- September 22, 2023
- Posted by: legaleseblogger
- Category: Related News
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Title: Considering the Benefits of Keeping Emergency Fund and Short-Term Savings in USD: A Look at Wise’s Cash Back Rates
Introduction:
In recent observations, it has been noted that Wise, a prominent online money transfer service, offers a higher cash back rate for USD compared to EUR. While 1.79% is provided for any EUR balance, a remarkable 3.85% cash back awaits those holding USD in their Wise accounts. This article examines whether it would be advantageous to keep emergency funds and short-term savings, approximately 10,000 USD, in USD rather than converting them to EUR, as is traditionally done.
Analysis:
The current scenario entails receiving monthly payments in USD to a Wise account, and subsequently transferring the entire salary to EUR. However, the absence of high-interest savings account options known to the writer has sparked curiosity about the potential benefits of utilizing the higher interest rate on offer.
How AI Legalese Decoder Can Help:
Enter AI Legalese Decoder – a revolutionary tool designed to alleviate confusion stemming from complex financial jargon and terms. By employing this sophisticated AI technology, individuals can effortlessly comprehend the intricate terms and conditions associated with the Wise cash back rates. The AI Legalese Decoder simplifies the entire process, enabling users to make well-informed decisions regarding their financial investments, such as whether to retain funds in USD for higher interest.
Significance:
Considering the substantial disparity in cash back rates between EUR and USD balances, it may indeed be worth considering retaining the emergency fund and short-term savings in USD. Doing so would allow these funds to earn an additional 2.06% in cash back, potentially resulting in substantial savings over the long term. Moreover, as there are no apparent drawbacks mentioned in the original content, it appears that preserving these funds in USD would be a prudent move.
Conclusion:
In conclusion, the option of keeping emergency funds and short-term savings in USD instead of converting them to EUR demands serious consideration. With Wise’s alluring cash back rate of 3.85% for USD balances, as compared to the 1.79% for EUR, this could prove to be a financially advantageous choice. By utilizing the AI Legalese Decoder, individuals can ensure a thorough understanding of the terms and conditions associated with Wise’s cash back rates, thereby empowering them to make informed financial decisions.
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****** just grabbed a
The downside is if the exchange rate moves against you. If EUR appreciates vs USD, then you may lose more than the difference in the interest rate. You will be betting that USD stays high (or goes higher).
the currency risk is no joke, it can swing around 8% per year on average and even more if you are unlucky, so even if you made 3.85% after a year you could still be down 5%.
If you do want to go the usd route regardless, i would advise to get an ultrashort treasury etf, they pay around 5.3% atm. And they hardly have interest risk because of the super short duration.
link: [https://www.vanguard.co.uk/professional/product/etf/bond/9933/us-treasury-0-1-year-bond-ucits-etf-usd-accumulating](https://www.vanguard.co.uk/professional/product/etf/bond/9933/us-treasury-0-1-year-bond-ucits-etf-usd-accumulating)
Good luck whatever you choose.
This sounds like a terrible idea. Do you have interest in have USD? For example, do you travel to the USA, or have property there?
I do keep my EUR there. No worries from my side and I have been using WISE since 2015
Lightyear app is giving you 2.75% on EUR, and 4.25% on USD holdings.
If no high-yield savings account is available, I would consider transferring the short-term savings to an online broker, and maybe part of the emergency fund, depending on your circumstances (overdraft, credit cards, other ways to get emergency funds you’ll be able to repay in a few days).
You can get around [Ôé¼STR](https://www.ecb.europa.eu/stats/financial_markets_and_interest_rates/euro_short-term_rate/html/index.en.html) for Ôé¼ with very little risk from a money market fund or a money market ETF, for example Xtrackers Overnight Rate Swap or Lyxor Smart Overnight Return (not to be confused with stocks ETFs, which would only be good long-term). You could also consider short-term bonds (perhaps via ETF) or holding some USD to get higher rates (>5%) but assuming currency risk (which it seems you’re already exposed to, since your income is in USD). My broker (IBKR) offers much better exchange rates than Wise, but discourages pure forex usage, so not sure how great it’d work. If you are in a developed EU country, local discount brokers may be easier to deal with (automatic tax deductions & such).
I’m afraid (maybe unnecessarily) of keeping higher amounts in my Wise account, ever since I read some horror stories of people with frozen accounts left with no communication from Wise. (Coming from a poorer country, I worry being discriminated against / treated as ‘suspect’.)
There are actually better options for EUR like Scalable Capital or TradeRepublic. Local banks are also pay more than Wise value.
Wise is not a bank. Your money is not guaranteed by anything! It’s not guaranteed by FDIC or similar. Wise deposits the customers’ money in real banks that have this guarantee, but the one who will receive the money in case it all fails is Wise and it will not be enough to cover all customers funds.
If Wise goes to shit, we would be the last in line to receive a composition, if at all.
Their terms are very vague regarding the “safety” of the account on purpose. Having emergency funds in Wise would be a big no for me.
This is just advice, feel free to search by yourself.