If you search online for the term certificate of deposit, many of the links refer to foreign CDs, particularly Indian. CD rates in other countries are typically several times those available stateside.
Last year, Bankrate published a story, "Foreign-currency CDs: tempting and risky," that examined some of the pros and cons of investing in an overseas CD.
- Foreign-currency CDs come with higher returns.
- They provide a hedge against the dollar.
- These CDs may come with FDIC-protection if bought domestically.
- Foreign CDs come with extra risk, including currency conversion.
- Buying a CD without FDIC-protection can leave savers open to big losses if anything happens to the issuing bank.
To protect yourself, look out for fees and keep tabs on currency fluctuations, the story says. If the exchange rate fluctuates between the dollar and the currency in which the CD was issued, you could find yourself with fewer dollars than you had going in.
From the story:
For example, some banks charge a fee to convert a foreign-currency CD back into dollars. And, if you withdraw your money early, you could be assessed other fees and suffer a loss of interest. Currency losses are taken against any interest earned.
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