Make euros work for you

In case anyone is confused, here's a reminder: the UK has opted out of the European single currency - the pound is still the pound. Most of us knew that anyway, but with every high- street bank in Britain offering some sort of euro product, from current accounts to mortgages, you could be forgiven for thinking this country had adopted the euro too.

Barclays and NatWest say they are offering personal customers a full range of banking products in the euro - the new currency which came into effect in 11 European countries at the beginning of the year.

Some banks have embraced the euro enthusiastically, launching a raft of new products to test the market, but others are more sceptical. Lloyds TSB, Cater Allen Bank and Citibank are also offering euro current accounts, but Midland sees limited demand and is only offering euro travellers cheques.

Charges vary. There is no charge for the NatWest, Barclays or Citibank accounts, but both have high minimum balances - 3,000 and 2,000 euros respectively. Citibank charges 15 euros a month if the balance falls below this.

Most of the accounts pay interest, but only at a very low level. Citibank pays tiered interest, from a quarter per cent up to 1 per cent for balances over 59,000 euros.

Who needs a euro current account? Typically, these accounts would have an appeal for internationally orientated customers, says Citibank's Amanda Iremonger. Someone who travels regularly to the rest of Europe, or somebody who owns property or has personal ties to other European countries might be tempted to open an account. Citibank has already received a lot of customer interest in the euro current account. "As the euro becomes more a part of peoples' lives, it will become more applicable to a broader section of the public," says Ms Iremonger.

For the vast majority of people in the UK, though, euro accounts will be irrelevant. "We don't see there's much need for our personal customers to open euro accounts," says Joanne Davis, a NatWest spokeswoman. Less than 5,000 personal euro current accounts have been opened, which represents less than 0.1 per cent of NatWest's customer base.

Lloyds TSB says euro current accounts have only been opened by customers who already held accounts in ecu - the forerunner to the euro - or a European foreign currency.

Most people in the UK will not have to change their banking arrangements at all. The euro is just another foreign currency. Existing debit and credit cards can generally be used in continental Europe to shop in euros, just as they were used to buy marks and francs.

Euro-denominated travellers cheques should be more widely used than euro accounts. They are being offered by all the banks, although travellers cheques will also be available in the original European currencies. Someone going on holiday to France may choose to take travellers cheques in francs. But if the journey is likely to involve more than one European country, euro travellers cheques would be better, as they can be cashed in any of the 11 participating countries.

Whether all shops and restaurants in Euroland will actually accept euro travellers cheques remains to be seen. Midland says it cannot guarantee they will be accepted in all outlets, though banks will certainly accept them.

Since interest rates for the euro are lower than sterling rates, savings accounts have little appeal. Through its offshore branches, Halifax has launched a euro savings account with a minimum opening balance of 10,000 euros. Rates are tiered from 2.25 per cent to 3 per cent for over 250,000 euros. With euro returns so low, Lloyds TSB says there is little point in offering savings accounts.

But lower rates should mean cheaper mortgages. Barclays has already launched a euro mortgage, and Abbey National is due to unveil a similar product next month. Lloyds TSB says it plans to offer a euro mortgage in the second quarter of this year.

The loan, made against a UK property, is denominated in euros and monthly repayments must be in the new currency. Barclays' euro variable mortgage rate is 4.72 per cent, compared to 7.7 per cent for its sterling rate. On a pounds 100,000 interest-only mortgage, this would mean payments of pounds 371 a month, compared to pounds 614 on the standard rate.

But providers are quick to warn about the risks involved in taking out any type of foreign currency mortgage, and stipulate that borrowers must have an income in euros. "In the late Eighties when interest rates were high, we did see people looking to borrow in a foreign currency," says Margaret Schwarz, product manager for mortgages at Abbey National. "But they were rather badly burned by the depreciation of sterling," she adds.

If the euro rises sharply against sterling, a euro mortgage raised against a house priced in sterling could even become higher than the value of the property, leaving the borrower with negative equity. Because of this risk, Barclays will only lend up to 65 per cent of the value of the property with its euro mortgage, and Abbey National has set a 70 per cent loan- to-value limit. "No one knows how stable the euro will be," says Mike Thompson, Barclays euro manager.

People working for multinational companies are most likely to take out euro mortgages, says Margaret Schwarz. "We have already had quite a surprising response," she adds.

Lloyds TSB euro helpline: 0845 3000138; Barclays euro helpline: 0845 60066