Foreign Currency Fixed Deposit Account

A foreign currency fixed deposit account is an account in foreign currency that offers a fixed rate of interest on a specific amount in a fixed period of time. While a regular fixed deposit is among the safest investment options, higher risk and higherreturns accompany a foreign currency fixed deposit account. The bigger the principal amount and longer the term of a foreign currency fixed deposit, the higher will be the interest earnings.

A foreign currency fixed deposit account is an account in foreign currency that offers a fixed rate of interest on a specific amount in a fixed period of time. While a regular fixed deposit is among the safest investment options, higher risk and higherreturns accompany a foreign currency fixed deposit account. The bigger the principal amount and longer the term of a foreign currency fixed deposit, the higher will be the interest earnings.

Benefits of a Foreign Currency Fixed Deposit Account

A foreign currency fixed deposit account can be beneficial in many ways, including:

• One can open a foreign currency fixed deposit account with a low sum for a tenure ranging from one week to 12 months.

 

• An investor can choose from a wide choice of foreign currencies, such as USD, AUD, GBP, HKD, NZD, EUR, YEN, CAD and CHF.

 

• Transactions can be made by cash, check or telegraphic transfer.

 

• Banks offer the facility of automatic renewal on the maturity of a foreign currency fixed deposit at the existing interest rate, unless one instructs a change.

 

• A foreign currency fixed deposit can be used as a guarantee to apply for an overdraft in foreign currencies or a mortgage at competitive rates.

 

• If one makes a detailed search of banks, interest rates as high as 12% can be earned.

 

• There is no fee to maintain the account.

 

• Non-resident fixed deposit account holder are not liable to pay tax and estate duty.

 

Risk Associated with a Foreign Currency Fixed Deposit Account

Due to fluctuations in foreign exchange rates, the earnings from foreign currency fixed deposit accounts can vary during theperiod of deposit. If the chosen foreign currency depreciates in relation to the home currency, it can adversely affect earnings from the account.

 

Requirements for Investing in a Foreign Currency Fixed Deposit Account

In order to invest in a foreign currency fixed deposit account, one has to fulfill the following requirements:

• The minimum age of the account holder should be 21 years. However, any individual above the age of 12 can open a joint account along with a legal guardian. An investor younger than 12 years can open a trust account with a legal guardian.
• Banks require an introducer to open a foreign currency fixed deposit account.

Thus, a foreign currency fixed deposit account offers the opportunity to reap benefits from attractive interest rates as well as currency appreciation.