Category Archives: Personal Finance

Using my Schwab card at an HSBC Philippines ATM in 2022

I haven’t used my Schwab Visa debit card to take out cash from an HSBC Philippines ATM since December 2019 (when the USD-PHP exchange rate was around PHP 50.82 to USD 1) until last Friday. Since end-2019 we’ve had a global pandemic, the USD-PHP exchange rate reached a low of around 47.53 and, in recent weeks, the rate reached a record high of around 56.54, and my usual go-to HSBC Ortigas Center branch moved from its ADB Avenue location to the nearby Shangri-La Plaza mall.

Anyway, last Friday, I decided to take out some cash to take advantage of the high exchange rate and also to see whether HSBC still does not charge any fee for using a Schwab ATM/debit card and whether the applied exchange rate is still competitive.

On one of the screens, the ATM warns that some fee may be charged by my card issuer (Schwab), but the HSBC ATM itself still did not add any explicit fee to my PHP 25,000 withdrawal. One screen that I don’t remember seeing before is an offer by the HSBC ATM to apply the HSBC exchange rate with enough warning that a 3% mark-up is included in the rate.

HSBC ATM offers to apply its own exchange rate

Every savvy traveler should know that these conversion rate offers should generally be avoided, especially if one is using a card that does not have any forex surcharges/fees. Depending on how one calculates the mark-up (x*1.03 or x/0.97), the implied rate without markup would have ranged between 56.018 and 56.069. The entire range is lower than the rate quoted by Google at the time which was 56.33:

Google USD-PHP Exchange Rate on 22 July 2022

After a couple of days, the withdrawal posted and $443.74 was debited from my account for an equivalent USD-PHP exchange rate of 56.339, which is slightly better than the Google rate, and obviously better than HSBC’s rate with or without mark-up.

Key Points

  • Using a Schwab ATM/debit card at an HSBC Philippines ATM is still fee-free.
  • Don’t use HSBC’s own conversion rate to take advantage of Schwab’s competitive rate.

Using my Schwab card at 7-Eleven (7-11) Japan ATMs

Last time I traveled to Japan in March 2019, I use my Capital One 360 Mastercard ATM card to withdraw cash from 7-11 ATMs. Capital One 360 does not charge any foreign transaction fees and at at that time 7-11 ATMs did not charge any ATM fee. In addition to my Capital One 360 card, I now have a Charles Schwab Visa ATM card which promises to refund ATM fees. Recently, I’ve read reports that 7-11 ATMs have started charging fees to international ATM card holders. I returned to Japan last week and found out out for myself if the reports are correct.

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How to pay lower US taxes on US investments as a non-resident alien from the Philippines

I’ve discussed the important IRS tax issues when investing in the US as a non-resident alien from the Philippines in a previous post. I’ll repeat some of them here in discussing the known ways of lowering or avoiding altogether some of these US taxes.

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Avoiding home-country bias in the Philippines

Home-country bias is the tendency of an investor to over-invest in his/her country’s domestic equity market in a scale that significantly exceeds the proportion of the size of the domestic market relative to the rest of the world.

Considering that even Americans, whose own stock market is 40% to 50% of the world market, can be guilty of home-country bias, it is not a surprise that investors from much smaller markets like the Philippines also exhibit this behavior. This is shown in the chart below, which visualizes data collected by Sercu and Vanpée from CPIS (December 2005) and World Federation of Exchanges, in their paper, Home bias in international equity portfolios: a review. When that paper was published, Filipinos’ equity portfolios were 99.5% domestic while the domestic market was just 0.1% of the world market cap.

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Thoughts on PERA in comparison to US retirement accounts

I have just started to read about PERA retirement accounts that have been recently made available to Filipino workers, including those working abroad. There have already been many articles written about PERA all over the web so I won’t bother with all the nitty-gritty details. You can read a good introduction on PERA from Katie Scarlett Needs Money.

PERA stands for Personal Equity and Retirement Account. They are often described as the Philippine version of American retirement accounts like 401(k) and traditional IRA accounts. I still have my own 401(k) and traditional IRA accounts from my time working in the U.S. so I find these comparisons interesting. In this post, I’d like to explore these comparisons in more detail.

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How are foreign capital gains taxed in the Philippines?

I previously discussed how the US taxes dividends and interest income of non-resident aliens investing in the US stock market. In summary, 15% tax is withheld from interest income, 25% tax is withheld from dividend income, while no taxes are withheld from capital gains.

(NOTE: Check out the post – More questions on Philippine taxation of foreign capital gains and dividends – for my most recent thoughts on this topic.)

But how does the Bureau of Internal Revenue (BIR) in the Philippines tax these types of income? The short answer is: It’s not clear. The long answer is as follows:

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Investing in the US from the Philippines as non-resident alien: IRS tax issues

When you open an online trading account in a U.S. brokerage account like Charles Schwab or TD Ameritrade, and you’re not an American citizen, you don’t have a green card, and you don’t live in the U.S., you’re generally classified as a non-resident alien by the Internal Revenue Service (IRS) of the U.S. Even as a non-resident alien, some or all of your income from your trading account may still be subject to taxes by the U.S.

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Charles Schwab vs Capital One 360 ATM Exchange Rate

As a follow up to my previous post comparing effective ATM exchange rates for withdrawing Philippine pesos from US dollar accounts from Charles Schwab and Transferwise, I now compare Charles Schwab and Capital One 360.

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ETFs in Philippines versus Thailand and Vietnam

FMETF is currently the only exchange-traded fund (ETF) available in the Philippine Stock Exchange. FMETF was launched in 2013 and aims to track the performance of the PSE Composite Index (PSEI), which tracks 30 companies in the Philippine Stock Exchange.

As of November 4, 2019, FMETF’s total assets is PHP  1,680,365,665.87 or about $33.3 million. In comparison, the total PSEi market capitalization is PHP 10,073,517,502,927.30 or about $199.4 billion. So, FMETF’s market cap is 0.0167% of that of the PSEi, six years after it was first introduced. And again in that span of time, no other ETF was introduced in the market.

I was curious how ETFs in a neighboring countries fare. The Stock Exchange of Thailand (SET) has a quite a few ETFs available. The TDEX ETF introduced in 2007 tracks the SET50 index, and the ETF has total assets of $3.1 billion compared to SET50 capitalization of  $388 billion. TDEX’s market cap is about 0.8% of that of the SET50 index. Keep in mind that there several ETFs in the Thailand market, some covering the larger SET100 and quite a few covering specific sectors. Needless to say, the Thai stock market is larger than the Philippine market.

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TransferWise vs Charles Schwab Exchange Rate at a Philippine ATM

TransferWise is an online money transfer fintech company. What’s great about them is they try to be transparent with their fees for transferring money internationally. They promise the best exchange rate possible, but they do charge fees for ACH bank transfers that are otherwise free for regular banks. In most cases they are cheaper than using wire transfer through your bank or services like Western Union or MoneyGram. They also offer a product called the Borderless account which allows you to have multiple currencies in your account. It also comes with an ATM/debit card you can use internationally. This service seems to be popular with so-called digital nomads. I guess this is also a good account for getting cash when you are travelling internationally.

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