A foreign currency bank account, also known as a multicurrency account, can facilitate transactions made in foreign currencies; that is, not in U.S. dollars. This can be a significant benefit for businesses. They may use multicurrency (or foreign currency) bank accounts for international transactions as well as to support operations overseas. This can offer a major convenience because of the flexibility with different currencies.
But these multicurrency accounts aren’t just for businesses. Some individuals may also want to fund a bank account with foreign currency in certain situations. Read on for a closer look at what a foreign currency account is, how to open a multicurrency account, and the pros and cons of this type of bank account.
Key Points
• Foreign currency accounts allow holding and sending funds in various currencies.
• These accounts can be useful for individuals who make frequent international transactions.
• Opening an account may require a valid ID, proof of income and employment, and a minimum initial deposit.
• Benefits include avoiding transaction fees and competitive exchange rates.
• Potential drawbacks include fees and high initial and ongoing balance requirements.
What Is a Multicurrency Account?
A multicurrency account is a type of bank account that’s designed to hold money denominated in foreign currencies. It may also be referred to as a foreign currency account or borderless account. It is a simpler way to deal with regular deposits of foreign currencies.
The types of currencies accepted for deposit or used for withdrawals can be determined by the bank. Some of the currencies your bank may process include:
• Australian dollars (AUD)
• Canadian dollars (CAD)
• Euros (EUR)
• Great Britain pound sterling (GBP)
• Japanese yen (JPY).
As mentioned, foreign currency accounts can be opened for business or personal reasons. Businesses that operate globally may require these accounts in order to send payments to vendors or receive payments from international clients.
You might open a foreign currency account for yourself, as an individual, in a few different circumstances. Perhaps you live or are working abroad. Or maybe you regularly make payments overseas or need to send money to friends and family internationally.
How Does a Multicurrency Account Work?
With a multicurrency account, you are able to deposit, hold, and send money in different currencies, just as the name implies. Depending on the financial institution, you may be able to earn interest on deposits, as well.
In addition, these accounts may allow you to convert funds back and forth into foreign currencies as needed without paying the usual fees associated with these operations.
A multicurrency bank account that’s set up as a savings account might follow typical savings account rules. For example, the bank may limit you to six withdrawals from the account per month (though these regulations have been loosened since the COVID-19 pandemic; check with your financial institution). If that limit applies and you exceed it, the bank may impose an excess withdrawal fee. Keep in mind that any fees assessed for a foreign currency account may be processed in U.S. dollars.
Multicurrency accounts at Federal Deposit Insurance Corporation (FDIC) member banks enjoy FDIC protection, up to the established limit. The FDIC insures banking customers up to $250,000 per depositor, per financial institution, per ownership category. This may well reassure you about the safety of your funds.
One thing to note is that foreign currency bank accounts aren’t used for forex trading. If you’re interested in trading foreign currency as an investment, you’d need to open a separate brokerage account for that. There are a number of online brokerages that offer the option to trade forex alongside other investments, such as stocks and exchange-traded funds (ETFs).
Typical Requirements to Apply for a Foreign Currency Bank Account
If you’re interested in opening a foreign currency account, it’s important to know what documents you’ll need. That way, you can gather the necessary materials and speed through the application process. The specifics can vary from bank to bank but generally, you must:
• Be of minimum age to open an account, typically 18 or 19
• Have a valid, government-issued form of identification
• Provide identifying information, including your name, address, date of birth and Social Security number
• Meet minimum deposit requirements
• Provide proof of income and employment
The requirements to open a foreign currency account aren’t that different from those for a foreigner opening an account in the U.S. Whether you can apply for a foreign currency bank account online or not will depend on the bank. Some financial institutions allow you to complete the application online, while others require you to open an account over the phone or in-person at a branch. Check with yours to learn the exact protocol.
You may also need to already have at least one other account open with the bank before you can apply for a multicurrency account. If the bank imposes this requirement, you may also need to maintain a specific minimum balance in that account to qualify.
Pros of Foreign Currency Account
If you’re curious about multicurrency accounts, it may well be because you are tangled in some red tape as you try to bank in, say, both U.S. dollars and euros. A foreign currency bank account can help meet certain money management needs, like toggling back and forth between two kinds of currency.
Here, the pros of multicurrency accounts.
• When you deposit funds into your account, you can hold it as multiple currencies, including leftover foreign currency from travel, in one place. You don’t have to exchange foreign currency before you can use it.
• You typically avoid foreign transaction fees you might otherwise incur.
• Being able to switch among different currencies could allow you to leverage the most favorable exchange rates.
• You may be able to earn interest on your balances.
• If the institution where your account is has FDIC insurance, you are covered up to $250,000 per depositor, per insured bank, for each account ownership category, in the rare event of a bank failure.
• Multicurrency bank accounts can be used for personal or business purposes.
• Sending payments or money in foreign currencies can be more convenient.
A foreign currency account could also come in handy if you travel. You can use a linked debit card to make purchases or withdraw cash in each country you visit, without having to get traveler’s checks from your bank.
Cons of Foreign Currency Account
While a multicurrency bank account might be appropriate in some situations, there are a few drawbacks to consider. Specifically:
• Your financial institution might charge you account and minimum balance fees the same as you might pay for any other bank account.
• Interest rates and annual percentage yields (APYs) may be low.
• Initial deposit requirements or minimum balance requirements may be on the higher end.
• Changing currency rates can affect the value of the money in your account.
Another drawback of foreign currency accounts is that not all banks offer them. And some banks may only offer these accounts for businesses, not individuals.
Multicurrency Account Fees
Foreign currency accounts can have fees, just as any other type of bank account may. Depending on the bank, some of the fees you might pay include:
• Monthly maintenance fees
• Excess withdrawal fees (for savings accounts)
• Overdraft or non-sufficient funds (NSF) fees
• Foreign transaction fees
• Currency conversion fees
When comparing multicurrency bank accounts, take time to review the details thoroughly. It’s important to understand which currencies you can hold, which fees you might pay, and whether you’re required to maintain a minimum balance in the account.
Once you’ve scoped those details out, see if the benefits of this kind of account will outweigh the fees. It could wind up being a good way to simplify your banking life if your financial life requires frequent foreign transactions.
The Takeaway
Foreign currency accounts can simplify money management if you regularly send or receive money in currencies other than U.S. dollars. Opening one of these multicurrency bank accounts is not that different from opening any other type of account. It can be a major convenience if your daily life involves receiving and/or sending funds overseas — and a good way to take control of your international financial life.
FAQ
What is the purpose of a multicurrency account?
A multicurrency or foreign currency bank account allows you to receive, hold, and send funds in more than one currency. This can be convenient for businesses and individuals who frequently make international transactions and would like to have an account that recognizes multiple currencies.
What types of banks offer multicurrency accounts?
Many but not all banks offer multicurrency accounts. Some of the U.S. banks that offer foreign currency accounts at press time include Citi and HSBC. Some financial technology companies like Wise and Revolut offer digital multicurrency accounts. For businesses, Wells Fargo and PNC offer foreign currency accounts. You can contact your current bank to find out if multicurrency accounts are available.
How does a multicurrency account work?
A multicurrency bank account allows you to deposit, keep, and send funds in more than one currency. You can decide if you keep the funds in different currencies or convert them. This kind of account can help you conduct international transactions without necessarily paying all the usual fees involved.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
Photo credit: iStock/RgStudio
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