In today’s world, operating with multiple currencies isn’t that surprising. After all, thanks to the internet, most people are already making international purchases, and businesses have extended their services on a global scale.
But how can you operate a business or receive money in other currencies?
Well, banks have come up with a rather simple solution to this problem. It is called a multi-currency bank account.
The name of this account is quite straightforward and explains its purpose. It is a bank account that allows you to store multiple currencies, instead of opening a new one for a different currency.
So, if you are someone who receives or pays money in a different currency, a multi-currency bank account is the perfect solution.
Well, if you use a regular checking account and you want to pay someone in a different currency, you have to exchange your money for that currency to make the payment. This means that you might lose a percentage due to frequent conversions and fees.
But what are the other benefits of a multi-currency bank account?
Let’s find out.
How Does a Multi-Currency Bank Account Work?
A multi-currency business account functions similarly to a typical online bank account, allowing you to send, receive, and withdraw funds as needed. They usually allow you to access your money through wire transfers, debit cards, and electronic payments. Customer service is available via phone or online, but typically there isn’t a physical branch.
The same goes for creating an online business account. Multi-currency account works similarly to a regular business account, you can only manage multiple currencies and get favorable exchange rates.
There may also be transaction fees attached to these accounts on occasion. This might take the form of a monthly account fee, a charge for deposits or withdrawals of certain currency notes, a charge for payments made to a specific client or in currencies exceeding a specified amount.
Benefits of Multi-Currency Accounts
Cut Down on Transaction Costs
Each bank may charge an operation fee for various accounts you maintain in different countries, and since the transaction chain is more complicated and sometimes opaque, there may be additional costs that you are unaware of.
Because payment is handled through a correspondent bank—the global banking network—you could be charged extra costs. You may store all the currencies that correspond to your supplier and customer bases in a single multi-currency account, and you just have to pay one account fee.
Your business is losing money on foreign exchange fees for each international currency transaction if it only has one currency account (that is, an account that can only store your home currency and no other). Your bank will exchange money for your local currency each time you get it in a foreign currency. The bank must do this for each transaction as it must pay a high foreign exchange commission to convert the funds.
These expenses might add up quickly for a company that gets paid regularly in several currencies. The ability of a foreign currency account to store various currencies renders this conversion unnecessary, which is one of its main benefits. Thus, there is no longer a need to impose conversion costs.
Your cash flow will be more efficiently managed the quicker you can turn things around. The slowness of cross-border payments is a known fact.
As a result of technically accessing local payment networks, your procedure will be faster and more efficient if you can complete transactions in local currencies. You may have instant access to your account from anywhere with a multi-currency business account that is utilized online or through an app.
Favorable Currency Exchanges
Another expense to consider is foreign exchange, or forex or FX. You can control forex volatility by using a multi-currency business account.
If the conversion rate is not favorable and you only have one account (let’s say that it can only accept foreign currencies when converted to British pounds), you might lose money. If you have clients in Europe, they can deposit money into your multi-currency account provided it supports euros. Likewise, you can pay all vendors in euros.
You may hold off on changing from one currency to another until you have a favorable exchange rate since a multi-currency account functions similarly to a holding account.
Additionally, if you have enough money, you may handle supplier payments by purchasing currency at a favorable exchange rate and keeping it in your account for later use. You may transfer money in the most economical manner with a multi-currency account, regardless of whether you’re buying or selling.
Easy Accessibility and Use
Operational effectiveness frequently makes the difference between a business’s success and failure. Furthermore, cash flow and management are essential when it comes to payments, which are the lifeblood of every organization; this is especially true when conducting business globally.
Improved Relationships With International Clients
Lastly, your international suppliers would appreciate it if you could pay them in their native currencies, just as employing local currencies can benefit your international clients. If you meet their demands, you could even be able to negotiate better rates.
The use case of this bank account comes down to personal needs. There are certain types of bank accounts for everyday purchases, while others like multi-currency accounts are best if you have international transactions.
So, if you or your business operates on a global scale, make sure to check out some of your local banks that offer multi-currency accounts.
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