What is a Domiciliary account and its Meaning?
A domiciliary account is a type of current account that allows you to fund it with foreign currencies such as dollars, Pounds or Euros and also enables you to do foreign transactions on that account. You can use a dom account to transfer money to another country or receive dollars, pounds or euros from another country.
Furthermore, a domiciliary account is just like a current account that is used for the purpose of transactions of business. It is not intended for saving of money, but rather it is supposed to help you carry out your business transactions using foreign currencies.
With a domiciliary account, you will open the account with your bank in the country where you live. Once the account is opened, you can then start using it. The account number will be send to your email or your telephone number.
After getting the account number, you can then give it out to the person that will send money for you abroad with some additional details. If it is a dollar account, the money will be sent in dollars, this means that the person sending you the money must send it in dollars. Once you receive your alert, you can go to your bank and withdraw the dollars by filling your foreign currencies withdrawal slip. The dollars will be given to you and then you can proceed to change it to your local currency (which is Naira in Nigeria) at the Bureau De Change. The Bureau De Change is just an office that buys dollars from you and give you Naira in exchange or they can sell dollars to you and you give them Naira in Exchange. What they basically do is to change whatever currency you need whether from local currency to foreign or from foreign currency to local. In Nigeria, I will advise you to change your money with them rather than using the banks for so many reasons. I have explained the reasons in this post on how to withdraw your foreign currency and exchange at higher rates.
When you want to send dollars to someone in a different country, assuming to your brother, wife, husband, son or daughter; all you need to do is to collect their details and then you proceed to the bank with your dollars (or any currency that you are using in your domiciliary account, this could be Euros, Pound sterling, etc). At the bank, you will request for a deposit slip; you will fill and then the bank will process it. You can learnhow to send or receive money using a Domiciliary account in Nigeria.
What type of Foreign Currencies can I use in my Domiciliary account?
Depending on the country that you are based in currently, you can use any foreign currency in yourdomiciliary account, but it also depends on the currencies your banks offer in your country. Most times, the banks make use of the most widely used currencies which may include:USDollars, British Pounds, Euros, etc. These currencies are widely accepted world wide in most countries and can be used as means of exchange.
This means that, if you are using a bank in Nigeria, then thedomiciliary account cannot be funded with Naira currency but with a different currency.
The best way to know the currency to use in your domiciliary account is to know the purpose for which you open the account. If you open the account for receiving from a transaction, then know the currency that would be used for paying you first before you even open the domiciliary account. Always confirm that currency with your bank before you proceed to open the account. This is because your bank may not accept to open a domiciliary account for you that may be funded with Indian Rupees. So always try confirming the foreign currencies accepted by your bank. If you have confirmed, you can then proceed to let your business partners abroad to know the currency you would accept. It is left for them to look for that currency in their own country from their Bureau De Change and then send it to yourdomiciliary account, which you will then withdraw. That is how easy it is to use adomiciliary account and that is basically the importance of thedomiciliary account (for foreign currencies).
How to receive Dollars, Euros or Pounds from a different country using your domiciliaryaccount
Yes, you can receive payments into yourdomiciliary account from another country using wire transfer. There are many methods used for sending and receiving foreign currencies; you should always ask with your bank’s customer care to know the type they accept. Depending on the method of transfer used, yourdomiciliary account will be credited with the corresponding amount of foreign currency within the stipulated time for the method of payment used. Payments through wire transfer from United States of America (USA)couldtake 2 or 3 working days to reflect inyourdollar domiciliary account, starting from the day the money was sent. Please note that Saturdays and Sundays are not working days and hence are not included. Public holidays are also not included. This means that if the money was sent on Wednesday, while Thursday and Friday happens to be public holiday, you will not receive the money until Tuesday or Wednesday.
Other methods could be faster but generally, the faster the method, the more the fee you are charged.
Charges may vary according to the type of transactions done, but the charges depend on your bank.
Can you pay or transfer money online using domiciliary account?
Yes, you can transfer money from yourdomiciliary account to another domiciliary account abroad or within your country. Depending on your bank, you could be charged a fee for this. All you need to do is to fill out the transfers form and enter all the details of the account you want to transfer the money to; hand the cash to the bank staff and the money would be send as appropriate.
If you are in Nigeria and you have registered for GTBank internet banking, then you can select “FX transaction” from the menu by the left. You can then choose the type of transfer you want to initiate such as: – transferring to anotherdomiciliary account or – changing your foreign currency into your local currency. When you want to use this method to convert the dollars (or Euro or Pounds) from your account into your local currency e.g Naira, the exchange rate would be determined by banks, and mostly, it is often at the official inter bank rate. At the time of this writing, GTBank was exchanging at 280 naira to a dollar while the exchange rate was 340/345 naira to a dollar at the Bureau De Change in Jos. This means if you were selling out your dollar to Bureau De Change, you will gain more compared to you selling it to your bank. The difference may not be much if you are exchanging few dollars, but it becomes marked if the dollars are much. Compare changing 200 dollars to Naira using the Bank and Bureau De Change rates. The difference could be 13,000 naira which is a lot of money. This is the single reason why using Bureau De Change is better.
Can you receive money with a different currency to your savings account?
It depends! Some banks can allow you to use your savings account to receive payments or receive money from a different country. If your bank offers this, then it is pretty easier than going throughthe stress of opening a domiciliary account, though using adomiciliary account gives you better flexibility over your money and also more profit than using your local currency savings account. All you need to do is to give your savings account to the person. Once the money is deposited, no matter the currency used, it will be converted to your country’s currency using the official bank rates.The exchange rates may also depend on your bank. In Nigeria, when the Naira was fixed at 197 naira to a dollar, it means that when the money is send to your savings account, it will be converted at 197 naira to one dollar; if you received 100 dollars, it means then that your bank will convert it to 19,700 (Nineteen thousand, seven hundred) naira. But with the floating exchange rate recently introduced by the Central Bank of Nigeria (CBN), your bank will determine how much you will be paid and you cannot alter this. That means, your bank may exchange it at 100 naira to a dollar or they could exchange at 50 naira to a dollar. The banks will always want to make profit from your money, this is the reason why you need adomiciliary account as I will explain the uses below.
Advantages of having aDomiciliary account
Adomiciliary account gives you lovely benefits that will make life easy for you when you are dealing with any transaction that is international. It has the following uses/functions:
- You can receive direct foreign currencies:Instead of your bank converting the foreign currency for you into your local currency, thedomiciliary account allows you to be able to receive foreign currency directly. This will enable you decide what to do with it.You can use the money to pay for goods or services online. I do host my website with a hosting provider that requires the money to be paid in dollars. If I receive any dollar in mydomiciliary account, I will prefer to use the dollar in my account to pay for hosting. This is far cheaper than converting the money sent to you into your local currency before paying your hosting provider using a Naira master card, the banks will charge you at a high exchange rate.
Anytime I use my Naira master card to pay for the hosting, the bank charges me 330 naira to a dollar. But if the banks were to convert my dollars into naira for me, they will convert at 280 naira to a dollar, is that not cheating? So always use adomiciliary account to receive direct deposit than using a savings account.
- You can pay for international transactions:by using yourdomiciliary account, you can easily pay for transactions online using your dollar master card instead of naira master card. Around April, May and June of 2016, some banks had to stop the use of Naira master cards for payments in foreign currencies due to the economic situation in Nigeria at that time. If you had nodomiciliary account, it means your business online would have ended by this policy. You can avoid such occurrences by using a dollar master card to pay for items or services online instead of naira master card. Though some services such as the *737# services may not yet work for Dom Accounts.
- It gives you more control over unstable currencies:Just as I explained above, instability in the economy couldcause negativeeffects on your business. But with adomiciliary account, you do not need to worry because no matter what the price of dollar or Euro or Pounds may be, you are shielded from the effect because you pay directly using the foreign currency and not with the Naira master card which the banks will charge a high exchange rate.
- You can serve as a referee for someone:this may not look meaningful to you but it is very important. The banks know the importance of using adomiciliary account for international transactions than using a savings account and paying via naira master card. When you use the naira master card, the banks gain more; due to this fact, the banks make it somewhat difficult for people to be able to open a domiciliary account. This is the reason why banks do not even give much enlightenment to customers aboutdomiciliary account because it does not benefit them. The banks prefer to enlight you and indirectly force you to open a savings account so that you can continue to save money with them while they use it for businesses. The banks will ask of two referees who are having a current account and whose account is not use for salary, and that the referees’ account must not be less than 6 months and must be active and not dormant. Please have you ever come across anyone in Nigeria with a current account with such criteria? There are but it is difficult to get them because most people are using savings account. I searched for good 4 weeks, I got 6 people after the bank kept rejecting 4 of my referees; but I was determined to open the domiciliary account because I know of the benefits. Hence, today, I can also serve as a referee to my friends and loved ones to reduce the stress of looking for referee.
Disadvantages of a Domiciliary account
- You are restricted to one type of currency per account:One down side of domiciliary account is that if you open a dollar account, it has to remain as that. When you want to transact in Euros, you have to get another Eurodomiciliary account and so on. This makes it messy and does not allow for easy transaction.
- It is difficult to get referees as I have explained above, as most people use savings account. The few with current account use it for salaries of which the banks do not accept salary accounts! reason best known to them.
If you are banking with Gtbank and you have registered for internet banking or mobile banking, then whenever you open a domiciliary account, the account will be added to your pre-existing Gtbank account menu, which means that you will have two accounts showing in your internet banking menu: one for your normal savings and another for thedomiciliary account.
Banks that offer domiciliary accounts in Nigeria include virtually all the major commercial banks in Nigeria such as Gtbank, First Bank, Diamond Bank, UBA, Union Bank, Zenith Bank, Fidelity Bank, Skye Bank, EcoBank, Sterling banks, etc.
Do you have any issues regarding your use of adomiciliary account or you have suggestions? Let us know from your comments.