While we are experiencing record low savings rates here in the United States, India continues to see their domestic savings rates rise to ridiculous heights.

As of this week, the largest bank in India – The State Bank of India, has seen it’s deposit rates rise to Read more...]]> Anyone keen on the savings environment in both India and the United States may feel like the two are each other’s bizarre-O worlds lately.

While we are experiencing record low savings rates here in the United States, India continues to see their domestic savings rates rise to ridiculous heights.

As of this week, the largest bank in India – The State Bank of India, has seen it’s deposit rates rise to a maximum of 10% APY on deposits with terms of just 7 days to 3 months. And the key rates in India have remained considerably high over the last few years as well – a time in which our rates domestically have encountered extreme lows.

This, however, is not something that is unanimously celebrated in India. In fact, according to this Business Standard article, “The State Bank of India’s decision to increase deposit rates by 25-100 basis points earlier this week has stumped its peers, who were planning to lower these rates after March.” At a time when many Indian banks and lending institutions are pushing for lower loan rates to stimulate domestic economic growth, a rate hike of this kind from the State Bank of India, has left some bank executives a tad disgruntled. One exec went on to state that, “We cannot understand why SBI had to raise deposit rates now. We have no plans to increase our rates but the move has ruled out any scope for a cut in our deposit rates.”

How to Take Advantage of India’s Deposit Rates?

Despite the mixed feelings on high savings rates in India, US savers are likely salivating over their returns. If you’re considering investing in the deposit products of foreign banks and currencies review our coverage of the risks associated with foreign currency CDs.

2012, however, may turn out to be quite a rewarding year for foreign currency CD holders. Although these products certainly dont come without risk, they pose as an enticing investment vehicle for a more risk-seeking consumer willing to perform the required due diligence.

With US bank deposits yielding less than the current rate of Read more...]]> It’s tough out there for income investors looking for bank deposits with attractive rates – at least domestically.

2012, however, may turn out to be quite a rewarding year for foreign currency CD holders. Although these products certainly dont come without risk, they pose as an enticing investment vehicle for a more risk-seeking consumer willing to perform the required due diligence.

With US bank deposits yielding less than the current rate of inflation, many savers are looking more favorably upon these CDs as an alternative.

Before we get into the current yields provided by some of these products, we should point out the major underlying risk associated with them – and that is the fluctuation in world currencies. When a currency rises or falls against the US dollar during the life of your CD this difference will be directly reflected in your earnings - putting at risk even your principal.

For example, if you happen to invest in the Brazilian Reel in 2012 and take advantage of their current 3 month CD yielding 5.09% APY, you will only garner this 5 percent return if the relative value of the US dollar and the Brazilian Reel remain constant throughout the life of the CD. If, for example, Brazil encounters heavy inflation during this period and sees the value of it’s currency sink against the US dollar your earnings will also sink accordingly.

Hypothetical Scenario #1

You invest in a Brazilian Reel 3 month certificate of deposit with a featured APY of 5.09 percent. During this period the Brazilian Reel sinks by 3.0 percent in value against the US dollar. You’re 5.09 percent CD is then only garnering 2.09% in real returns (still a much better yield than what is offered domestically).

Hypothetical Scenario #2

You invest in a Brazilian Reel 3 month certificate of deposit with a featured APY of 5.09 percent. During this period the Brazilian Reel rises by 3 percent in value against the US dollar. You’re 5.09 percent CD is now garnering 8.09% in real returns.

As you probably infer, picking stable currencies is crucial to realizing projected gains, and therefore thorough research should be had before investing in any foreign currency CD.

Top Foreign Currency CD Rates in 2012:

1) Brazilian Reel – 3 Month CD yielding 5.09% APY.

2) South African Rand - 3 Month CD yielding 3.55% APY.

3) Australian Dollar - 3 Month CD yielding 2.78% APY.

4) Indian Rupee - 3 Month CD yielding 2.02% APY.

5) Mexican Peso - 3 Month CD yielding 1.89% APY.

Source: EverBank

The primary reason for many people to use Swiss banks in the past was to Read more...]]> When you think about Swiss Banks, the first thing that comes to mind is likely Switzerland’s well-known commitment to privacy. The Swiss banks have been getting money from the rich and the filthy-rich since the Middle Ages. These account holders are then known externally only by their account numbers, and only the banks know their true identities.

The primary reason for many people to use Swiss banks in the past was to evade taxes. Others have been known to use it for sheltering their money from being stolen, especially during times of war. Then there are some that simply opened a Swiss bank account because it was convenient when traveling or vacationing in Europe, because they could simply withdraw money with their own Swiss credit or charge cards.

Related: Foreign currency bank CDs may advertise higher interest rates but with greater risk due to lack of FDIC insurance. Some domestic banks will allow Americans to invest in growing economies around the world through bank deposits in foreign banks.

Who are the primary customers?

There are a few types of people that come to mind, such as politicians, celebrities, dictators, socialites, industrialists, financiers, white-collar criminals, and those who just don’t trust traditional banks. Some top criminals were known to have Swiss bank accounts, like Boston crime boss James “Whitey” Bulger, but run-of-the-mill Swiss nationals and legal residents are the main account holders at Swiss banks.

You may think they are exclusive, but in reality, anyone can open an account. You don’t have to have large amounts of money to open one either. At their web site Swiss-Bank-Accounts.com, anyone can open an account with as little as 5,000 francs. Right now, that’s just over $5,000. The American dollar is weaker than the Swiss franc, which has powered through the global crisis and avoided the drastic devaluation that has hurt other currencies.

How do you set up an account?

• Like many domestic banks, you can often apply online. Or you can also apply by “correspondence”, or letter, at the bank of your choice.
• You can transfer money from your bank to the Swiss bank through wire or the Internet, or mail a check or money order.
• Paypal and Western Union can sometimes be used to fund the account, but contact the bank beforehand.
• You may also be able to use a debit card or credit card to fund the account.
• Go to a local branch of the Swiss bank, like Credit Suisse.
• Or take a trip to Switzerland and visit a bank branch.

With these mundane techniques for opening an account, you may be wondering how confidentiality could possibly be maintained for account holders, especially with the electronic and paper trails they leave behind. But clients of these banks tend to be a bit more ingenious with ways to hide their funds, like using wire transfers and doing multiple offshoring, all the while opening and closing accounts until their money has reached the Swiss bank.

Of course, it’s useful to have the help of unscrupulous brokers, bankers and accountants. They help account holders by placing accounts in the name of other offshore companies, preferably with a multi-layered global presence. These corporations can be intentionally ambiguous phantom organizations with store-fronts and web sites that miraculous disappear and reappear with different names.

The USA Today recently reported on a prime example of this kind of illicit money transfer ingenuity. Leon Cohen-Levy and Mauricio Assor, father and son hoteliers, were accused of placing revenue from a sale of one of their hotels into an anonymous HSBC account that was officially held by a Panamanian firm, and the two men didn’t report their sale to the Internal Revenue Service.

The privacy laws behind Swiss banks have brought on a lot of suspicion regarding non-government and government organizations that have their money stored in offshore Swiss accounts. Accusations have been raised that the Swiss banks’ cloak of privacy has protected drug lords, dictator, suspected tax evaders, and terrorists.

Sound like fun?  Think again

America is proactively looking to uncover any American money that has been laundered using Swiss banks. Back in January of 2003, the U.S. Treasury announced that it would be signing an agreement with Switzerland that will involve sharing information for tax purposes. In March 2009, Switzerland agreed to increase their anti-money laundering laws to honor their agreement with the U.S. So now that the 2009 treaty is in effect, account holders of Swiss bank accounts are required to be identified and any transactions that are suspicious must be reported to the Money Laundering Reporting Office.

Criminal charges are also to be filed against 4,000 or so Americans who had an account with UBS. These account holders will be fully audited and will be liable for tax repayments and penalties, unless they are given leniency by the 2009 IRS voluntary disclosure program. This program has since ended, but the Justice Department and IRS are still putting pressure on suspects of UBS and other offshore bank account holders.

With the U.S. deficit mounting, and taxes inevitably on the rise, more and more U.S. citizens are being tempted to open up offshore accounts for their money. Even with all of the risks involved, like imprisonment, large fines, and disclosure threats, some are still risking it anyway. I, on the other hand, prefer just to keep my money close by.

This post comes from the NerdWallet.com team of financial bloggers and experts in helping consumers compare rewards credit cards.

If your looking to get into foreign currency CD’s but are having a difficult time overlooking their risk factor, then you may wish to diversify into a foreign currency index CD (or as EverBank calls it, a “world currency index CD”). Basically all these financial products do is diversify your Read more...]]> Below are some of the highest yielding “World Currency Index CD’s.” Compare different strategies and find the best match for your portfolio.

If your looking to get into foreign currency CD’s but are having a difficult time overlooking their risk factor, then you may wish to diversify into a foreign currency index CD (or as EverBank calls it, a “world currency index CD”). Basically all these financial products do is diversify your foreign currency CD’s into multiple currencies with varying interest rates.

Remember, when dealing with foreign currency CD’s you must always take into account how your desired currency will compare with the US dollar throughout the life of the CD. If the US dollar weakens against the currency you have invested in, you stand to make more money than the fixed interest rate would indicate, however, you can also lose money if the opposite occurs.

Foreign currency index CD’s mitigate this risk by assigning portions of your overall investment to different currencies and rates. Typically the overall amount is broken up into 3-6 currencies. Below are some of EverBank’s World Currency Index products:

Commodity Index CD (foreign currencies)

This index product is built around four different currencies from “commodity-based countries.” Below is the break down.

Australian Dollar (25% of total) yields 1.63% APY for 6 month terms

Canadian Dollar (25% of total) yields 0.13% APY for 6 month terms

New Zealand Dollar (25% of total) yields 1.88% APY for 6 month terms

South African Rand (25% of total) yields 6.09% APY for 6 month terms

As an overall index, the commodity Index CD yields 2.52% APY for both 3 month and 6 month maturities. The current US national average for certificates of deposit with these same maturities is 1.45% and 1.51%, respectively.

As an index, this will supposedly outperform US CD (certificates of deposit) with the same maturities primarily due to the lucrative rate provided by the South African Rand. However, if you were to solely invest in the South African Rand you would encounter a substantial amount of risk. This index CD hedges against that risk by countering 25% invested in the South African Rand with 75% invested in very stable and developed nations (with lower accompanying yields).

Petrol Index CD (foreign currencies)

This is another EverBank product. It is built on 3 currencies from non-middle eastern, oil producing (and exporting) nations. The currencies and their overall percentage of the index are as follows:

British Pound – (33% of total) yields 0.13% APY for 6 month terms

Mexican Peso – (33% of totatl) yields 5.83% APY for 6 month terms

Norwegian Krone – (33% of total) yields 0.75% APY for 6 month terms

As an index, the Petrol Index CD yields 2.01% APY for both 3 month and 6 month maturities. Again, beating the US national average by over 0.50% APY on the same maturities. A common theme with EverBank’s “World Currency CD’s” is to have atleast 50% of an index comprised of stable currencies from stable countries with modest rates complimented by more lucrative rates by “iffy” nations, to bring the overall yield to a respectable percentatge.

To learn more on foreign currency CD’s you may want to review EverBank’s World Currency center.

First I’d like to mention that the main lure for domestic CD’s (certificates of deposit) are their relative safety when compared to all other possible investments in the universe. In almost all cases they Read more...]]> Want better interest rates on your savings? Try foreign currency certificates of deposit. Below are the going rates for CD’s in various developed (and undeveloped) nations, as well as 5 crucial elements to take into consideration before investing.

First I’d like to mention that the main lure for domestic CD’s (certificates of deposit) are their relative safety when compared to all other possible investments in the universe. In almost all cases they are federally insured, fixed rate, time deposits in which you clearly know what you are earning and how long it will take. EverBank’s CD’s are protected against bank failure by the FDIC but your deposits are still susceptible to losses and gains due to currency price fluctuations.

5 things to consider before investing in foreign currency CD’s:

1) Perhaps the most crucial and sometimes overlooked factor of foreign currency CD’s is the constantly changing value of one currency vs. another. Before you invest in a foreign currency CD you must first convert your US dollars into the desired currency. If you happen to invest, say, $10,000 into an Indian bank and the Indian Rupee falls 10% while your money is invested then you could end up with far less than you put in. However, the inverse of this effect is also true and substantial gains can be earned as well.

2) Make sure you know the exact path in which your money is taking in order to get to the desired foreign bank. Are you simply wiring your money to a broker overseas? Do you know the broker or institution in which you are investing? For example, the Capital Bank of Mexico is currently offering any United States customers a 90-day 12% APY certificate of deposit. Sound attractive? I’d first read up on BankVibe reader comments before investing. Some claim it is a complete scam, however the Capital Bank of Mexico claims it has never lost any depositor’s principle or accrued interest. Needless to say, due diligence is a must.

3) While EverBank’s CD’s are federally insured by the FDIC (up to $250k) other foreign currency CD’s may not be. If a foreign bank or broker is offering suspiciously high rates then it is likely they are not insured. Always inquire into deposit insurance before investing.

4) How has the country performed on a macro-economic level when compared to the United States? Is this country experiencing growth? Are they a capitalistic society? Are they rich in natural resources and do they efficiently get them to market? A country experiencing consistent growth due to positive fundamental changes in their government is more likely to have stable banks. Banks grow in stability when they are able to securely finance a range of diverse domestic business ventures, land and home purchases, a well as obtaining new deposits.

5) How accessible is the institution in which you wish to invest. Can you receive support relatively easily? Do you get a response within 24 hours? Are there English speaking customer service agents? Do they deal with American deposits regularly?

Above are all crucial questions and criteria you should carefully consider before investing in foreign currency CD’s. And as always, you should speak with a certified financial adviser before opening any new deposit account.

(provided by Everbank)

Tomorrow we will take a look at diversifying your foreign currency CD investments through Multi-Currency Index Funds.

The catch? Well, for starters Mexico doesn’t have any sort of FDIC equivalent to protect your investment against an economic/bank collapse. They do, however, state that throughout Read more...]]> A couple weeks ago BankVibe covered Capital Bank of Mexico’s CD rates. To recap, Capital Bank of Mexico offers potential American customers CD rates yielding an APY of anywhere from 12-19%. Even when compared to other foreign currency CD rates these are still suspiciously high.

The catch? Well, for starters Mexico doesn’t have any sort of FDIC equivalent to protect your investment against an economic/bank collapse. They do, however, state that throughout their 75 years of existence no American (or non-American) investor has EVER lost their principle and/or interest accrued.

Needless to say, their has been much interest surrounding these certificates of deposits and their accompanying rates, so I thought I would share a recent Economist article which can hopefully shed some light on the Mexican banking industry and the recent history of their economic stability (or lack there of).

The Economist article stated that, after the 1994 peso crash, the risk of Mexico’s difficulties spilling over into America was considered so great that the Clinton administration helped bail out its southern neighbor. In the first quarter of 2008, the boot was on the other foot, though the scale was entirely different. Now it was the turn of Banamex, one of Mexico’s two largest banks, to help out Citigroup, its crisis-stricken parent. Banamex provided $453m of the $1.1 billion Citi earned in net income from its overseas operations between January and March (Citi lost $5.1 billion overall).

The article went on to state that Mexico has one of the most open banking systems in the world; two of its top five banks are Spanish-owned, one is American, one British, and only one is Mexican. Yet the crisis in global banking has barely ruffled it. Also, Mexico’s economy is usually more exposed than almost any other to a slowdown in America. As Alejandro Valenzuela, boss of Banorte, delicately puts it: “Decoupling is the wrong word, but there is now a certain shield.”

If a Mexican bank is solvent enough to bail out a deficient American bank does that mean they are becoming reliable enough for foreign consumers to purchase certificates of deposits?

Would you feel safe trading in the security of federal insurance for more lucrative rates?