If you are considering opening any of the foreign accounts in Ghana then there are a few things here you should be aware of.
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What is a foreign account?
Foreign accounts refer to bank accounts which are denominated in a currency different from the home currency. For example, any bank account in Ghana which is transacted in a currency other than the Ghanaian Cedi can be classified as a foreign account.
In Ghana, foreign accounts are generally available in the three major currencies: the United States Dollar (USD), the Great British Pound (GBP), and the European EURO (EURO). Just like the local currency accounts, foreign accounts can be similarly opened as either a current or savings account although the savings accounts attract very less interest rates.
Why foreign accounts?
Foreign accounts have become rooted in the Ghanaian banking system for many reasons. The frequent foreign transactions by Ghanaian businessmen and traders make foreign accounts attractive to securely transact in foreign currencies. Day in day out, we witness many individual Ghanaians and corporate organisations engaging in the import and export of various products that require the exchange of foreign currencies.
Besides importers and exporters, many individuals also come to a point where they have to make payments in foreign currencies. For example, students studying or planning to study abroad are required to pay their fees in foreign currency.
Unfortunately, the Ghanaian currency has been quite unstable over the past years making it expensive to cover such foreign transactions. Having a foreign account tend to avoid such currency fluctuations and allow consistent financial transactions over the long term.
Foreign accounts have also become a form of lucrative investment medium for some people. By holding a foreign currency such as the US Dollar for a period of time, there is the hope that it will generally appreciate against the local currency (Ghanaian Cedi).
For security wise, people with such an investment mind-set hold foreign currencies by depositing in foreign accounts. They then convert them to the local currency when there is an appreciable increase in the exchange rates.
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Types of foreign accounts
There are basically two types of foreign accounts at the moment: foreign exchange (FX) account and foreign currency account. The difference between these two accounts mainly lies in how the accounts can be funded.
While foreign exchange accounts can be credited with internally generated foreign currency (such as those bought from the forex bureaus), foreign currency accounts on the other hand can only be credited with off-shore remittances or cheques originating from off-shore accounts. In addition, one can locally deposit cash in a foreign exchange account but not in a foreign currency account.
One negative side of foreign exchange accounts is that there is usually a limit imposed on transfers to external foreign partners. Besides this, account holders require some supporting documents before such external transfers can be made from their accounts. On the other hand, one can externally transfer any amount from a foreign currency account without any supporting document.
What it means is that if you’re an individual who do not expect any off-shore remittances or cheques, then it may be unnecessary to open a foreign currency account. In such a circumstance, foreign exchange account remains your best option.
For individuals and corporate organisations who consistently receive off-shore remittances, the foreign currency account would be more appropriate. These include Ghanaian nationals who work abroad and receive their income in foreign currencies.
Nevertheless, these categories of people have the upper hand to additionally opt for the foreign exchange account.
Ghanaian banks operating foreign accounts
With the exception of few banks, most Ghanaian banks offer the services of the two foreign account types. However, each Ghanaian bank may have their unique terms and conditions.
For example, most banks require some minimum initial deposit before opening the account while others do not. A typical example of the few that require no minimum balance is Barclays bank. CAL bank requires an initial deposit of USD 50, GBP 50 and EUR 50 to open an account in US Dollars, British Pounds and Euros respectively. In a similar manner, UT bank requires minimum amounts of $100, £100 and €100.
It is also important to ask of the presence of any commissions before proceeding to the account opening. Some banks charge commissions on deposits as well as other fees such as account maintenance fees; other banks charge no fees. UT bank and ADB (Agricultural Development Bank), for example, charge no such commissions and fees.
Another bitter truth is that some Ghanaian banks only allow withdrawal in Ghana Cedis. An example is the Agricultural Development Bank.
Ecobank Ghana allows two withdrawal options: either in Ghana Cedis with no commission or in the foreign currency with a commission of 2.5% charged on the withdrawn amount.
That doesn’t sound good, right? Many clients would rather prefer to withdraw in foreign currency and change them at the forex bureaus to enjoy more cash. Oh yeah! The exchange rates at the banks are low- far too low compared to that of the forex bureaus.
Bank of Ghana controversial restrictions
The lucrative nature of foreign accounts appears to have diminished over the past years due to some restrictions imposed by the Bank of Ghana.
The Bank of Ghana, at some points in time, introduces various measures to combat the cedi depreciation. Although these are normally imposed as temporary measures, they still demotivate a section of the populace from maintaining foreign accounts.