# How to get high interest rates from other countries



## emperor (Jul 24, 2011)

I've tried a lot of things in my life, buying stocks, buying gold, buying collectibles and once you add up all my successes and failures I pretty much break even. One thing that has always interested me is foreign currency and their interest rates.
Right now in Russia their interest rate is 9% how can I open a Russian bank account and get 9% interest? Same with the states, they give 2% interest but all the banks here give almost no interest or charge a fee. I know I can buy stocks and I know for some people they think its a dumb idea, which is fine, I'm just asking how can I open a foreign bank account and get their going interest rates. Thanks


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## The_Tosser (Oct 20, 2015)

At what points does the currency exchange differences between your (CAD?) and the target market come into your calc's?


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## FI40 (Apr 6, 2015)

emperor said:


> I've tried a lot of things in my life, buying stocks, buying gold, buying collectibles and once you add up all my successes and failures I pretty much break even. One thing that has always interested me is foreign currency and their interest rates.
> Right now in Russia their interest rate is 9% how can I open a Russian bank account and get 9% interest? Same with the states, they give 2% interest but all the banks here give almost no interest or charge a fee. I know I can buy stocks and I know for some people they think its a dumb idea, which is fine, I'm just asking how can I open a foreign bank account and get their going interest rates. Thanks


I'm not too sure how you could implement that strategy, but even if you could, keep in mind that Russia has much higher inflation than we do, so one would expect that the currency exchange rate you are paying now for rubles would probably not be the same as a year from now for example, which could certainly hurt your returns. Also, a bank account in Canada is backed by our govt, whereas in Russia I guess it's backed by the bank and maybe their govt...which I wouldn't trust as much as Canada's, especially considering you're not a citizen.

Investments more suitable to foreigners, like their bonds or whatever else, have higher yields for good reasons. There's no free lunch unfortunately.


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## Eclectic12 (Oct 20, 2010)

emperor said:


> ... interest? Same with the states, they give 2% interest but all the banks here give almost no interest or charge a fee. I know I can buy stocks ...


Odd ... when I was wandering around NY state in the finger lakes area, the local banks were advertising HISA of something like 0.24%.

Then too, this review in Jan 2015 is listing the ten best US savings accounts as having something like a range of 0.90% through 1.10%
http://money.usnews.com/money/blogs/my-money/2015/01/16/the-10-best-savings-accounts-in-2015

American Express is trumpeting that they offer 0.90% versus the top fifty US banks that offer 0.07%.
https://personalsavings.americanexpress.com/home.html

This comparison for National US banks a high of 1.11% and a low of 0.05%.
http://www.bankaholic.com/sem/savin...58131&ef_id=VlMbjQAAAWLMRp9T:20151123135837:s


I'm curious as to what US banks you are seeing that offer 2%?


As for opening a US bank account, I suspect the easiest would be to look for a Canadian bank that has a US arm that is catering to snowbirds etc. I suspect they won't be offering high interest rates though.


You may also want to check the Canadian market as both Tangerine as well as PCF have almost no fees and offer 0.80% interest. According to this chart, other Canadian financial institutions offer from 0.80% through 1.85%.
https://www.highinterestsavings.ca/chart/


Bottom line is that there does not appear to be enough difference to make it worth taking on the currency risk for the US.


Cheers


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## The_Tosser (Oct 20, 2015)

Eclectic12 said:


> Odd


+1

I just didn't want to be the downer so early in the day  lol.

EDIT: Seriously though. I have a few ideas on how it could most easily be done but i don't think most would follow through with it. I also know it's not exactly what i 'believe' the original poster wants, IE a GIC/CD vs an actual 'bond', which clearly has other concerns on top.


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## CPA Candidate (Dec 15, 2013)

https://en.wikipedia.org/wiki/Interest_rate_parity


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## Joe Black (Aug 3, 2015)

emperor said:


> Right now in Russia their interest rate is 9% how can I open a Russian bank account and get 9% interest?


You don't seem to have considered at all that Russia's currency may drop against the dollar between the time you "invest" and when you redeem your investment. If it drops 10%, you 9% profit is wiped out and you come out with less than you put in.


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## gibor365 (Apr 1, 2011)

Joe Black said:


> You don't seem to have considered at all that Russia's currency may drop against the dollar between the time you "invest" and when you redeem your investment. If it drops 10%, you 9% profit is wiped out and you come out with less than you put in.


 On the other hand dollar can drop comparing to ruble ....  this is all speculations ...


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## Eclectic12 (Oct 20, 2010)

gibor said:


> Joe Black said:
> 
> 
> > You don't seem to have considered at all that Russia's currency may drop against the dollar between the time you "invest" and when you redeem your investment. If it drops 10%, you 9% profit is wiped out and you come out with less than you put in.
> ...


Agreed ... but I think the point is that where the currency swing of over 10% ... the 9% interest rate could be irrelevant. 

If I recall the article correctly, Jan 2014 to Dec 2014 would be a case in point as it started the year at something like 33 to 1 USD and ended the year at 80 to 1 USD. I believe the last numbers from the article were something like 58 to 1 USD. 

Of course nothing says one has to pull it out at such a bad rate ... but the question is where is it headed and when will the rate make it worth while?


Bottom line is simply comparing interest rates while ignoring currency fluctuations is likely a recipe for disaster.


Just like had one converted CAD to USD when it was close to par then been paid say 1% on one's USD for a couple of years ... one may not care that one could make 1.8% in Canada as even if one gets a not so great exchange rate ... one is probably looking at a 30% gain from the currency alone.


Cheers


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## OhGreatGuru (May 24, 2009)

Remember that Cyprus banks went bankrupt offering customers higher-than-market interest rates on savings accounts, supported by buying Greek government bonds, which were then defaulted.

You can always find high-interest bonds somewhere in the world, but the reason they are high-interest is because the market considers them high-risk.


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## HaroldCrump (Jun 10, 2009)

Remember _Glacier Bonds_?


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## emperor (Jul 24, 2011)

Okay thanks for the info Ill read up on bonds. I just have all my cash in stocks (which have all lost money) and Canadian HISA which is being devalued. I think Canada is in for a really rough patch with all the spending and anti corporation stuff. I don't really like the US either so I'm trying to find some where good to park my money. Probably just like everyone else I imagine


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## Eclectic12 (Oct 20, 2010)

It is good to consider other choices ... the challenge is that other choices have different risks associated with them.

As I say ... without taking those other factors into account, the overall result may not end up the way it looks at first glance.


Cheers


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## gibor365 (Apr 1, 2011)

Curious if anybody know what are interest rates in Euro zone countries ....


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## Rusty O'Toole (Feb 1, 2012)

Hedge funds do this kind of thing all the time. They borrow in a low interest rate country, invest in a high interest rate country and hedge with credit default swaps. They make good profits until the high interest rate country defaults then they blow out. But that is ok, they got the 2 and 20 for enough years to make themselves rich, and the money they lost was the customers'.

Better stay away from deals like this unless you have a pretty sophisticated knowledge of finance, hedging, etc.


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## james4beach (Nov 15, 2012)

A few places in Europe have negative interest rates. Switzerland and Sweden
http://www.bloombergview.com/quicktake/negative-interest-rates

The western world is in a monetary race to the bottom. Canada has some of the highest interest rates around... as low as they are, I'm still thankful. I think the BoC rate will head towards zero, and all western countries will converge on zero, then negative rates.

I'm still a buyer of 5 year GICs


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## james4beach (Nov 15, 2012)

All US rates (at any normal bank) are zero, by the way. Absolutely zero. There is no such thing as "yield" in US fixed income.

People at my US office gawk with mouth open wide when I tell them about our GICs that pay 2.3% interest.


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## Eclectic12 (Oct 20, 2010)

What is a "normal" US bank? 
Or maybe it's a chequing account instead of a savings account that pays zero?

I ask because the US banks that are part of the Canadian banking conglomerate seem to be paying 0.05%, which lines up with the surveys I've seen as well as the banks I've walked by in the US. Definitely a lot less than 0.8% but not quite down to zero.


Cheers


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## NorthernRaven (Aug 4, 2010)

You can find US rates for savings and CDs ("Certificates of Deposit", their term for GICs) on this NerdWallet page. Savings seem to top out at 1.10%, and you can find some 5-year CDs over 2%. I don't know how comprehensive their data sources are.


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## james4beach (Nov 15, 2012)

OK, maybe it's a bit above zero. I was thinking at too-big-to-fail banks, which are Citi, Bank of America, JPM, Wells Fargo, etc


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## Eclectic12 (Oct 20, 2010)

Citi Bank's web site has a "by state" listing but for the states I checked, it seems to range from 0.01 to 0.10%.

Wells Fargo is similar in terms of having to pick a state. For the states I checked, there is a base of 0.01% with a potential bonus ranging from 0.06 through 0.21%

Bank of America is showing 0.03% with potential bonus of 0.03%, preferred rewards lists 0.06% bonus.



Bottom line is that while compared to Canada, the rates are pitiful ... it seems hard to find one offering zero.



Cheers


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## gibor365 (Apr 1, 2011)

I don't have too much US$ as FI, but what I have I just put into Tangerine, at least they give something
US$ Saving 0.25%
1 Year Guaranteed Investment	
0.45%
1½ Year Guaranteed Investment	
0.55%
2 Year Guaranteed Investment	
0.75%
3 Year Guaranteed Investment	
1.25%
4 Year Guaranteed Investment	
1.75%
5 Year Guaranteed Investment	
2.00%


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## marina628 (Dec 14, 2010)

A couple years ago I considered giving my friend in New Zealand some cash because of their high interest rates but when you consider the Forex and fact somebody has to pay income taxes I did not bother.Difficult to keep much cash around with these rates today.


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## emperor (Jul 24, 2011)

I looked at tangerine it seemed like they gave a horrible conversion rate though, I think it says 1.357. Doesn't that mean I'm basically getting 65 cents for every dollar instead of 74 cents. Also what is everyone one else doing? Is everyone else just holding Canadian money even though it keeps dropping?


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## gibor365 (Apr 1, 2011)

emperor said:


> I looked at tangerine it seemed like they gave a horrible conversion rate though, I think it says 1.357. Doesn't that mean I'm basically getting 65 cents for every dollar instead of 74 cents. Also what is everyone one else doing? Is everyone else just holding Canadian money even though it keeps dropping?


I don't care about conversions ..... I transfer back and forth US$ from my CIBC US$ account to Tangerine US$ account and withdraw US cash when I need it...


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## mars (Mar 11, 2014)

I picked up some US$s just a couple weeks ago for an upcoming trip south. I did the exchange at my TD branch and it worked out to 1.36 to 1 or 1 to 0.735. As to opening a bank account in another country, I've never done it but I have listened to a few podcasts by Simon Black and he actually recommends having at least 1 account in another country as opposed to all where you live, he is an expat American. Not sure he has ever recommended Russia but has mentioned Singapore. Here is the link to the website where you can find the podcasts. https://www.sovereignman.com/about/ The interesting thing about the exchange rate, you have to also remember what you are comparing against, are you comparing the Russian Ruble against the US $ or Cda $? The Canadian dollar hasn't been performing great against the US buck either so if both the Canadian and Russian currencies drop against the US $ does it really matter if they stay the same against each other? Picking up a currency when it is low is not really a bad idea if you think the currency is going to go up or your currency is going to fall against it. No different than every Canadian rushing to buy houses in the US when we were at par and now cashing in because there is a large gain because the Canadian dollar has dropped.


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## Eclectic12 (Oct 20, 2010)

mars said:


> ... The interesting thing about the exchange rate, you have to also remember what you are comparing against, are you comparing the Russian Ruble against the US $ or Cda $? ...


True ... though it seems the Ruble to CAD did only a slightly better.

Jan 2014, 1 USD to 33 rubles where 1 CAD to 31 rubles.

High exchange in 2014 for USD was 1 to 80, high for CAD was 58.9 rubles.


Current close for USD is listed as 1 USD to 67.25 where CAD close as 1 CAD to 50.83 rubles.


http://www.xe.com/currencycharts/?from=CAD&to=RUB&view=1D



None of which tells us what's going to happen in the 2016.


Cheers


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## james4beach (Nov 15, 2012)

emperor said:


> I looked at tangerine it seemed like they gave a horrible conversion rate though, I think it says 1.357. Doesn't that mean I'm basically getting 65 cents for every dollar instead of 74 cents. Also what is everyone one else doing? Is everyone else just holding Canadian money even though it keeps dropping?


My opinion is that long term prospects for CAD are better than USD. Fundamentally, the US is in much worse fiscal shape than Canada. Therefore I view this as a buying opportunity for CAD (you buy low, right?)

I have USD income coming in. So I let it accumulate to 10K, then I convert it using the gambit method. I feel great about buying large amounts of CAD at such low prices.

I expect that in the short term (next few years) USD will be the stronger currency. In longer term (many decades) I think CAD will be stronger.


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