Overseas Bank Accounts for Higher Interest Rates | General financial discussion | Discussion forum

hehe, I feel your pain, mike! 😛

I am keeping my $1000 GBP in an HSBC Bank Canada GBP High Rate Savings Account, currently yielding around 0.30%. It's not great but then I don't have much invested in it and the foreign exchange loss would be larger than not earning any interest. Who knows, maybe I'll have to book a vacation to the UK!! 🙂

Cheers,
Doug

With HSBC, you can enquire about its international account opening feature. For a modest service charge (around $200-300, exclusive of any discounts to Premier and Advance qualified customers) levied by its international banking division, HSBC Bank Canada can open you an account in Canada then fill out a bunch of documents to have an account opened with the desired HSBC Group subsidiary.

With regard to other banks, it may be possible to open accounts for non-residents of foreign countries (i.e., a Canadian wanting to open a British bank account) but there would be limitations on the countries available to open bank accounts and since many don't have large Canadian operations, they may limit account openings to only those with significant assets. If you look at that Barclays offshore banking site, they won't even consider you with less than $25,000 GBP (about $40,000 CAD) and even at that lowest level, you're charged monthly service fees, eating up any interest gains).

One of the best ways, I would speculate, to open foreign bank accounts is to book travel to that country and go into a branch there. Do your research before you fly though, to ensure they even allow non-residents to open bank accounts.

Hope that helps,
Doug

There is one problem with this AUD/NZD scheme not yet mentioned: the cost of foreign currencies, which is five to seven percent (HSBC rates) for a round trip. (There is 10% non-resident withholding tax on the interest.) It will take two years' interest to recover the price of foreign exchange plus the interest you would have gotten from Canadian banks. (HSBC pays 5.25% in Australia.) By the way, deposit insurance in Australia expires in Oct 2011. Deposit insurance in New Zealand has already expired.

If you convert C$150000, you get A$148464 (HSBC rates). With that you earn A$7794 interest (5.25%) and pay A$779 tax (10%), so you finish the first year with A$155479, which buys C$148380. Had you left your C$150000 in Canada, you would have earned C$3300 interest (2.2%) and paid C$495 tax (15%), so you would have finished the first year with C$152805. Therefore, you would lose C$4425 or 2.9% the first year with AUD. Because you haven't broken even, you keep your AUD account and go for another year.

You start the second year with A$155479, and you earn A$8163 interest and pay A$816 tax, so you have A$162825 by the end of the year. That buys C$155391. Had you left your money in Canada, you would have earned C$3362 interest (on C$152805) and paid C$504 tax the second year, bringing your CAD balance to C$155662. Therefore, at the end of the second year, you are still worse off by C$271 or .2%. What do you call an interest-earning scheme in which, even after two years, you are no better off than leaving your money at AcceleRate or Peoples?

First, I have a grammar lesson for you: you are = you're, not your. You should have written "You are missing the point" or "You're missing the point." (If you're angry that someone has corrected your grammar: don't be. You can only be better off having your grammar corrected; you can never be worse off. In fact, this grammar lesson is of more benefit to you than anything about money in this thread.)

Second, the example doesn't go for one year, it goes for two years.

Third, you have to compare your AUD balance with your CAD balance to know if you're better off or worse off. And the only way to do that is to check how much CAD you can buy with your AUD. You're not paying foreign exchange cost every year, but you will have to pay it if you ever spend that money outside of Australia.

Fourth, your time horizon had better be two years, because you don't know what interest rates will be like after that. AUD rates can drop and CAD rates can rise, so AUD may not always have a rate advantage. Also, it is highly likely that you will find a better investment (or have another use for that money) in two years. (MAXA Financial already has a 3.75% 6-year redeemable GIC. Who's to say it won't be 5.25% in two years?)