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Are foreign CD rates better?

By Sheyna Steiner · Bankrate.com
Wednesday, August 29, 2012
Posted: 6 pm ET

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.

Pros:

  • Foreign-currency CDs come with higher returns.
  • They provide a hedge against the dollar.
  • These CDs may come with FDIC-protection if bought domestically.

Cons:

  • 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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1 Comment
A citizen
August 30, 2012 at 6:17 pm

Isn't here risk EVEN with FDIC insured CDs with American Bank? Isn't there a chance/Risk that even the Funds covered by FDIC will take forever to be recovered (paid back to depositors) without earning any interest? And isn/t that as bad a risk that is indicated with conversion rate change with foreign CD? And how about the conversion rate going other way around, that is Dollar becoming weaker against the specific currency, while Dollar is more likely to depreciated with atlest TWO FUNDAMENTAL ECONOMIC elements, unlimited and ongoing printing of bills and rediculously low interest rates for even more rediculous length of time which is bound to have rampant inflation driving Dollar Value as a currency locally and overseas much further down. How about all these risk when alarming investors to foreing CD risks? Wouldn't it be better to educate investors neutally and candidly?