Mobile-only Starling Bank has launched a new account that allows customers to store, send and spend euros with no fees.
With the pound fluctuating ahead of a potential no-deal Brexit, could this currency account keep your cash safe, or is there a better way?
Read on to find out which currency account is best for you, and whether converting your pounds to euros could really make a difference to your fortunes.
What is a currency account?
Not to be confused with a current account for your day-to-day banking, a currency account allows you to transact in foreign currencies.
Amidst fears that the pound could fall in value after Brexit, some consumers have been looking for ways to store their wealth in other currencies. Opening a currency account is one way to do this.
Starling’s Euro Account is the latest currency account to launch, but the market also includes products from fellow app-based ‘challenger’ brand Revolut and a number of other providers.
How does Starling’s Euro Account stack up?
To determine the quality of Starling’s Euro Account, it makes sense to compare it to rival Revolut, as well a high street bank option from HSBC and the new Borderless Account from TransferWise.
Starling Bank Euro Account
Starling’s new Euro Account is being marketed to customers with close ties to Europe, though its website also states it’s for ‘[a]nyone who wants to hold euros in their bank account’.
Accounts are being rolled out slowly to customers on Starling’s waiting list, but those who open them will not yet receive a debit card. This means you will only be able to use your Euro Account over the internet, and via the Starling Bank app. Later this year, Starling personal account debit cards will also work with the Euro Account.
A Starling Euro Account comes with an IBAN (International Bank Account Number), making it easier to send and receive payments from abroad. To exchange your pounds into euros, Starling uses the interbank exchange rate without any fees or commission.
Revolut Standard Account
A standard Revolut current account allows customers to load their cards with up to 24 different currencies.
The account does come with an IBAN, but unlike Starling, Revolut is not a bank: it only offers a prepaid card. This means your money is not covered by the Financial Services Compensation Scheme (FSCS), the regulations which protect £85,000 of your money if a bank goes into administration.
That said, your Revolut balance is held in a segregated account with a major bank, so it says your funds should be protected if the firm goes bust.
Revolut’s account offers the interbank exchange rate on weekdays for all but four currencies (Thai Baht, Russian Rubbles, Ukranian Hryvnia, and Turkish Lira). On weekends, all ‘major’ currencies have a 0.5% markup, and other currencies have a markup of 1%.
TransferWise Borderless Account
Launched last year, TransferWise’s Borderless Account gives you four sets of international bank details and allows you to hold and spend more than 40 currencies.
Since this is an electronic money account, not a bank account, it presents a similar risk to Revolut.
Read our story on the TransferWise Borderless Account for more details.
High street currency accounts
Many high-street banks, including Barclays, HSBC, Lloyds, Metro Bank, and Santander, offer currency accounts of some kind, but it’s not unusual for them to have strict eligibility requirements, and to charge fees.
An International Current Account from Lloyds comes with a £7.50, €8 or US$10 monthly fee, and account holders must earn the equivalent of £50,000 a year (or have £25,000 to invest immediately). Metro Bank’s Foreign Currency Account charges a monthly fee that differs depending on the currency you use (€5 a month for euros).
Barclays and HSBC provide currency accounts without monthly fees, but they don’t have debit cards, making day-to-day spending difficult.
It’s also common for high-street currency accounts to charge fees for payments and transfers, though these vary between banks.
Terms vary between providers, so you always need to check the conditions before signing up. For the sake of comparison, we’ll look at HSBC’s Currency Account.
With no monthly fee or minimum balance, this account is more affordable than some of its rivals. But with no debit card, it’s impractical for daily spending.
Money is converted at the HSBC exchange rate, which is lower than the interbank rate (£1 would get you €1.09 instead of €1.14 at the time of writing).
|Account||Currencies supported||Card||Fees for same-currency transactions||Exchange rate||IBAN||Eligibility criteria|
|Starling Bank Euro Account||1 (EUR)||None (due to be released in future)||None||Interbank||Yes||Starling Bank current account holder|
|Revolut Standard Account||24 (including EUR, USD, JPY, ZAR, AUD)||Prepaid Visa or Mastercard debit card||None up to £5,000, 0.5% thereafter||For most currencies: Mon-Fri – Interbank, Sat-Sun – Interbank + 0.5%||Yes||None|
|HSBC Currency Account||1 per account (but available in 14 currencies including EUR, USD)||None||None between HSBC accounts, €6 for sending to non-HSBC accounts over the internet, €12 via telephone or in branch*||HSBC Exchange Rate (lower than interbank)||Yes||HSBC current account holder|
|TransferWise Borderless Account||40+ (including EUR, USD, JPY, ZAR, AUD)||Mastercard debit card||None||Interbank + 0.35% to 0.2%||Yes||None|
*fees shown for euro acccount – charges also apply for other currencies
Which currency account is best for you?
The best currency account for you really depends on how you want to use it.
If you need to send and receive money between the UK and Europe frequently, then Starling’s new Euro Account could be a good option. But the current lack of a debit card means you’ll struggle to spend your euros in day-to-day transactions.
Revolut and TransferWise’s accounts are ideal for holding multiple currencies at once, and come with a debit card, but it’s worth remembering that neither offer FSCS protection.
HSBC and similar high-street banks’ offerings are usually more expensive and difficult to use day-to-day. But they could still work if all you want to do is hold cash, especially since transferring money between your currency and sterling accounts is usually free.
Will a current account save you from a weak pound?
If you’re worried about the value of the post-Brexit pound, exploring other currencies is certainly an option.
But there are factors you should keep in mind when opening a currency account:
- No interest: most currency accounts do not offer interest on balances. That means even if your money is stored in a currency stronger than sterling, it will likely lose its value over time.
- Changing exchange rates: if the pound does dip after Brexit, there’s no guarantee it will remain the weaker currency. All currencies are subject to fluctuations, and the one you choose could also face a crisis, lowering the value of your balance in an instant.
- Ease of access: if your money is stored in a currency account, you’ll need to transfer it to spend in pounds, meaning it may not be a wise choice for your rainy-day or emergency funds.
If you are opening a currency account primarily to grow your balance, it’s important to remember that your risk losing money.
There might be better ways to shore up your cash’s value that doesn’t put the capital at risk, such as high-interest savings accounts.