Author Topic: Turkish bank account for non property owner  (Read 11632 times)

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Offline Karennina

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Re: Turkish bank account for non property owner
« Reply #20 on: February 02, 2015, 10:20:47 AM »
Thank you very much both Lee and Linda that has helped me hugely  :)
I can't believe there is a thread on Facebook today asking if you need to have residency to open a bank account, some answers are saying that some banks won't let you open accounts unless you can show you have residency!



Offline Colwyn

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Re: Turkish bank account for non property owner
« Reply #21 on: February 02, 2015, 11:06:45 AM »
Colwyn I have read a lot of your posts on here over the years and I can tell you know your stuff     ;)
Unfortunately I don't, do you think you could elbarate on your post if you wouldn't mind as in do you think I would be making a mistake putting a large ish sum if money in a Turkish bank account as opposed to in the Uk, I am a little worried now as to whether I should carry out what I was planning     :)
Thanks...
Very kind, Karennina. I have to start with a financial health warning. I am not now, nor have I ever been, a financial advisor. Whatever knowledge I have comes from a life-long interest in economics and the need to sort out my own finances in retirement. So I won't advise you what to do; merely outline how I have been thinking about this.

Looking at the interest rates in the UK and comparing them with what you can get from a Turkish bank it looks like an easy decision. The best I can get in the UK for an ordinary bank account is 3% from Santander (which is thus my main bank) - although there are some strings on this and my return is actually higher than 3% from cash back. What is the rate you can get in Turkey? Last time I asked it was about 10% and that is an easy number to use. So Turkey looks best. But to see how much return you actually get in real terms in each country you need to knock off tax and then see what you get against inflation. So: 10% less tax (@ 15%) = 8.5% less inflation (@ 8%) = you will be 1.0% better off in buying power at the end of the year in Turkey. If we do the same for the UK 3% less tax (@ 20%) = 2.4% less inflation (@ 1%) = you will be 1.4% better off in buying power in the UK. So (surprisingly?) you are doing better living in the UK than in Turkey out of your banks.

Now, what you are thinking about doing is more interesting than this (ouch for the pun); you are looking at earning Turkish interest and living in the UK. So high interest @ 8.5% and low inflation @ 1% = better off by 7.5%. It is win-win and a great deal all round. isn't it? It is as long as the value of the TL against the £ remains stable. The exchange rates were remarkably stable right through the 2000s, in fact the lira actually gained value. Historically this was very unusual but people got used to it. In theory, if Country A has much greater inflation than Country B (Turkey and UK) then Currency A should fall in relation to Currency B (TL loses value) all other things being equal. But, of course, all the other things muck up this simple theory. Turkey has experienced huge streams of money coming into the country which has supported the lira despite weaknesses in the economy. Now, the question we have to ask is whether this will continue or have the good times come to an end? Well "You pays your money and takes your choice" as they say. Which way do you bet? Obviously you would be taking a risk but big returns often involve risk taking (unless you are banker-financier and can rig the market as several recent scandals have shown). I choose not to take risks in currency exchange and especially not in relation to Turkey and the increasingly worrying behaviour of RTE. There are different kinds of risks and if you are prepared to take them you might make even better money. For example, £10,000 put into a US market tracker ISA in January 2014 would have given a return of £2000 tax-free today to pay for your next Turkish holiday.

Sorry this has been such a long post; it is difficult to say some things briefly and clearly. If I didn't manage the clarity please ask for better explanation and I'll see what I can do.

 
« Last Edit: February 02, 2015, 11:21:13 AM by Colwyn »

Offline JohnF

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Re: Turkish bank account for non property owner
« Reply #22 on: February 02, 2015, 11:52:59 AM »
Your fingers must be sore after that Colwyn!

My take on it is a bit more simplistic. 

Q) What currency do rich (or even not so rich) Turks keep their wedge in? 

A) Anything but their own Lira. Traditionally the USD, but in recent years also in GBP and EUR.  Its why its so easy to open foreign currency bank accounts, everyone does it.

Historically, the high interest rates in Turkey were needed because inflation has always been an issue.  No-one is going to save if their money is worth less (in spending power) at the end of the month, hence interest rates were always higher than the inflation rate (generally speaking).

Currently, inflation is running at 8/9% in Turkey and the banks are offering in the region of 10% interest.  You don't need a degree in economics to work out what your true interest rate is after tax...

As regards sinking a bucket of money into the Lira while living in the UK (and not therefore directly subject to Turkish inflation) - all I'll say there is, do you think the Lira will strengthen or weaken over the period you intend to invest?  If you know the answer to that one you'd be a happy (and rich) little camper.

JF

Offline Colwyn

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Re: Turkish bank account for non property owner
« Reply #23 on: February 02, 2015, 17:35:31 PM »
But to see how much return you actually get in real terms in each country you need to knock off tax and then see what you get against inflation. So: 10% less tax (@ 15%) = 8.5% less inflation (@ 8%) = you will be 1.0% better off in buying power at the end of the year in Turkey. If we do the same for the UK 3% less tax (@ 20%) = 2.4% less inflation (@ 1%) = you will be 1.4% better off in buying power in the UK. So (surprisingly?) you are doing better living in the UK than in Turkey out of your banks.
What a silly mistake. I am full of embarrassment! In Turkey you would be 0.5% better off as against 1.4% in UK. Sorry!

Offline suehugh

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Re: Turkish bank account for non property owner
« Reply #24 on: February 02, 2015, 18:35:12 PM »
Hi Kayakebab
Thanks for the info
Just to clarify as at my age it takes a while to sink in.
After 30 days would you collect  a 1/12 of 9%' or the full 9% less tax of course

Thanks also Colwyn for the overview

Offline suehugh

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Re: Turkish bank account for non property owner
« Reply #25 on: February 02, 2015, 18:38:47 PM »
Suehugh - sorry for misreading your original post :-[
Nothing to apologise for Highlander
Hugh

Offline Karennina

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Re: Turkish bank account for non property owner
« Reply #26 on: February 02, 2015, 18:45:48 PM »
Thank you very much Colwyn for taking the time to explain and type that, I am getting it now.
Thanks also to John, decisions decisions  ;)

Offline kayakebab

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Re: Turkish bank account for non property owner
« Reply #27 on: February 02, 2015, 22:24:36 PM »
The full 9% less tax Sue

Offline suehugh

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Re: Turkish bank account for non property owner
« Reply #28 on: February 03, 2015, 10:34:46 AM »
Thanks Kayakebab. Question fully answered and the word wow seems to apply after all.

Offline Colwyn

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Re: Turkish bank account for non property owner
« Reply #29 on: February 03, 2015, 10:52:27 AM »
The full 9% less tax Sue
Are you sure about that, KK? Doesn't sound right to me. That would give an annual interest rate of 108%. No wonder Sue thinks "Wow!" and Highlander threatens to be on the next flight over!




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