I have been a U.S. mortgage lender for the past 10 years and a visitorto CostaRica for 7 of these years.  With each trip I learned a little more about how toget around Costa Rica when it comes to money and the Costa Rica way of banking. 

Moving to Costa Rica was no exception ... I am still learning how banks workdown here, so do check back to this blog as I'm sure updates will bewarranted.
 

Costa Rica Money: 
Do flip-flops really cost 25.000,00?!

Costa Rica's currency isofficially called the colón (ka-lone). However, a single colón is not worth much - so youwill be spending colónes (ka-lone-ehs). 

As with all denominations, the colóne's exchange rate varies constantly based onmarket conditions in comparison with the U.S. dollar,Canadian dollar, Euro, etc.  Recent valuations havethe colón ranging between ¢490-¢515 to $1.00.  For quick mathpurposes;  a travelercan use a 500:1 ratio on the fly when it comes tounderstanding what that guy on the beach is charging for the sandals (hint:don't pay more than ¢5.000,00-or- cinco mil colónes... which is $10.00).

Costa Rica's Central Bank (BancoCentral de Costa Rica) is the equivalent of the U.S.Treasury in that it controls all Costa Rica banking andmonies.  Although each authorized Costa Rica banking institution canwithin certain guidelines settheir own exchange rates ... Banco Centralde Costa Rica doespublish a colón vs. dollar exchange rateused for official purposes such as import duties, governmentfees, etc.  This daily exchange rate is based on the previous daystrading averageand postedon its web site of www.BCCR.fi.cr.  

Costa Rica Colón vs. U.S. Dollar 11-20-07 thru 04-10-08

All posted and published exchange charts for Costa RicaColónes vs. U.S. Dollars show two rates.  The buy rate or "Compra" is howmuch the bank will buy your dollar for if you want colónes.  The sell rateor "Venta" is how much the bank will sell you a dollar for if you areexchanging-in those colónes.  Example:

Traveling With Money in Costa Rica: 
How many $100 dollar bills should I roll-up in mysocks?!

Quick answer - don't bringany $100 dollar bills. 

While we're on the dont's; DO NOT BRING MONEY ORDERS OR TRAVELERS CHECKSeither.  Seriously!  It oncetook me three taxis, two different banks, three hours and six AmericanExpress travelers checks to finally get three travelers checks approved forcashing - and this only happened after a bank manager took pity on mydemonstrative inability to sign my name the EXACT same way three timesconsecutively, as is a minimum mandatory for cashing a travelers checks inCosta Rica.  By the time I got back to the hotel with the money, my wifeand son had assumed the worst and made their beds on top of our luggage in thelobby.

What to bring for Costa Rica vacationmoney and travel expenses:

• 2 credit cards, Visa or MasterCard issued.
  • Credit cards can be used for purchases in many places or to withdraw funds as needed in most ATMs (cajero automáticos);
    • Advise the card's customer service department of your trip so they can denote on your account that charges in Costa Rica are expected;
    • Make sure you bring the card's emergency contact number in case of a need to report a theft or loss;
    • Double check that your credit cards are insured against fraud with proper report of theft or loss;
    • Keep each card in a different location so if one is lost or stolen, the other will remain available.
• 1 debit card, Visa or MasterCard issued.
  • Debit cards can be used for purchases in many places or to withdraw funds as needed in most ATMs.
  • Costa Rica banks are more likely to allow draws of funds (up to 90% of the balance) off debit cards as they can see the money available.
    • For extra security - only put a limited amount of money in the debit or checking account.  If more funds are needed, you can usually move additional money over to your debit/checking account from your same bank's savings account.
• Cash - because it is still king.
  • Not all Costa Rica stores and restaurants take plastic & taxis never do - so plan ahead and always carry some cash.
  • However, bills larger than $20.00 are NOT recommended.
    • Many places - including banks, may not accept larger bills due to the ever increasing worldwide problem of counterfeiting U.S. money.
  • I also suggest exchanging those U.S. dollars for Costa Rica colónes at banks to ensure a fair exchange rate and to keep counterfeit colones out of your pocket. 

Costa RicaBanks: 
The end of theline is over there.

Costa Rica is a thriving economy whichexperienced 7.9% growth in 2005 and 6.5% in 2006.  Costa Rica is thedestination of choice by affluent retirees, eco-tourists and more recentlyhigh-tech industry.  Dubbed the "Silicon Valley of Latin America", CostaRica's highly educated and disciplined workforce have attracted industry leaderssuch as Microsoft, Abbot Laboratories, Baxter Healthcare, GeneralElectric, Acer, Proctor & Gamble and Intel's $300 million microprocessorfacility employing 3,500 people.

The Costa Rica banking system is an integral part of thisgrowth.  It's financial stability is instrumental in maintaining not onlythe confidence of  such major corporations, but also the approximately60,000 American citizens that live in Costa Rica and the 750,000 U.S.visitors that help support it's $13.5 billion tourism industry.

Costa Rica has both state owned and private banksoperating under the jurisdiction of its Central Bank or Banco Central de CostaRica.  Each type of bank has its own advantages depending on yourindividual needs and wants.

BancoNacional de Costa Rica in downtown San José

Costa Rica National Public Banks - where deposits are insuredand guaranteed (similar to the U.S. FDIC); have locations most everywhere and long linesdepending on days and times:

State Owned / Government Banks
Banco Nacional(BN)
Banco de Costa Rica(BCR)
Banco Crédito Agrícola de Cartago(BCAC)
Banco Internacional de Costa Rica (BISCA)-has office in Miami
PublicBank
Banco Popular(y de Desarrollo Comunal)

Costa Rica Main Private Banks - deposits not insured,limited locations, usually associated with International banks, often greater varietyof services and options, etc.:

Private banks can be more aggressive whenit comes to investment banking and interest paid on depository accounts, but becareful and remember the ever constant formula; 'higher return = higher risk'. In the 1980's some private Costa Rica financial companies were offering up to45% interest on colón deposits, but ultimately all of these failed and becausethey were not guaranteed by the government the investors lost their money. With that said, do your homework and you will find the variety of banks and theoptions offered here in Costa Rica will easily meet most security andinvestment goals.

And finally, as mentioned above - YES the Costa Rica bank lines can belong - especially around the mid-month and end of the month Fridays which are Costa Ricapay days.  To save some aggravation try to plan ahead and avoid banking onthese days or any day before or after a holiday when lines are at their longest.  Ifyou have a bank account in Costa Rica, most banks offer Internet banking whichis another good alternative.

Opening a Costa RicaBank Account: 
Please put on this papergown, the banker will be in to see you shortly.

Costa Rica bankswork very closely with the U.S. government in ensuring you and your money arelegitimate.  In the States a valid Social Security Number and state issuedphoto identification usually gets you through most transactions.  In CostaRica, everything starts with your passport and ends when your physical examcomes back clean ... but after standing in the long lines, you're just so darnedhappy to be talking with a real person, the physical exam seems like a longdeserved closure. 

All kidding aside, be prepared with the properdocumentation and you will find theexperience of opening a Costa Rica bank account to be straight-forward and mostly painless.

Documentation required:

• Passport or Cedula I.D. (if resident)
• Two (2) Letters of Personal Reference - preferably from a local professional that also has an account with the bank (ie: attorney, accountant).
• Two (2) Letters of Banking Reference - from your U.S. or foreign banks where you have existing or previous accounts.
• Minimum Deposit - varies by bank

My own personal experience in opening a Banco Nacionalsavings account that included a MasterCard debit card (tarjeta débito) was quickand easy.  I took all of the above documents into my local Banco Nacional (BN) branch on a Thursday, deposited $100.00 and picked-up my debit cardthe following Wednesday.  The customer service woman spoke some English andthere were no issues other than the short 15 minute wait.

Transferring Money ToCosta Rica: 
Wire me not, Debitme good.

At the beginning of this blog I mentioned I was stilllearning about the Costa Rica banking system.  As a 10 year veteran of U.S.domestic banking I'm also learning about International banking now that I amliving in Costa Rica while a majority of my money remains in the U.S. 

Since moving to Costa Rica I had beenoperating financially from my U.S. bank issued Visa debit/check card andlocal Banco National savings account.  If I needed money, I would simplydraw off my U.S. debit card at most any ATM or from Banco Nacional itself.  Bills,including my son's school tuition had been easily handled via debit card to bankaccount transfers.  As my debit account would deplete, I'd move money viaonline banking from my U.S. high-yield money market account over to my U.S.checking account which is the source for my debit card balance.

Now It's Time for a MajorPurchase:  I'm in Costa Rica and I need a car.  I'm notworried about paying for a car within my budgetbecause Costa Rica has an excellent banking system and my U.S. money can be readily wired. In retrospect, I admittedly had a false sense of security as the former owner of a U.S. mortgage company... because I personally know how very easyit is to wire funds at the stroke of a computer key.

Thinking there are no money issues, Igo car shopping and enter into an agreement to purchase a car at a cashprice.  After making a deposit on the car, I return home to initiate thetransfer of necessary funds to my Costa Rica bank account.  I go online andfind that my U.S. bank requires an original signed authorization for allInternational wire transfers.  I call my U.S. via Skype and explain I am in CostaRica and need to remotely transfer funds via an online or verbal request.  To makea long story short - this was not an option. 

My U.S. bank insisted that Iprint the online International Wire Authorization form and "mail" it with an original signature totheir main office in Utah.  The time line was 4-10 days to initiatethe wire with an additional 3-10 business days until thefunds are credited to my Costa Rica bank account.  On top of that, my U.S.bank was charging $40.00 for sending the wire and my Costa Rica bank  was charging their own fees for receiving the wire.  Almost two weeks after starting the process ... I stilldidn't have the money!

After my frustration melted away, I had amoment of clarity; why don't I just draw the money I need to buy the caroff my U.S. debit card into my Costa Rica bank account.  After all, thissame process had been working for the paying my son's tuition when the bankcredited money to his schools Banco National account.  So I go to the bank, take my papernumber and wait for the customer service woman to see me.  She doesn'tspeak English, but that's alright, I'm prepared.  I had brought my questions on a piece of paperprinted in both Spanish and English from my new powerful and Costa Rica languagespecific Word Magic computertranslation software. 

The customer service representativeinforms me that for a $1.00 fee my Costa Rica bank can draw up to 90% of mydebit card's available balance for deposit into my own Costa Rica bank account... INSTANTLY!

Holy gun smoke batman!  How frick'in easy was that!? I felt like I was back in my mortgage office solving the world's financing problems allover again, but this time I was the direct beneficiary.  Cash IS still King, butDebit is apparently the way to get your hands on it in Costa Rica. Based on just this scenario;  I strongly suggest opening a Banco National or Banco deCosta Rica account if you plan on spending any amount of reocurring time in Costa Rica.

Costa Rica HomeMortgage Loans and Real Estate Financing:  
What'sOld is New Again!

Many foreign buyers of Costa Rica property come to the table as cash buyers by taking equity out of existingproperty in the U.S. or elsewhere via cash-out refinancings or secondmortgages.

However, with U.S. banks writing down 10's of billions ofdollars in bad mortgage debt, shuttering complete mortgage operationsfrom coast-to-coast and laying-off 10's of thousands of professional banking personnel... updated lending guidelines in the U.S. are severely restricting such cash-out transactions.

Unlike the recent U.S. availability of 100% financing,reduced documentation loans, etc., etc.  Costa Rica banks remainconservative providers of real estate loans for those that meet strict lendingguidelines requiring fully documented income, pledged/sourced assets and paymentreserves.  Costa Rica real estate bank financing is primarily for those borrowers that have demonstrated they are not at risk of non-repayment that might lead to a foreclosure ... and if this does happen, the Costa Rica banks have ensured from the beginning the loan was not much of risk for having to write off the loans as bad debt.

Real Estate financing that has in the past been reservedonly for Costa Rica residents is slowly being made available to non-residents. Private and International banks are leading the push for expanded lending guidelines as they seek business in stable markets such as Costa Rica.  Of course, CostaRica government banks in direct competition re-evaluate their own lending guidelines as the market opens up.

"When you look at the demographics of the baby boomer population, we believe that there will be a lot of baby boomers looking for vacation (and living) opportunities outside of the United States." -says Eric Hibbert, managing director of Lehman Brothers resort home lending group based in New York.  "Costa Rica has built a very nice brand, and people are heading there."

Starting July 1, 2008 U.S. based lending giant Leman Brothers will begin offering U.S. citizens home loan financings for property in Costa Rica with a variety terms ranging from one- to 30-year fixed rate mortgages.  But keep in mind, these programs are designed for only the most qualified of borrowers with credit scores above 700 and down payments of 20% or more with the ability to prove without a doubt the loan will be repaid*. 

Um, disregard the above information about Lehman Brothers expanding their mortgage lending into Costa Rica ... on September 15, 2008 they filed for bankruptcy following the massive exodus of most of its clients, drastic losses in its stock, and devaluation of its assets by credit rating agencies. The filing marked the largest bankruptcy in U.S. history!

However, Costa Rica banks and financially sound international banks continue to make progress in opening up the Costa Rica market!

Which will hopefully be a good thing [assuming the new 100% home financing demonstrated below as being offered by Banco de Costa Rica (BCR) is still a conservative loan based on mitigating risk factors such as additional secured assets, etc.]