Ask the Expert: Foreign Bank Accounts
July 27, 2010
Q: Where can I find CD rates for international banks? Can U.S. citizens typically and freely open accounts at non-U.S. banks?
A: There does not appear to be a comprehensive source on CD rates for banks around the world, so your best bet would be to start with some country-by-country Internet research, tracking down rates from the web sites of individual banks.
As a U.S. citizen, you generally should be able to open an overseas account, but you will find the exact requirements for doing so will vary from country to country. There are three general cautions you should bear in mind before opening a foreign bank account:
- As long as you continue to live in the U.S., you will be responsible for paying any relevant U.S. taxes on your foreign accounts.
- Putting money in a non-dollar-denominated account will subject you to changes in exchange rates. While these can work in your favor, an adverse currency swing could quickly wipe out all the interest you might earn in a year.
- Your deposits will not benefit from the same protections that U.S. banking customers enjoy. These include both anti-fraud regulations and FDIC deposit insurance. Keep in mind that when some banks went under during the financial crisis, the FDIC was there immediately to backstop deposits that fell within the insurance limit. In most countries, you'd be unlikely to find such an effective safety net.
In short, it may be more effective to shop for the best CD rates here in the U.S. than to chase higher rates that come with a number of unknowns.
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