Well, yes. It is not illegal to have an offshore credit card. However, there is a good chance that some people are using offshore credit cards to avoid paying income taxes. After all, credit cards allow easy access to offshore funds and accounts in so-called tax-havens (Caymans, anyone?). These allow income to be hidden. U.S. citizens, don’t forget, are required to pay taxes on income earned anywhere in the world. Tax audit lawyers see this over and over again–citizens who are earning money abroad who aren’t aware (or don’t care) that they owe taxes on that earned money. The IRS has now taken several steps to fight tax-avoidance schemes perpetrated with credit cards issued by offshore banks.
U.S. courts have issues summonses on American Express and MasterCard aimed at offshore credit cards issued in Antigua, Barbuda, the Bahamas, and the Cayment Islands.
This first summons alone netted over 237,000 credit cards issued through 28 banks in 3 countries. The IRS believes there could be 1 million to 2 million U.S. citizens with debit/credit cards issues by offshore banks.
Be careful where you bank, eh?