Probably the Most Fascinating and Asked About Offshore Banking Product

The Offshore Credit Card

Even years before my entry into the world of offshore banking, I was entrigued by the idea of an offshore credit card, that I would use to access my offshore funds from the comfort of my stateside residence.


offshore credit cards, whether visa, or master card or another network work nearly identical to "regular" cards from the perspective of the merchant or ATM machine
offshore credit cards, whether visa, or master card or another network work nearly identical to "regular" cards from the perspective of the merchant or ATM machine

At the time I was introduced to the concept, I was a very early stage "seed" investor in what looked like a promising biotechnology company. When I say "seed", it was definately early-stage -- just an idea really, and as biotech companies tend to do at this stage, they eat cash like a hoover.

Because it was an early stage company, it was not ready for institutional funding yet. It was in fact, at the "friends and family", then the "widows and dentists" stage, and then later the "Angel Investor" stage. For a fuller understanding of the stages of early development company capital raises you can see my hubpage how to get venture capital for your company.

We were working with a guy who had some experience raising early stage seed money from people and one of the things he did was quite unique. He intentionally structured the company in the Bahamas, and had each of the investors submitting notarized IDs, bank reference letters, source and use of funds declarations, etc etc. to enable each of the investors to have an account in the Bahamas.

The idea was all of the massive windfall of royalty monies received from international sales could be held outside of the United States without repatriating the funds, and therefor owing no taxes on the money.

So how were we going to access the money? Would we have to spend it offshore too?

Well, this is where I heard of the an "offshore credit card" -- or more precisely, an "offshore debit card" or "prepaid offshore credit card". The idea was, me, the widows and dentists, and the other later stage angels could access our offshore funds with our Mastercard or Visa and use it to buy shoes at nordstroms, or ski vacations, or a mazerati, or who knows what.

That was the late 90's. Of course, since then the IRS has gone out of its way to issue declaritive statements to indicate that while holding an offshore bank account, and an offshore credit card is not illegal, if they are able to determine that you are doing so for the explicit purposes of evading taxes or defrauding the US government, then it is, obviously, illegal.

Offshore Credit Cards - the fascination

Of all of the offshore banking services or offshore banking products this one, outside of the offshore account itself, seems to garner the most interest.

Why These Aren't Really Credit Cards

The term "offshore credit card" as I discussed above is really kind of a misnomer of sorts. In reality, these are not "credit cards", but rather secured or prepaid credit cards or debit cards.

The reason?

Because a bank in a foreign jurisdiction is in no position to pursue defaulted accounts. The good people at mastercard, visa, or amex shouldn't (in their right minds) let an offshore bank sell anything other than a card that is backed by assets.

The potential for fraud is so high otherwise that they would cease to be very useful

The Fees

Card fees, both for transactions purchased from merchants and for money extracted from ATM machines are going to be higher than domestic banks

This goes for transaction fees, loading fees (in the case of prepaid credit cards), account query fees, pretty much you name it. This includes a fee (usually) to buy the card itself. That's a lot different than the high tax economies where you can't open your mail without finding preapproved credit cards being shipped to your cat!

If you are new to offshore, get used to it. First, the economies of scale aren't really there for a lot of banks. Secondly, assuming you are looking for bank secrecy when you go offshore, it's just a lot more expensive to operate your bank like that. Many offshore banks don't loan out client funds, and are forced to fund operations based on fees.

The good news is, since the bank doesn't play fractional reserve banking games with your deposits, you know your deposit will be there when you go to get it out -- In addition, since they aren't playing fractional reserve banking games, they are not obliged to use (and in fact often aren't part of) the central banking system in their home countries. This often means they are able to protect the identity of the customers better because they are operating with less official scrutiny/oversight.

The bad news is, you're going to pay a little more for you card.

What's the Offshore Card's Purpose

Primarily it's privacy, coupled with convenience. For the purposes of this discussion we'll talk about convenience first.

Convenience of Offshore ATM and Offshore Credit Cards

While slightly more expensive to operate than their onshore versions, they truly are as convenient as your domestic bank's ATM card or the VIsa and Mastercard you have in your wallet right now. From the ATM machines' or the merchant's perspective they are pretty much identical.

That is a BIG difference from the world before this product. It used to be very difficult, time-consuming, and costly to bring your offshore money into your country of residence for spending purposes.

It was generally handled with bank wires, and if you found yourself in the uncomfortable position of travelling in a location without any of your domestic banks' branches you had precious few options for retrieving your money until you returned home.

Enter the Offshore Credit Card

Suddenly, your funds could remain offshore until the moment, time and place where you needed them. In addition, you could avoid the hassle, epxense, and exposure of sending large sums of money into the US from known tax havens via bank wire.

It's almost too good to be true! Well, maybe it is. If you're using your offshore credit card to repatriate unclaimed income and using it to avoid having to claim income or assets from the local tax authorities you're more than likely breaking several laws of your home country.


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    • profile image


      7 years ago

      good news for us


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