Multi-currency account (And other borderless solutions)

As the internet makes its way further into our everyday lives, there are more and more people who choose to do their shopping online. With this increasing volume of business comes an opportunity to sell your wares – to not only the people around you but also people all over the world.

Online marketplaces, such as Amazon and eBay, make it easier than ever to start a business of your own. But despite the convenience of these platforms, selling into a global market presents some challenges; namely, accepting, holding and making payments in foreign denominated currencies.

In this post, we’ll explore how a multi-currency account works and list the services offering this payment feature.

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What is a multi-currency account?

A multi-currency account allows you to hold a balance of foreign-denominated currencies all in one place. It acts as a collection of bank accounts, and in addition to holding currency, allows you to make and receive payments in those currencies.

Developed for both individual and commercial use, a multi-currency account is especially useful for small businesses that rely heavily on internet transactions. In these situations, the ability to hold a balance of foreign currencies can save unnecessary transaction costs.

Many multi-currency account services integrate with popular online marketplaces such as Amazon, eBay, Etsy, Shopify and Walmart. This is incredibly efficient for businesses who would like to centralise the way they handle payments and receipts.

What services offer a multi-currency account

Here is a list of services that offer a multi-currency account. Beside the name of each service, we have included its average cost, speed of transfer, receiving countries, and our review score – sorted from highest to lowest.

To sort this chart by column, click its respective headings. If you are reading on mobile, you may need to scroll horizontally to view all fields.

Our pick for individuals

TransferWise is the market leader in peer to peer payments. It facilitates transfers at the mid-market rate and charges a low transparent fee. A debit card can be attached to their borderless account for seamless online purchases.

Our pick for business

WorldFirst is a reliable service for business transfers. It offers competitive rates and advanced payment features. The service includes a broad selection of account denominations, which is exactly what a business needs when engaging in cross-border transactions.

What is it most useful for?

As we’ve mentioned, a multi-currency account allows you to hold a range of account balances, and make and receive payments from those accounts. This capability allows you to operate in regions of the world which would otherwise not be possible, or at the very least, be difficult and expensive.

To accomplish this, each of your currency accounts is usually allocated its own bank account number. That way, you are able to provide these details to any of your counterparties, and use it as you would any other bank account.

Here are some of the types of bank details you can expect to receive:

• American account number and routing number
• Australian account number and BSB code
• British account number and sort code
• European IBAN

Some providers of multi-currency account solutions are more tailored towards individuals and may offer a linked debit card. This is particularly useful if you are a freelancer or contractor who makes purchases online, or engages in other credit card related activities, such as booking flights and hotels.

A practical example

Let’s look at how a multi-currency account solution can work in a real-world situation.

Consider that you are a consultant based in the UK, but many of your clients are located in the United States. Maybe you are a software developer, website designer or maybe you run a small e-commerce store. The location of your customers doesn’t matter so much to you, but it will be most convenient for them to pay in their local currency.

However, this is not so great for you. If someone pays you in US Dollars, you’ll need to exchange that into British Pounds so it can be received into your UK account. This presents a problem; exchanging currency can get expensive. Banks, online marketplaces and money transfer services are going to charge you to facilitate that.

Or there is another solution; receive and hold US Dollars in a multi-currency account!

By doing this, you are taking more control over how and when you want to exchange money. Perhaps you have bills to pay in US Dollars also? It would be much easier to pay these suppliers with the US Dollars you have received from your clients, rather than making payment from your UK account.

Either way, it is completely your choice if and when you’re ready to transfer your funds to the UK. And when you do, you’ll receive the benefit of working with an international payment specialist. This leads us to introduce how a multi-currency account aligns with a money transfer service, and how this will benefit you in the long run.

A borderless account as an extension of money transfer

Banks are the traditional providers of currency services, including foreign denominated bank accounts. However, these banks, despite their size and the strength of relationships with their clients, are often expensive. This means that they may not always provide rates that align closely with the mid-market rate.

Transfer services specialise in foreign exchange and often do it much cheaper than traditional banks. Also, recently they have branched out to offer multi-currency account services to their clients. They offer the ability to establish foreign denominated accounts in a simple and seamless process.

So, while international payment specialists are not technically banks, they can be used as a substitute for holding traditional bank accounts. And while they won’t be able to provide a full suite of financial services, they may be able to offer other payment features such as:

• Spot contract
• Recurring payment
• Market order
• Currency forward contract
• Foreign currency options
• Cash pickup

The benefits of a multi-currency account

Now that we understand what a multi-currency account is and how it works, what are its benefits?

• Receive payments in different currencies
• Hold payments in different currencies
• Send payments in different currencies
• Much more competitive rates than offered by banks
• Generally free to open and no ongoing monthly fees
• Some services may offer a linked debit card

Conclusion

A multi-currency account is a perfect solution for individuals and businesses who conduct their commercial affairs across international borders. It allows funds to be received and stored in a range of currency denominations, which is not only very convenient but can also save you substantial transaction costs in the long run.

If you have any questions or feedback, let us know in the comments below.