A reader has written in asking: “I’m looking for a euro account in the UK that pays interest. My main purpose is to hold a large amount of euros and maybe convert to sterling or transfer to a French account sometime in the future.”
Ruth Jackson-Kirby Answers: Unfortunately, there aren’t any euro savings accounts in the UK that pay interest. Barclays offers a Euro Savings Account, but with an interest rate of 0% it is a bit of a misnomer.
Where to save Euros
So, rather than focusing on making a return while your money is sat in the account you may be better off looking for an account that won’t cost you money.
Several of the high street stalwarts offer euro accounts but you need to be careful of monthly fees and poor exchange rates. For example. Lloyds offers an International Current Account where you can hold euros, but it has a €8 monthly fee and you must either earn £50,00 a year or have £25,000 to invest. Metro Bank also charges a monthly fee of €5-€15 for its Foreign Currency Account depending on your balance.
Best Euro savings accounts
HSBC and Barclays both offer foreign currency accounts without a monthly fee, but you have to have a sterling current account with them in order to open the account and the exchange rates are pricier than other options as they don’t offer interbank rates.
The interbank rate is the price banks charge when they are moving money between themselves. So, if Bank A exchanges money with Bank B the interbank rate is levied. Customers don’t usually get that rate – we are usually charged more so that the bank can make a profit on the transaction.
As well as leaving Euros on account you should also check to see if analysts think the Euro will devalue in the future and if it is worth keepping funds in GBP to transfer to Euros later. If you are interested in this we keep track of the pound to Euro forecast here.
Revolut has proved a popular option for people wanting to make regular transfers and payments in international currencies. It is fee-free, and you get interbank exchange plus 0.5%. But I wouldn’t recommend this for you. Revolut is not a bank account – its technically a pre-paid card – so your money would not be protected by the Financial Services Compensation Scheme. Given you want to deposit a large sum this would be an unnecessary risk.
Instead, you may want to take a look at Starling Bank. This challenger bank launched a Euro Account earlier this year. It is fee-free and offers you competitive interbank exchange rates plus 0.4%. You will also get an IBAN (International Bank Account Number) with your account, making it easier to transfer funds abroad if you eventually decide to do that.
Starling Bank is covered by the FSCS so up to £85,000 of your money will be protected should the bank run into problems.
The drawback to the Starling Bank account is that you won’t receive a debit card, but it doesn’t sound like that would be much of a problem for you as you don’t mention want to spend direct from the account. Plus, Starling Bank has plans to issue debit cards in the future.
Just be aware that because your money won’t be accruing interest it will be steadily losing purchasing power thanks to inflation.
When you do decide to exchange your money from euros into another currency think twice about doing it with your bank. High street banks, and challenger banks for that matter, have limitations when it comes to currency exchange.
You should consider an independent currency broker. They can offer you a highly competitive exchange rate plus extra services such as forward contracts or market orders
Forward contracts allow you to fix an exchange rate for a period of time, which can be useful if you want to exchange a large sum and secure a good exchange rate ahead of time.
Market orders are where you tell your currency broker the exchange rate you are hoping for and they switch your money when the exchange rate hits your target.
Ruth Jackson-Kirby has been writing about personal finance for 15 years. She writes for The Sunday Times, Good Housekeeping, MoneyWeek and Moneywise.
