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Multicurrency Accounts Can Pay Off for International Business

By Tim Moran

A growing number of financial institutions offer accounts that let businesses and individuals hold money in multiple currencies. Some of these accounts are designed to let businesses make and receive payments in different currencies without the need for conversion in each transaction, or to open an account with a foreign bank. Some companies even offer payment cards that work with these multicurrency accounts.

Observers note that, if you do business in different currencies, you may wish to consider opening one of these multicurrency accounts. With so much uncertainty in the economic climate today, demand for multicurrency accounts—particularly those offering U.S. dollars and euros—have jumped, as businesses look to protect themselves from exchange rate fluctuations.1

 

How Useful are Multicurrency Accounts?

 

Any enterprise—large or small—doing business across borders and having to manage multiple currencies might benefit from having a multicurrency account. This way, for instance, you can get paid by your client in one currency, then pay suppliers or employees in another.

 

Many believe a multicurrency account is also useful if:

 

  • Your business trades internationally—be it exporting, importing, or both;
  • You’re an online seller across several marketplaces;
  • You operate an e-commerce store and sell goods or services in multiple currencies;
  • You employ staff abroad or work with freelancers overseas;
  • You’re an independent contractor or freelancer that works with international clients regularly.2

Generally, a multicurrency account allows you to send and receive funds in multiple foreign currencies, potentially changing your current way of processing international payments. Through these multicurrency accounts, funds are either exchanged into U.S. dollars or held in the currency of the transaction until you’re ready to exchange them.3

 

A major benefit of a multicurrency account is the ability to send and receive funds in different currencies while avoiding an exchange between them. By accepting the foreign currencies you typically work with, you reduce the risk of losing out on the exchange rate spread with each transaction to and from your account. That you can also conduct business in U.S. dollars adds to their flexibility.4

 

Flexibility Key to Multicurrency Accounts

 

Experts suggest that it’s important to find a multicurrency account that’s flexible enough for your needs by comparing what’s available and weighing factors that include:

 

  • Supported currencies. Many banks support at least a handful of major currencies—but do they match the currencies you frequently conduct business in?
  • Account minimum. Some banks require a minimum monthly account balance. One that matches your cash flow can help you avoid fees and penalties.
  • Account fees. Asking for a complete list of fees can help avoid surprises. Look also for processing or handling fees on specific currencies and transactions.
  • Currency conversion charges. In addition to exchange rate differences, your bank might charge a fee each time money is converted into another currency.
  • Transfer amounts. Transaction limitations vary by bank, so it’s good to make sure your account can handle payment amounts typical for your business—including minimums and maximums.
  • Turnaround speed. How long does the typical transaction take between your home bank and accounts overseas?
  • Flexibility and support. Does the account allow for transfers, deposits, and withdrawals over the phone, online, or at a branch? Are there fees related to each option?5

In today’s financial market, there a few new players offering multicurrency accounts, but getting one from your current bank could come with side benefits. The most important include:

 

  • Interest: Most banks will pay you interest for currencies you hold in your foreign account. While the interest can be quite low, it’s still something.
  • Overdrafts: Another advantage is the possibility to arrange overdrafts with your bank. The terms might not be the most advantageous, but you’ll still have the possibility to access a quick loan if you really need it.
  • Exchange Rates: Banks don’t have the most advantageous exchange rates out there, but a foreign currency account gives you the possibility to keep your money in the currency of the transaction until it is convenient for you to convert.6

The main drawbacks of multicurrency accounts with a bank, say experts, are the costs and fees. While most banks will open one for free, almost all of them charge transaction fees, as well as fees for ATM withdrawals. Some banks may also charge annual account management fees and require you to deposit a minimum amount to open the account.7

The

Takeaway:

If your enterprise—small or large—is doing business globally, experts say it might be time to look into setting up a multicurrency account. These are available today from banks and other financial entities, and they offer the promise of avoiding common fees and exchange-rate issues.

Tim Moran - The Author

The Author

Tim Moran

Tim Moran is a veteran business-technology journalist. He has most recently been involved in brand publishing startups, including creating CMO.com for Adobe.

Sources

1. “Multi currency business bank accounts: A complete guide for UK small business owners,” Startups; https://startups.co.uk/multi-currency-business-bank-account/
2. Ibid.
3. “Manage your transactions abroad with a foreign currency account,” Finder; https://www.finder.com/savings-accounts/foreign-currency-account
4. Ibid.
5. Ibid
6. “Multicurrency Accounts Must Knows – Before You Sign Up,” TranSumo; http://transumo.com/multicurrency-accounts/
7. Ibid.

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