How to hold foreign currency in a bank account

[FireLane]

These days, I'm less confident about the economic future of the United States. I'm considering whether I should open a bank account that holds cash in a currency other than USD.

This would be a (minor) hedge against depreciation of the dollar, in case of further Trump-induced chaos. I'm planning some international trips in the next few years and it would also be useful for that.

Wise seems like the top contender for multi-currency accounts. Does anyone have experience with them, good or bad? Are there other companies you'd recommend?

[ChpBstrd]

Your options are:

1) Set up a foreign bank account. Benefits include being able to stash funds in another currency in a place subject to another country's laws. Drawbacks include having to file complex tax documents.

2) Switch to Interactive Brokers where they have a function to allow you to directly hold foreign currency. Benefits include being able to diversify out of USD. Drawbacks include the account still being domiciled in the U.S. if you anticipate a full breakdown of law and order.

3) Use your existing brokerage account to diversify out of dollars by just buying a fund. Benefits include ease and nimbleness, and some ability to trade options. Drawbacks include expense ratios and the account still being domiciled in the U.S.
     UDN - Goes up when the US dollar goes down against a basket of currencies
     FXE - Buys Euros and earns something like their risk-free rate as a dividend
     FXY - Buys Yen and earns something like their risk-free rate as a dividend
     FXF - ... Swiss Franc...
     FXA - ...Australian Dollar...
     FXC - ...Canadian Dollar...
     FXB - ...British Pound...

4) There are also futures and options available for sophisticated heavy-hitters, but these require significant education to use correctly, and come with massive downside risks if used incorrectly.

[bluecollarmusician]

We have family abroad, and they (and we) tend to travel a lot.

I have not personally used Wise yet- but my Sister-in-Law/Brother-in-law love it, and recommended it to us for ease of use in actually spending in multiple currencies while traveling.

They haven't used it for the purpose that you describe, but they have been very happy with it's ease of use and flexibility.

When they suggested it to is, I really didn't consider it, as we have other options we have long used for getting local currency when needed (for transfers there are a couple of services I have used, and for local currency ATM's work fine) so I wasn't really sure what the benefit would be.

Interesting idea...

[Christof]

Wise seems like the top contender for multi-currency accounts. Does anyone have experience with them, good or bad? Are there other companies you'd recommend?

I used them when they were called Transferwise. I switched to Revolut many years ago because the overall package was better for me. Both are viable options, imo, and both are now available in the US.

On the more practical side: The major options to use money in other countries electronically are Visa, Mastercard, American Express, PayPal and Western Union, all of which are US companies.

[reeshau]

If you are actually going to hold money; that is, a significant amount for a significant time, make sure you understand where it truly is.  Fintechs are not FDIC-insured banks.  And while nearly all of them partner with banks to hold cash, there are times and ways where your money can not be present at those banks.

One horror story:
https://www.bankingdive.com/news/evolve-lineage-bank-face-lawsuit-over-missing-funds/744926/

This doesn't mean the whole idea is a scam.  But it is more complex than a brick-and-mortar bank.  Make sure you go in with your eyes open.

[Cannot Wait!]

I have a Wise card. I got it on the recommendation of a (non mustachian) friend. It is very easy to use - it knows what country you are in and will use the appropriate currency. It doesn't have foreign transaction fees which is great. You have to preload it so it acts more like a debit card than a credit card. It doesn't give interest or incentives like % cashback or points. So basically I've found it to be convenient while travelling but I use credit cards in my own country (Canada) for the rewards.

[Freedomin5]

I have an HSBC multi-currency account. It’s pretty simple to use.