If your business has a strong hold in the overseas market, or you regularly receive and make payments in a foreign currency, then you may benefit from opening a foreign currency account. By having foreign currency, you will save money as you will not be paying conversion costs.

A foreign currency account can be managed in the same way as a standard current account, and many banks offer this service, although eligibility criteria and charges range from bank to bank, and opening an account will be subject to usual diligence procedures.

Approach the larger branches

Most high-street banks offer foreign currency accounts but I recommend you try the larger branches. But I think you will find that charges per cheque are more expensive than sterling current accounts because there is more work involved. Certainly, if you are spending as well as earning money in the US, it makes sense to keep the money in dollars as you don't have the exchange costs to bear, advises Nigel Lander, a specialist finance adviser with Business Link for London .

For example, Lloyds TSB runs currency accounts including dollar accounts, and if you visit one of their Business Centres, you can find out more about the options available. Its currency accounts can offer the following benefits:

- Allows you to make transactions in a foreign currency

- Can be used to fund short-term cashflow requirements

- Available for any business dealing in one or more foreign currencies

- You can have a cheque book for foreign currency transactions

- Payment and collection of foreign currency funds is simplified

You can also reduce the risk of adverse movements in exchange rates and interest is paid on some of your credit balances. With the account from Lloyds TSB, interest is calculated on the credit balance each day and paid half-yearly, with the exception of company accounts. Basic rate is normally deducted automatically from any credit interest Lloyds pays. Credit interest rates can vary from day-to-day.

But charges and expenses apply

Foreign currency accounts with chequebooks can be a useful way of making regular payments in a foreign currency. But be aware that if you pay using a cheque, the person receiving it will most likely sustain a hefty local bank charge.

The complexities of the US banking system means that getting value for your cheques is not the not same as in the UK, where cheques can be cleared in three days. In the US it can take up to a month to get the value. Dollar cheque accounts are available in the UK, but not quite as easy to use as sterling, and you need to understand that there will be charges and expenses involved, advises Lander.

(6/11/03)

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