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July 26, 2022

What Is a Multi-Currency Bank Account and How Does It Work?

When a company begins the process of branching out to new countries, one of the first questions to inevitably arise has to do with foreign currency. Or should we say foreign currencies, because it’s just as likely that a modern international company will need to pay vendors, accept money, and even manage team members in multiple different markets. If this all sounds like a bit of a headache, here’s a bit of good news: a multi-currency bank account can make global business banking a lot easier.

A multi-currency bank account is a bank account designed specifically to tackle the challenges of global banking. It lets you spend, hold, and receive multiple currencies in the same place and at the same time, giving you the control (and competitive exchange rates) you need to expand internationally.

In this guide, we’ll review the basics of multi-currency accounts—from how they work to what to look for when comparison-shopping. Regarding that second point, we’ll also show you why we think Levro is a great multi-currency account for international companies that need an all-in-one platform for payments, compliance, and more.

What is a multi-currency bank account?

A multi-currency bank account—sometimes referred to as a foreign currency account—is a bank account that allows you to spend, hold, and receive multiple different currencies. These accounts can be held at either a traditional bank or with a financial technology company. In the latter case, the fintech might have its own banking license or work with a partner bank to provide banking services along with other account features.

Businesses with an eye on expanding internationally should consider some of the difficulties that might arise when conducting business in foreign currencies. How will you pay foreign vendors and suppliers who prefer receiving money in their local currency? How will you manage payments coming in? And how will fees and exchange rates eat into your profit margins? These are a few of the questions that lead many global businesses—from startups to well-established firms—to open a multi-currency bank account.

How does a multi-currency bank account work?

Different multi-currency accounts may come with different features and capabilities, but most of them have a few things in common. In general, these accounts essentially consolidate the functions of multiple single-currency checking accounts into a single, all-in-one platform where the customer can manage money in multiple different currencies.

Levro, for example, allows customers to receive, hold, and send more than 30 different currencies to 80-plus countries from a single interface.

What’s the difference between a multi-currency account and a bank account?

Why not just open a new bank account overseas? For one, keeping track of multiple bank accounts can be a time-consuming, logistical headache. And sending money between multiple different bank accounts can be costly when you consider not only transfer fees but also exchange rates and currency conversion fees.

Traditional bank accounts can be limited in other ways, as well. Some countries or jurisdictions may have special requirements that businesses must satisfy before they are able to open an account overseas. For example, a business may need to secure a local business address and satisfy certain structural requirements before it qualifies for a local currency account.

Multiply that by several accounts, and you can start to see how the costs and resources can add up. If your business is doing more than just the occasional overseas transfer, a multi-currency account could be a strong option to consider.

5 benefits of a multi-currency account for international companies

Depending on the multi-currency account you choose, you may have access to certain features and benefits that can help your global business scale more quickly and efficiently.

Here are some of the perks available with the best multi-currency bank accounts for international businesses.

1. Smoother payments to international vendors and team members

One of the benefits of being a global business is having access to a wider range of talent and suppliers based in different countries. But in order to pay vendors and team members in their local currencies, you may want a solution that allows you to minimize fees, track payments across borders, and smooth out the impact of shifting foreign exchange rates.

A good multi-currency bank account should be able to handle all of the above. Levro, for instance, offers fees that are up to 10x lower than those you’ll find at banks and other financial institutions when you convert and send payments to vendors. And Levro’s SWIFT payment tracking gives you up-to-date notifications on the location and status of your global payments.

2. Lower fees and competitive FX rates

While wire transfers can be the fastest and most convenient way to move money between accounts, they can also be expensive. If your business depends on wire transfers to pay foreign employees, vendors, or subsidiaries, it’s worth considering—and minimizing, wherever possible—the cost of wire transfer fees.

Most multi-currency accounts don’t do away with fees altogether. But the best ones tend to offer lower and more transparent wire transfer fees than you’ll find pretty much anywhere else. Aside from wire transfer fees, some of the other commissions and fees a multi-currency account can help you save on include:

  • Foreign exchange rates that can end up hurting if they’re much higher than the mid-market exchange rate (also known as the interbank rate)
  • Currency conversion fees charged by banks that don’t accept payments in certain foreign currencies
  • Third-party or intermediary bank fees that sometimes accompany interbank transfers
  • Monthly account fees and monthly account balance minimums

3. Great for managing and reducing currency risk

Currency risk, otherwise referred to as exchange-rate risk or FX risk, describes the business impact of a move in the price of one currency in relation to another. For example, say you’re a U.S. company that buys parts from a supplier in the U.K. Unless you receive payment for those parts on the same day the deal closes, your company is exposed to some level of currency risk. If the value of the GBP rises against the value of the USD in the time between settlement and payment, you could be looking at a worse deal than what you thought you’d agreed to.

The same is true for a U.S. company that keeps a significant portion of its balance sheet in a foreign currency (or currencies). If your business isn’t in the game of currency speculation, these are the types of risks you may want to avoid.

Though some degree of currency risk is part of doing business internationally, a multi-currency bank account can help manage and mitigate currency risk. Levro’s bank account helps you apply dollar-cost averaging principles to your largest conversions, which can reduce the risk of converting currencies at an unfavorable time. You can also wait to make larger conversions when the rates are near their 52-week lows.

4. Easier multi-currency accounting

A multi-currency bank account can save your company’s accountants time and peace of mind. Some multi-currency accounts allow you to create and export reports per currency into your preferred accounting software.

Speaking of simplifying your finances, try to look for an account that offers physical and virtual cards with controls that make sense for your business. It goes without saying that cards should come with no foreign transaction fees, but other perks to consider include:

  • Employee cards with customizable limits and spending controls
  • Automatic account reconciliation with purpose-specific and vendor-specific virtual cards
  • Security features such as 3-D Secure technology
  • No annual fees

5. Compliance solutions for a global business

Some multi-currency bank accounts come with features that make it easier to stay compliant in local jurisdictions.

Perhaps you’ve heard of the Report of Foreign Bank and Financial Accounts (FBAR) introduced as part of the Bank Secrecy Act. This report must be submitted to the Treasury Department every year for certain foreign financial accounts, including bank accounts. If you were to open foreign bank accounts in every jurisdiction your company does business in and track the monthly balances in each of those accounts…well…you’d be quickly headed for a mess of paperwork.

With a multi-currency account, you may be able to buy and hold dozens of different currencies without having to worry about FBAR compliance. Levro’s U.S.-held accounts, for example, do not require FBAR.

Open a multi-currency bank account with Levro

So, now you know some of the advantages of opening up a multi-currency bank account as a global business.

It’s important to note that these accounts may not be appropriate for every business. If you tend to make infrequent transfers and only conduct business in your domestic market, it might not be a priority (at least for now). But if you’re looking for a modern banking solution that can help you scale globally and reduce the stress of managing multiple currencies, consider Levro’s multi-currency bank account.

Ready to get started? Apply for an account today, or send an email to [email protected] to learn how Levro can help your business.

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