Most people need to open a bank account in order to handle their daily monetary transactions. Many employers now directly deposit paychecks into employee’s bank accounts. People who write checks or who use their debit card to make payments need to have a bank account. This is why young adults open a basic bank account as soon as they are able.
When people open a basic bank account it lets them easily conduct bank transactions and purchase daily goods. For most people a basic bank account is all that they will ever require. There are checking accounts as well as savings accounts that are adequate for most needs. There are certain circumstances that may require a little bit more flexibility and this is why foreign currency current accounts can be very helpful.
What are foreign currency current accounts?
These accounts are a convenient solution for people who regularly receive payments in a foreign currency. This type of accounts lets individuals manage their money without the need of converting the currency into dollars. Deposits into these accounts can be made by checks, international money transfers, or cash. Withdrawals can also be made by the same methods.
What are advantages of foreign currency accounts?
Whenever a payment is made into a bank account that comes from a foreign country, it must first be converted into the destination currency. There is usually a fee involved with this as well as the uncertainty of the daily currency fluctuations. If there is a large amount of money involved the fees and currency fluctuations can incur a sizable loss in money. When an individual has a foreign currency current account there is no need to first convert the currency before depositing it into the bank account. This saves the conversion fee and it protects the bank account holder from currency fluctuations. The bank account holder can keep the money in this account until needed before converting. It is also possible to let the balance sit until a more favorably exchange rate arises.
What are the disadvantages of foreign currency accounts?
Holding money in a foreign currency account does incur certain fees. When the money is withdrawn there is a fee involved, since the currency has to be converted at that time, unless the bank account holder wishes to withdraw the money in the foreign currency. If the bank account holder uses the account to write checks there are quarterly fees payable for the use of checkbook facilities. Cash withdrawals and deposits are limited and can be subjected to fees. Each bank is different and bank account holders may withdraw money up to a certain set amount that is determined by the bank, before needing bank approval to withdraw the funds. There are no direct debits available for these types of accounts. Exchange rates can fluctuate wildly and this may mean a loss of money if the funds are withdrawn on a day of large currency fluctuations.