Top dol­lar How to hold the green­back

To pro­tect against cur­rency shocks some savers choose to hold for­eign ex­change. James Con­ning­ton looks at their op­tions

The Daily Telegraph - Your Money - - FRONT PAGE -

The sharp fall in the value of the pound af­ter the Brexit vote, and fears of con­tin­ued political in­sta­bil­ity world­wide, have fo­cused peo­ple’s minds on the dan­gers that cur­rency swings can pose to their wealth. This ap­plies es­pe­cially if you in­cur reg­u­lar costs in other cur­ren­cies – if, for ex­am­ple, you own a hol­i­day home abroad.

One way to avoid sud­den shocks is to hold some of the for­eign cur­rency you need in a spe­cial ac­count.

But fees, ex­change rates and the level of pro­tec­tion af­forded all need to be con­sid­ered. Here we run through the main op­tions.

UK bank ac­counts

A num­ber of banks of­fer for­eign cur­rency ac­counts to Bri­tish cus­tomers, al­though many are in­ac­ces­si­ble to the av­er­age saver.

Banks also use their own ex­change rates when you buy the for­eign cur­rency; th­ese rates are sel­dom the best. All come with pro­tec­tion from the Fi­nan­cial Ser­vices Com­pen­sa­tion Scheme (FSCS), how­ever, which cov­ers up to £85,000 per per­son, per provider.

Bar­clays of­fers ac­counts in a range of for­eign cur­ren­cies, in­clud­ing dol­lars and eu­ros. There is a $2,000 or equiv­a­lent min­i­mum balance, be­low which a £7 quar­terly fee is charged.

Trans­fer­ring money into the ac­count from a ster­ling ac­count in the same name is free. Trans­fers of less than £100 from any other ac­count also in­cur no charge; above this sum there is a £6 charge.

It’s free to trans­fer money to a ster­ling ac­count in the same name, but in­ter­na­tional pay­ments come with a charge.

Lloyds of­fers dol­lar and euro ac­counts for those who have a £50,000 in­come or £25,000 to save or in­vest. There is a monthly fee of €8 or $10, waived for the first three months, al­though only one fee is charged if ac­counts in mul­ti­ple cur­ren­cies are held. There is no charge for re­ceiv­ing money elec­tron­i­cally. HSBC’s Ex­pat ser­vice of­fers for­eign cur­rency ac­counts – which don’t re­quire you to be an ex­pat – but new cus­tomers need to main­tain a min­i­mum balance of £60,000 in to­tal within their Ex­pat ac­counts. Be­low this there is a £35 monthly fee. In­vestec of­fers a “cur­rency ac­cess ac­count” which al­lows mul­ti­ple for­eign cur­rency bal­ances to be viewed in one place. There is no on­go­ing fee, cus­tomers are as­signed a ded­i­cated for­eign ex­change dealer, and ex­change rates are com­pet­i­tive. How­ever, £50,000 worth of trans­ac­tions must be car­ried out an­nu­ally.

Citibank of­fers a mul­ti­ple cur­rency ac­count for those with a min­i­mum balance of $200,000.

Bro­kers

Some for­eign ex­change bro­kers may let you hold for­eign cur­rency on ac­count. For in­stance, Cax­ton’s in­ter­na­tional pay­ments ac­count of­fers a “buy and hold” fea­ture. There are no fees and the ex­change rates of­fered are com­pet­i­tive.

How­ever, Richard Rawl­in­son of Cax­ton said bro­ker ser­vices tended to be used when there was a spe­cific event in mind, such as a house pur­chase.

He said: “We have held funds on ac­count for a client for two years, al­though we pre­fer not to.

“I some­times ad­vise clients to keep their money with us for, say, three months to take ad­van­tage of a good rate. Af­ter that we dis­cuss what should hap­pen to the cur­rency. If you want us to hold your money in dol­lars that’s fine, but we don’t want to be­come a free bank.”

Ad­di­tion­ally, there is no FSCS pro­tec­tion for such ac­counts, al­though more com­plex means of hold­ing cur­rency in­volv­ing “op­tion” con­tracts do qual­ify for £50,000 of cover as they count as in­vest­ments.

For­eign bank ac­counts

You may be able to open a bank ac­count in the coun­try whose cur­rency you wish to hold.

How­ever, there could be min­i­mum bal­ances and sig­nif­i­cant amounts of pa­per­work re­quired. Check also that the bank doesn’t re­quire you to visit in per­son.

It will be far eas­ier to open an ac­count abroad if you are al­ready a cus­tomer of the bank in Britain.

The pro­tec­tion avail­able will de­pend on lo­cal rules – in EU coun­tries it is €100,000.

For this op­tion, how you trans­fer the money from the UK will be a key fac­tor. It’s un­likely that your bank will of­fer the best rate. In­stead, con­sider trans­fer ser­vices such as Trans­fer­wise, FairFX, Cur­ren­cies Di­rect, Mon­ey­corp and Cax­ton.

There is no FSCS pro­tec­tion if a trans­fer com­pany goes bust while it has your money.

Pre­paid cards

Th­ese may work for a hol­i­day­maker buy­ing dol­lars a few months in ad­vance to take ad­van­tage of a good rate, but hold­ing cur­rency on a pre­paid card is not a vi­able longterm so­lu­tion.

Money loaded on to a card is not pro­tected by the FSCS, which means if the is­su­ing com­pany fails you could lose it all. Ad­di­tion­ally, the bal­ances that can be held are usu­ally re­stricted.

‘We’ve held funds for a client for two years, al­though we pre­fer not to’

The fear of more political shocks has prompted some to hold dol­lars (above, Cen­tral Park in New York) rather than eu­ros (right, French pres­i­den­tial con­tender Ma­rine Le Pen)

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