Can I open a savings account abroad?

necronom

This is probably a "No", as it seems too obvious, but I just heard that Argentina has an interest rate of 40% If I put £50,000 in a bank there I'd get £20,000 a year interest! I assume there is some legal reason why I can't do this, or I'd have heard about it.

Does anyone know any info about this? Why it can't be done, etc?

eskbanker

Maybe it's technically possible but a few reasons (in no particular order) why it's not a good idea:

• You'd have to do plenty of research from a distance, with websites possibly not available in English
• They may not accept account applications from non-residents
• If interest rates really are 40% then chances are that exchange rates will reflect rampant inflation so you wouldn't get anything like 40% back in sterling (the peso has lost a quarter of its value over the past year)
• There may be taxation issues with money being transferred in either direction
• There may be taxation issues with the interest earned
• Do you know what the Argentinian deposit protection scheme (if any) looks like?
• Political and economic uncertainty could pan out in many different ways, unlikely to be advantageous to foreigners trying to make a quick buck
• etc, etc....

But if you feel lucky, go ahead and come back and tell us how you got on!

Alexland

You wouldn't get £20,000 of interest as you would have had to convert your £50,000 into their rapidly devaluing peso currency and you then get your 40% in pesos too. The peso has lost 25% of it's value in the last year so assuming that continues £50000 x 1.4 x 0.75 = £52,500 so 5% although there would be transaction fees, the actual rate of interest may be different, etc. Overall it would be high risk.

ValiantSon

You almost certainly can't, but then you wouldn't really want to either. The central bank has increased interest rates to 40% because the Argentine Peso is crashing: inflation is at 25% and the value of peso has fallen by 19% since the start of the year. If you could open an account you would need to convert your sterling into pesos (which would cost) and then suffer the effects of Argentine inflation, before withdrawing your money at some point and once again paying for it to be converted back to sterling. There is a high chance that you would be significantly down on the deal, or at best come away with an interest payment that is not that different from what you could achieve in the UK.

necronom

Thanks for the replies. I thought it must sound better than it is.

I'll have to wait for our rate to go up, which isn't going well for me. I think we had double figures in the 70s and 80s. Since I've started having savings the rate has just been going down.

ValiantSon

necronom wrote: »

Thanks for the replies. I thought it must sound better than it is.

I'll have to wait for our rate to go up, which isn't going well for me. I think we had double figures in the 70s and 80s. Since I've started having savings the rate has just been going down.

Do you really want a return to double digit interest rates? The most likely cause of such rates would be rampant inflation, which would be eroding the value of your savings at a rate of knots.

necronom

I don't know enough about it (clearly), but when we had 6% just before it all went wrong, I don't remember anything else being any different. I was just getting a decent interest rate.

ValiantSon

necronom wrote: »

I don't know enough about it (clearly), but when we had 6% just before it all went wrong, I don't remember anything else being any different. I was just getting a decent interest rate.

6% is within a normal range for interest rates in an economy experiencing moderate inflation, but getting into double digits suggests that inflation is getting out of control.

eskbanker

necronom wrote: »

I don't know enough about it (clearly), but when we had 6% just before it all went wrong, I don't remember anything else being any different. I was just getting a decent interest rate.

You're still just looking at one half of the equation though - inflation was in 4-5% territory in 2008 so the net return on your money wasn't what you perhaps perceived it to be....

Granted, typical savings interest rates now are below inflation by a point or two but it's not the massive swing you seem to feel it is.

jimjames

necronom wrote: »

I don't know enough about it (clearly), but when we had 6% just before it all went wrong, I don't remember anything else being any different. I was just getting a decent interest rate.

You can get a decent interest rate now if you look and make some effort

necronom

Just over a year ago I put £15,000 into a Peer to Peer lending account, and got about £700 - £750 interest over the year. I'll lose 1% when I withdraw, and there is a risk with it. I do keep checking savings accounts, but current accounts seem to offer better rates than savings ones. A lot have really low limits, like 5% on the first £2,500, which is a total waste of effort.
I'll keep looking.