Since Foreign Account Tax Compliance Act (FACTA) was enacted many innocent expats have been affected. Offshore bank accounts have been purged and now countries like the UK are considering following suit.
Any Briton residing in Europe and paying euro-denominated bills in investment or pension income earned in sterling would have to have been forgiven for hoping that the plunge in the economic fortunes of nations such as Spain, Greece, Ireland and Portugal would result in a weakening of the euro’s strength. However, unfortunately the euro remains strong against the pound with concerns that the UK’s uniquely bad fiscal forecast will see sterling lolling in the doldrums for some time to come.
In just the past 3 years there has been a negative 25% movement in the value of a pound compared to a euro, and this has impacted many British expats – particularly pensioners – and it has resulted in some experiencing extremely difficult times. This situation has also served to raise the profile of multi-currency bank accounts…
Previously such accounts were hardly ever utilised by an individual, instead international companies sometimes favoured them for example. But negative and extreme currency movements have increased everyone’s awareness of the need to protect against over-exposure to one currency, what’s more, as so many of us lead truly international lifestyles nowadays, a multi-currency account can be very beneficial. Today we’re going to lay out the pros and cons of multi-currency offshore bank accounts so that you can quickly assess whether such a structure could be of use to you.
The Definition of a Multi-Currency Offshore Bank Account in a Nutshell
Some banks which particularly court expatriate and international business – such as HSBC, Barclays and Citibank to name but three – offer qualifying customers the option of having a single or a combination of foreign currency accounts under held one single account number. Such a structure is a multi-currency bank account.
The popularity of these account types has increased in recent years, not only because many more of us have become aware of the damage extremes of currency movement can have, but because there has been an increase in awareness of how much it can cost to exchange and move money between currencies.
There has been a dramatic increase in the numbers of forex companies all offering to help those who move money internationally – and they sell their services off the back of the fact that banks seldom offer the best rates of exchange, and they usually charge far more to transfer funds too. Well, banks are finally catching on and attempting to hit back at this market by winning the business of those clients who need to transact between dual or multiple currencies on a regular basis.
The Pros of an Offshore Multi-Currency Bank Account for Expats
- You can easily take advantage of currency movements by being able to move the percentage of your account held in one currency to another to benefit from a positive forecast for a given currency.
- Such an account makes it very easy for an expat who is paid in one currency but who has bills and liabilities in another currency – all transactions can be managed within the one bank account.
- Banks often offer different interest rates on different currencies and so it may be possible to offset a currency’s negative movement and another’s weak interest rate offering by diversifying across those currencies doing better and offering more – once again, you can do all this transparently under one account number.
- Charges for moving money between currencies are usually much less for expatriates who bank in this way.
- You can enter into forward contracts with your bank – in the same way as you can with dedicated forex companies.
- You get one online overview and one bank statement covering all transactions, movements, exchanges and currencies within your multi-currency account – which makes it very easy to manage your money in this way.
- You only need to open one account – which cuts down on the amount of time wasted on application form filling.
- Multiple accounts can be costly – one single multi-currency account can therefore be a more cost effective way of handling your international transactions.
- You may be able to do international transfers, fee free, to other account holders with the same bank. Note: this is not offered by all banks.
The Cons of an Offshore Multi-Currency Bank Account for Expats
- It is impossible to accurately predict a currency’s movement in relation to another currency, and using a multi-currency account solely in order to ‘trade’ on movements is likely to be considered unwise!
- Not all banks offer the currencies you may wish to have included beneath your single multi-currency account number umbrella – check before signing up.
- You may need to keep an eye not only on a currency’s value in relation to another currency, but also the interest rate your bank is offering on that currency in order to ensure that your account balance is correctly and ideally divided between the better returning currencies.
- Despite their flexibility and many benefits (see above), multi-currency accounts can be more work to manage effectively than a straightforward single currency account.
- Account fees and minimum balances usually apply.
- You still may not get the most preferential rates of exchange or fees if you compare with dedicated foreign exchange companies’ offerings.
- Not all accounts are as flexible as others – for example, your so-called fee-free transfers and transactions may only apply if you’re moving money between accounts in different countries/currencies that are all held in your name…so do check the small print.
Final Facts and Things to Consider
Not all banks offer the same terms and conditions on their multi-currency offshore bank accounts. Some require greater minimum deposits and fees than others for example, what’s more, the benefits of such an account structure need to be determined on a case by case basis. I.e., what’s right for you may not be what’s right for me, so do ensure you do your research carefully so that you can make an informed choice about the right way forward.
According to research by Lloyds TSB, the popularity of these account types has increased with some groups of expatriates such as retirees for example – therefore if you do require greater flexibility to transact internationally, perhaps a multi-currency offshore bank account is the way forward for you?
This article does not constitute advice…
If you’re moving abroad and wondering how to manage your money, an international account from Lloyds TSB for expats is a free and flexible solution
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