Offshore CDs may have higher yields, but how risky are they? As we learned with the Caribbean-based Millennium Bank
and Stanford International Bank
, offshore CDs can be risky.
This Bankrate.com article
has a short review of offshore CDs. Since they're not FDIC-insured, "your only security lies in the credit worthiness of the organization backing the CD." One thing that wasn't mentioned in the article is the case we saw with the two supposed banks that I mentioned above. How well is the foreign bank being regulated so you know it's not a scam?
There are some FDIC-insured banks that do offer foreign currency accounts. EverBank
is the most popular one. One example is their Australian dollar WorldCurrency CD. The 12-month CD rate is currently 3.63%. As I described in this post
, the main risk is currency fluctuations that can cause a loss.