Multi currency account: holding several currencies in one place

Money arrives in its own currency and stays there until you decide to convert or pay it out. Without such an account, an incoming dollar payment is converted into euros on arrival and converted back when a dollar invoice is due, and both conversions carry a margin. WorldFirst lists the features business clients look for: holding several currencies, sending and receiving international payments, choosing when to convert, including with forward contracts, and local account details per currency.

Payments in and out still use the rails of each currency. A euro balance reaches SEPA, a dollar balance goes out over US domestic rails where the provider has local access and over the SWIFT chain where it does not.

The costs sit in four places: an account or monthly fee, fees per incoming or outgoing payment, the margin on each conversion, and sometimes fees for cards or for holding a balance. Interest on foreign currency balances is often low or zero. Of these, the conversion margin decides most of the bill for a company with steady flows, so ask for it as a stated spread over the mid-market rate.

Banks and licensed payment or e-money institutions both offer multi currency accounts, and the protection differs. At a German bank the balance is a deposit, and the definition of a deposit in section 2 of the German Deposit Guarantee Act does not limit it to euros. At a payment or e-money institution the money is not a deposit. Section 17 of the ZAG requires the institution to safeguard customer funds, either on a separate account at a credit institution or central bank, in safe and liquid assets, or through an insurance or guarantee. If the institution fails, safeguarded funds belong to the customers and not to its creditors.

The license questions behind this are on the pages on the e-money license and payments regulation in Germany.

Holding dollars does not remove the dollar risk. It moves the moment of conversion, and the balance still loses or gains value in euros. What the account does allow is a natural hedge: paying dollar costs from dollar income, so only the net amount is exposed. The page on FX risk management covers forwards, options and hedging policies.

A foreign currency account holds one foreign currency, such as a dollar account at a German bank. A multi currency account holds several currencies under one account and one login, and many providers add local account details for each currency.

At a bank it is a deposit and falls under deposit guarantee rules. At a payment or e-money institution it is protected by safeguarding: the funds are kept apart from the institution's own money and go back to customers if it fails.

No. It lets you choose when to convert and lets you pay costs in the currency you earn, which reduces the amount you have to convert. The balance itself still moves in value against the euro.