• Kale

FIRE: Can I earn MORE by keeping my savings in a FOREIGN BANK?

Let's see if we can earn more in Canada, The UK, and Germany.

Money is money across the globe.


As we move further into globalization 3.0 (thanks for the phrase Thomas Friedman), it is not a crazy notion to entertain keeping our savings in a bank account not physically located within the United States.


Honestly, digital banks, by general design, do not have a specific fixed location - so the only real changes would be to rates offered, currency, insurance, regulations, and potential fees.


So let's have a look.



Canada


Highest deposit rates: 1.50% (EQ Bank) and 2.15% (Tangerine)

Insurance: CDIC offers deposit insurance coverage up to $100,000 per depositor

Regulations: Immigration documents or 2 forms of US ID needed to open accounts, most large banks require you to open account in-person, you must report foreign holdings in excess of $10,000 to IRS

Fees: Primarily wire fees/international transfer fees - electronic transfer mostly free, no other major fees

Currency: Canadian Dollars (1.31 CD = 1 USD), 10-year range (0.95 to 1.41 CD = 1 USD)


Canada also offers tax-free savings accounts with an annual contribution limit of up to $6,000.

This is an amazing vehicle where all earnings on contributions are not taxed when added or withdrawn (promoting saving). Non-residents can open these but will pay a 1% tax on holdings every month they have a positive balance.


5 Major Canadian Banks:

  • Royal Bank of Canada (RBC)

  • Toronto-Dominion Bank (TD Bank)

  • Scotiabank

  • Bank of Montreal (BMO)

  • Canadian Imperial Bank of Commerce (CIBC)


The United Kingdom


Highest deposit rates: 1% (UBL UK) and 0.82% (OakNorth Bank)

The types of savings account used are referred to as "notice savings accounts" - these are not offered in the US by essentially are similar to 1-4 month CDs.

Insurance: Up to 85,000 pounds covered by UK government

Regulations: The standard opening of a UK bank account by a US citizen requires a large initial balance ($100,000+) and likely carries a sizable maintenance fee, all standard documents will be required by the large UK banks to do this

Fees: Very similar to large banks in US (there are fees for just about everything) and likely international wire/currency fees


Interest earnings on savings account are TAX-FREE for most up to $1,000 in earnings. Maximum income for the zero tax allowance is approximately 83,000 pounds.


5 Major UK Banks:

  • HSBC

  • Lloyds

  • RBS

  • Barclays

  • Natwest

Germany


Highest deposit rates: 1.00% (TargoBank), 0.50% (Bank of Scotland)

Insurance: 100,000 euros per person per bank

Regulations: Opening a bank account as a US citizen in Germany appears impossible (aside from digital accounts such as N26)

Fees: Very similar to large banks in US (there are fees for just about everything) and likely international wire/currency fees


5 major German Banks:

  • Deutsche Bank

  • Commerzbank

  • KFW Bankgruppe

  • DZ Bank

  • HypoVereinsbank

Summary


Additional interest can be earned by banking digitally overseas.


The problem with the current system, however, is the effort required to do so.


When you add up minimum balance requirements, time spent opening the account, fees for moving the money internationally (international money transfer is a total scam but very few reasonably priced options exist), other fees charged by the international banks, the lack of tax advantage, and the potential volatility in currency value + sustained positive interest rate spreads - this endeavor may not be currently with your time as a small/smaller depositor.


In my opinion, time & effort spent on international banking is better spent on asset protection strategies.


Offshore LLCs or trusts which protect your assets from malicious creditors are far more valuable than the current 100 basis point spread available on foreign bank savings accounts.

Contact us

team@froogal.us

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