Investing in certificates of deposit (CDs) in a country outside the U.S. is definitely possible. However, it is much riskier than putting your money in a U.S.-based CD.

Certificates of deposit (CDs), often known as time deposits outside the U.S., are a low-risk way to store your savings for the short term and earn a modest return in the meantime. When you take out a CD with a bank or credit union, you agree to leave your money in an account for a set period, which can range from a few months to several years. In exchange, the financial institution guarantees you a return on your savings.

The interest rate paid on CDs—and thus your return—is typically higher than that offered for standard savings accounts. However, the interest rates offered in the U.S. in recent years have been much lower than some of those offered abroad. For investors who are after the best possible return on their CD, this can make foreign currency CDs an attractive prospect.

Understanding Foreign Currency CDs

There are plenty of countries around the world that offer foreign currency CDs. You can take out a CD in countries with a developed economy, such as Australia or Canada, or emerging markets like India or Mexico. Or you can find CDs that are denominated in other countries' currencies but remain insured by the Federal Deposit Insurance Corp. (FDIC).

CDs work in much the same way no matter where you open them—you agree to leave your money in the account for a set term and in exchange, you are paid a percentage return on it.

The return you are paid on CDs is related to the base interest rate for a given country, which is normally set by the national government. The U.S. has had a historically low base interest rate (almost 0%) for the last few years and, as a result, the yield (that is, the return) on CDs has also been low.

Some other countries have a much higher base interest rate and financial institutions in these countries offer much higher CD returns. For example, interest rates in South Africa were 8.25% in July 2023 and those in Mexico were 11.25%.

Higher returns can make these foreign currency CDs seem like a better deal than U.S.-based CDs. However, foreign currency CDs are much riskier than those denominated in U.S. dollars. There’s a simple reason for that—the exchange rate between currencies.

Exchange rates between the U.S. dollar and other currencies can vary wildly and are very difficult to predict. They vary so much, in fact, that fluctuations in the exchange rate can easily wipe out the returns you will receive from a CD.

To take a specific example—some Mexican CDs could pay more than 11% in interest, but the Mexican peso has frequently fluctuated against the U.S. dollar, even into the negatives, depending on the year. If your CD matures when the peso is weak, you may even lose money once you’ve converted it back to U.S. dollars.

For many investors, this added risk will undermine the primary benefit of a CD. Certificates of deposit are valued for their low risk and the fact that the funds in them are federally insured. Most foreign currency CDs do not have these features. 

There is an important exception, however. If you have expenses in a foreign currency and won’t need to convert your money back to U.S. dollars, a CD in that currency can make sense. If you own a vacation property abroad, for instance, and want to put aside some money to pay for renovations in a few years’ time, you can put it in a CD in that country. You may earn more interest—strictly in terms of the local currency—than if you kept your money in dollars and only converted it when you need it.

Get a Foreign Currency CD

If you are willing to assume the risk, however, there are two main ways of getting a CD in a non-U.S. currency. You can either take out a CD with a U.S.-based bank that offers foreign currency CDs, or you can approach foreign banks directly.

When it comes to the first option, you have very limited choices. Very few U.S banks offer CDs in foreign currencies—perhaps because of the risks we’ve outlined. However, EverBank (formerly TIAA Bank) is an exception. Their WorldCurrency CDs require a minimum of $10,000 to open and they will take as much as 1% on currency conversion. In exchange, you get access to CDs in a fairly wide range of currencies and FDIC insurance for your deposit.

The second option—approaching foreign banks and credit unions directly—can be much more complicated and much riskier. While it’s possible to secure impressive CD rates by taking this option, you should make sure you understand the banking regulations in the country you want to invest in.

You will be responsible for converting your money into another currency and back to U.S. dollars again, and your money won’t be insured by the FDIC. There may be local deposit insurance available, but you may have to take legal action in the country if your institution defaults, adding another layer of expense and complexity to your CD investments.

The Bottom Line

It’s possible to invest in a CD denominated in a foreign currency—that is, not U.S. dollars. To do so, you can find a U.S.-based financial institution that offers foreign currency CDs or look for a bank abroad that will allow you to open one directly.

Foreign currency CDs are far riskier than those held in U.S. dollars. Exchange-rate fluctuations can easily wipe out the return you’ll receive, and if you invest directly with a non-U.S. bank or credit union, your funds aren't insured by the U.S. federal government.