What is a Foreign Currency Account?

And start paying in other currencies from home.

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    Foreign currency accounts are essential, particularly for business owners that operate on an international level.

    Such an account allows you to enjoy multiple benefits, including faster cross-border payments, real-time exchange rates, and lower transfer fees.

    Read on to learn about how to open a foreign currency account and its benefits.

    What is a foreign currency account?

    A foreign currency account is a multi-currency borderless account that allows the account holder to send and receive payments in multiple currencies.

    Having such a bank account has a huge impact on how you manage your international finances and transactions.

    Foreign currency accounts are not limited to just businesses and can be used to manage your personal finances as well.

    How foreign currency accounts work

    Foreign currency accounts allow you to make and receive payments in foreign currencies, which makes dealing with international transactions much easier and more convenient.

    Such accounts allow you to easily switch between currencies and take advantage of strong currency rates.

    Using a foreign currency account can save up to 5% on foreign transaction fees compared to conducting a regular wire transfer through a current account.

    Banks offering foreign currency accounts

    Many leading international banks offer a foreign currency account through which you can deposit and withdraw money both online or at a branch.

    The most popular banks include the following:

    HSBC

    You can easily manage your foreign currency through the HSBC Currency Account while paying absolutely no monthly fee.

    There are up to 14 different currencies to make transactions with, and you can open a separate account for each one to store, send and receive money.

    Such an account is designed to support an international lifestyle.

    You can easily access your account online, manage your finances, and make and receive worldwide payments regardless of your location.

    To be eligible for an HSBC Currency Account, you need to be 18+ years and hold an active HSBC current account.

    Barclays

    Foreign currency accounts offered by Barclays allow you to open an account in euros, US dollars, and 20 other currencies making the entire process of making and receiving foreign payments extremely easy and convenient.

    To start foreign banking with Barclays, all you need to do is hold an active sterling current account with them.

    With a Barclays foreign currency account, you will be able to reduce your admin and foreign exchange costs while benefiting from their 24/7 online or telephone access customer service.

    Standard Chartered

    Opening a foreign currency account with Standard Chartered allows you to enjoy unique benefits and gain maximum return on your investment and in a choice of 8 major currencies, including AUD, CAD, CHF, EUR, GBP, JPY, NZD, and USD.

    However, there is a minimum opening balance of a foreign currency savings account which is 200 in any currency except Yen.

    How to open a foreign currency account

    Opening a foreign currency account is quite similar to opening a typical bank account.

    All you need to do is gather your identification documents and personal and financial information before applying online or visiting your local bank branch.

    While there is an option to set up an account completely online depending on which bank you choose, some banks may require you to be physically present in the branch.

    If you require more information or have any questions regarding opening a foreign currency account, it would be best to contact a representative from the bank of your choice.

    Why should you get a foreign currency account?

    If you have an international lifestyle or have a business involving foreign clients, managing your finances through a foreign currency account is extremely beneficial and will make your life more convenient.

    For a multi-jurisdictional business, operating with a foreign currency account is essential as you regularly deal with payments and receivables in different currencies.

    Reduced Exchange Rate & Better Conversion Costs

    The biggest benefit of using a foreign currency account is that it allows you to save on exchange rate fees preventing you from incurring any exchange rate loss that comes with regular bank transfers or wire transactions.

    For example, suppose you or your business are receiving payments in GBP.

    In that case, you can use the same account to make GPB payments without converting the currency back into your local one.

    Therefore, you save a lot by avoiding the high fees that come with conversions.

    Neither do you have to worry about short-term currency fluctuations.

    Easier International Transfers

    You can make international payments and transfer money to and from your foreign currency account using online banking.

    You can also make a payment from your current account to another company or person at your local branch.

    Leverage Exchange Rates

    Most banks that provide foreign currency accounts allow you to switch among currencies.

    Through this, you can take advantage of strong exchange rates, especially through large transactions.

    Many banks use this as a unique selling point for foreign exchange accounts as this is unlikely to leverage exchange rates through a regular current account.

    Greater Convenience

    Foreign currency accounts are easy to open as all the currencies you deal in are managed in one place.

    As a result, your monthly accounting is less complicated, and you no longer need to hold separate accounts with different banks making it even easier to track your income and expenses.

    Additionally, it is much faster to make and receive international payments with a foreign currency account than a regular current account which can be time-consuming.

    Downsides to foreign currency accounts

    Additional Fees & Charges

    Just like any other bank account, you can be charged a fee for getting into an overdraft or for any special cash handling on some of your transactions.

    Therefore, when deciding which bank to open a foreign currency account with, you should choose the one with the lowest fees.

    High Minimum Balance Requirement

    Some banks may have a requirement of a minimum daily balance.

    However, a few international banks, such as HSBC, do not have any minimum account balance requirements.

    Therefore, you should always be wary of banks with such balance and maintenance requirements.

    Lower Interest Rates

    Compared to a standard savings account, foreign currency accounts have lower interest rates on all funds deposited.

    Therefore, you may be better off using a regular bank account with a higher interest rate for funds deposited than a foreign currency account.

    What should I consider when opening a foreign currency account

    Currency Choice

    Any good foreign currency account provider will allow you to hold multiple current accounts in different currencies.

    This should include all the major currencies.

    If you are interested in making transactions with a minor currency that is less common, you should research more carefully and learn about your options in dealing with that currency.

    Forex Fee & Charges

    You should also be able to transfer money across the globe from any of your current accounts securely and without incurring expensive forex charges.

    To make such cross-border transactions possible, your bank must support key international transfers, including SWIFT, as well as fee-free global transactions across accounts held with the same bank.

    Overdraft Facilities

    It can be extremely beneficial if your foreign currency account provider offers an interest-free overdraft facility to help you cover unforeseen expenses.

    This way, you can avoid any risk and have some sense of security if you are ever facing any financial difficulty.

    Depending on your circumstances, you should definitely consider opting for a bank that offers an overdraft facility with a foreign currency account.

    Debit Cards

    You should also ensure that your foreign currency account allows you to withdraw cash at multiple locations globally.

    Additionally, having a debit card gives you access to other benefits, such as airport lounges.

    Do neobanks offer foreign accounts?

    An alternative to traditional banks that offer foreign currency accounts include Statrys, Starling Bank, Revolut, and Wise if you’re looking for a completely online banking experience.

    Revolut

    Every time you use your card abroad, you are charged two separate fees in addition to the cost of what you are purchasing.

    One is a currency conversion fee, and the other is an administrative service fee.

    However, with a Revolut, your money is exchanged at an interbank rate, and you don’t get charged either of these fees.

    Additionally, you can withdraw your money from an ATM without having to pay any extra charges.

    Starling Bank

    You can set up an online foreign currency account with Starling Bank.

    Rated as Britain’s Best Bank 2021, you can manage multiple currencies at a real exchange rate for your business and personal use.

    All Starling Bank accounts come with helpful money management features that help your business grow, such as instant payment notifications, spaces for separating tax from overheads, and 24/7 support.

    Wise

    You can hold and trade in 40+ currencies through the wise multi-currency account, including GBP, EUR, ESD, and AUD.

    It is a borderless virtual account where you can convert your currencies at the real exchange rate in whatever currency you need whenever you need, all from the comfort of your home.

    Final Words

    Opening a foreign currency account is extremely important for your business and personal affairs if you regularly receive and make international payments.

    After considering the benefits and exploring all your options regarding which bank to open an account with, you should be ready to open a foreign currency account.

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