Opening a foreign currency account

If your business has a strong hold in an overseas market, you may benefit from opening a foreign currency account. Here, we look at how to go about it.

If your business has a strong hold in the overseas market, or you regularly receive and make payments in a foreign currency, then you may benefit from opening a foreign currency account.

By having foreign currency, you will save money as you will not be paying conversion costs.

Cheaper alternatives to foreign currency accounts

Opening and maintaining a foreign currency account can be expensive. Some banks may require a minimum deposit or monthly fee, or may require you to visit the country to fill out paperwork.

But if you need an overseas account, there may be a cheaper, more convenient alternative to a foreign bank account. TransferWise is an online multi-currency account that lets businesses send and receive money in over 40 currencies without high fees or poor exchange rates. The account comes with your own US, Eurozone, UK, and Australian bank account details, which means you can receive and hold payments in USD, EUR, GBP, and AUD for free.

Money is always converted at the real, mid-market exchange rate so you won’t get hit with high fees that banks typically hide in a bad exchange rate. This makes TransferWise up to eight times cheaper than banks. Regulated by the FCA and used by over 3 million customers, you can rest assured that TransferWise will keep your money safe.

A foreign currency account can be managed in the same way as a standard current account, and many banks offer this service, although eligibility criteria and charges range from bank to bank, and opening an account will be subject to usual diligence procedures.

The bank route

If you do take the bank route, most high street banks offer foreign currency accounts but it may be worth trying the larger branches. If you are spending as well as earning money in the US, it makes sense to keep the money in dollars as you don’t have the exchange costs to bear.

Many banks runs currency accounts including dollar accounts. Currency accounts can offer the following benefits:

  • Allows you to make transactions in a foreign currency
  • Can be used to fund short-term cashflow requirements
  • Available for any business dealing in one or more foreign currencies
  • You can have a cheque book for foreign currency transactions
  • Payment and collection of foreign currency funds is simplified.

Foreign currency accounts with chequebooks can be a useful way of making regular payments in a foreign currency.

But be aware that if you pay using a cheque, the person receiving it will most likely sustain a hefty local bank charge.

The complexities of the US banking system means that getting value for your cheques is not the not same as in the UK, where cheques can be cleared in three days.

In the US it can take up to a month to get the value. Dollar cheque accounts are available in the UK, but not quite as easy to use as sterling, and you need to understand that there will be charges and expenses involved.

Related Topics

Foreign Exchange (FX)

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