What is a Foreign Currency Account?

If you often deal with international transactions, whether for personal or business purposes, you might have encountered hurdles like fluctuating exchange rates, payment delays, and high transaction fees. 

However, there is a solution to this problem, which is to use a foreign currency account that allows you to hold different currencies, making cross-border money transfers much more convenient. 

This article will explain what is a foreign currency account, how it works, and how it benefits your business.

A foreign currency account is an account that allows you to hold one or more currencies other than the domestic currency of the country where the account is held. It is also known as a multicurrency account if it can hold more than one currency.

For example, if you are in the US, where the domestic currency is USD, but you are doing business with clients who pay in Hong Kong dollars (HKD), you might consider opening an account to hold, send, and receive money in HKD. This account is your foreign currency account, enabling transactions in a currency different from your country’s domestic currency.

You can open a foreign currency account at a bank in your home country (onshore) or a financial institution in another country (offshore). 

Foreign currency accounts work similarly to any regular bank accounts, allowing users to deposit, withdraw, and make payments, but potentially in more than one currency. 

Foreign currency accounts typically allow you to hold and manage multiple currencies under one account number, reducing currency exchange fees and simplifying international transactions through direct currency-to-currency transfers.

You can also conveniently convert foreign currencies at favorable exchange rates.

If you are a frequent traveler or do business with overseas clients and suppliers, a foreign currency account can significantly help you reduce currency conversion and foreign transaction fees, as well as benefit from favorable exchange rates. 

Here are some reasons why you should get a foreign currency account:

• Holding Multiple Currencies: You can hold, receive, and send money in different currencies.
• Reducing Currency Risk: Holding funds in the currency of your key markets reduces risks associated with fluctuations in the foreign exchange markets.
• Better Conversion Costs: Enables receiving and sending money without converting from one currency to another, preventing exchange rate loss associated with regular wire transfers.
• Easier International Transfers: Streamlines sending and receiving money in the same foreign currency without needing currency conversion.
• Greater Convenience and Efficiency: Manages all your currencies in one place without needing separate accounts with different foreign banks.

Travel Convenience: Simplifies managing expenses and accessing funds while traveling abroad, avoiding the need for constant currency exchanges.

While foreign currency accounts offer certain advantages, they may not suit every business’s needs. The following are some disadvantages of foreign currency accounts.

• High Minimum Balance Requirements: Some banks require maintaining a higher minimum balance than standard accounts, which can be financially burdensome and restrict cash flow flexibility. 
• Lower Interest Rates: Typically offers lower interest rates than savings accounts in domestic currencies, reducing the earning potential on deposits.

You can find multiple foreign currency account options in the US, ranging from traditional banking institutions to digital-only fintechs and neobanks. 

Traditional banks are a suitable choice if you value face-to-face interactions and full banking services, including in-person customer support at branches and access to financial products like loans and mortgages.

However, most banks offer foreign and multicurrency accounts exclusively for corporate clients. Some may also have a substantial minimum balance requirement. 

Here are some examples of traditional banks that offer foreign currency accounts:

On the other hand, if you prefer digital convenience and an option to open a foreign currency account online, consider bank alternatives such as fintech companies or neobanks.

These bank alternatives often offer multicurrency accounts that are quick to set up and can be managed conveniently through mobile apps or websites. They also often offer more competitive exchange rates than traditional banks. 

The following are some of the popular bank alternative options for businesses in the US:

Just as with opening any regular bank account, it's essential to shop around to ensure you choose the right foreign currency account.

Here are some factors to consider when choosing a foreign currency account.

When opening a foreign currency account, the main thing to consider is the supporting currency.

If you plan to send and receive money from different countries, you should look for accounts that can hold multiple currencies, including the major ones, such as EUR, GBP, JPY, CNY, and AUD.

If you are interested in making transactions with a minor currency that is less common, it’s important to research carefully and understand your options for managing those transactions efficiently. 

Another key factor to consider is the various fees associated with the account, including the following:

• Account opening fee: Some banks may charge an initial fee to open an account, particularly for corporate clients.
• Monthly fee: Most account providers charge a monthly account maintenance fee. Traditional banks typically charge higher fees, while many fintech providers offer accounts with no monthly charges.
• FX rates and fees: Different account providers set varying foreign exchange rates, which can significantly impact your conversion costs. Additionally, markups on these rates are common and can differ widely between providers.
• Transaction fees: Fees are typically charged for international wire transfers and sometimes for incoming funds. The cost can vary depending on the currency and the transaction amount. 
• Other fees: These can include fees to deposit or withdraw funds in cash, initial deposit and minimum balance requirements, and potential fees for closing the account.  

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 ever face any financial difficulty.

Consider opting for a bank offering an overdraft facility with a foreign currency account, depending on your circumstances.

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

Some providers also offer multi-currency debit or credit cards. These cards are essential for efficient global purchases, as they automatically convert to the local currency at the point of sale.

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

If you have a company incorporated in Hong Kong, Singapore, or the BVI or are planning to expand to Asia, Statrys could be your solution for a foreign currency account.

Founded in 2018, Statrys is a Hong Kong-based business banking alternative offering multi-currency business accounts and Singapore and Hong Kong company incorporation services. Statrys accounts allow you to hold and manage payments in 11 major currencies, including USD, HKD, CNY, AUD, EUR, GBP, SGD, JPY, CHF, NZD, and CAD, all under one account number.