I have been a U.S. mortgage lender for the past 10 years and a visitor to Costa Rica for 7 of these years.  With each trip I learned a little more about how to get 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 work down here, so do check back to this blog as I'm sure updates will be warranted.
 

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

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

As with all denominations, the colóne's exchange rate varies constantly based on market conditions in comparison with the U.S. dollar, Canadian dollar, Euro, etc.  Recent valuations have the colón ranging between ¢490-¢515 to $1.00.  For quick math purposes;  a traveler can use a 500:1 ratio on the fly when it comes to understanding 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 (Banco Central de Costa Rica) is the equivalent of the U.S. Treasury in that it controls all Costa Rica banking and monies.  Although each authorized Costa Rica banking institution can within certain guidelines set their own exchange rates ... Banco Central de Costa Rica does publish a colón vs. dollar exchange rate used for official purposes such as import duties, government fees, etc.  This daily exchange rate is based on the previous days trading average and posted on 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 Rica Colónes vs. U.S. Dollars show two rates.  The buy rate or "Compra" is how much the bank will buy your dollar for if you want colónes.  The sell rate or "Venta" is how much the bank will sell you a dollar for if you are exchanging-in those colónes.  Example:

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

Quick answer - don't bring any $100 dollar bills. 

While we're on the dont's; DO NOT BRING MONEY ORDERS OR TRAVELERS CHECKS either.  Seriously!  It once took me three taxis, two different banks, three hours and six American Express travelers checks to finally get three travelers checks approved for cashing - and this only happened after a bank manager took pity on my demonstrative inability to sign my name the EXACT same way three times consecutively, as is a minimum mandatory for cashing a travelers checks in Costa Rica.  By the time I got back to the hotel with the money, my wife and son had assumed the worst and made their beds on top of their luggage in the lobby.

What to bring for Costa Rica vacation money 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 problem of worldwide counterfeit 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 Rica Banks: 
The end of the line is over there.

Costa Rica is a thriving economy which experienced 7.9% growth in 2005 and 6.5% in 2006.  Costa Rica is the destination of choice by affluent retirees, eco-tourists and more recently high-tech industry.  Dubbed the "Silicon Valley of Latin America", Costa Rica's highly educated and disciplined workforce have attracted industry leaders such as Microsoft, Abbot Laboratories, Baxter Healthcare, General Electric, Acer, Proctor & Gamble and Intel's $300 million microprocessor facility employing 3,500 people.

The Costa Rica banking system is an integral part of this growth.  It's financial stability is instrumental in maintaining not only the confidence of  such major corporations, but also the approximately 60,000 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 banks operating under the jurisdiction of its Central Bank or Banco Central de Costa Rica.  Each type of bank has its own advantages depending on your individual needs and wants.

Banco Nacional de Costa Rica in downtown San José

Costa Rica National Public Banks - deposits insured and guaranteed (similar to the U.S. FDIC), locations most everywhere, long lines depending 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
Public Bank
Banco Popular (y de Desarrollo Comunal)

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

Private banks can be more aggressive when it comes to investment banking and interest paid on depository accounts, but be careful and remember the ever constant formula; 'higher return = higher risk'.  In the 1980's some private Costa Rica financial companies were offering up to 45% interest on colón deposits, but ultimately all of these failed and because they 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 the options offered here in Costa Rica will easily meet most security and investment goals.

And finally, YES the Costa Rica bank lines can be long - especially on the 2nd and last Fridays of the month which are Costa Rica pay days.  To save some aggravation try to plan ahead and avoid banking on these days or any day after a holiday when lines are at their longest.  If you have a bank account in Costa Rica, most banks offer Internet banking which is another good alternative.

Opening a Costa Rica Bank Account: 
Please put on this paper gown, the banker will be in to see you shortly.

Costa Rica banks work very closely with the U.S. government in ensuring you and your money are legitimate.  In the States a valid Social Security Number and state issued photo identification usually gets you through most transactions.  In Costa Rica, everything starts with your passport and ends when your physical exam comes back clean ... but after standing in the long lines, you're just so darned happy to be talking with a real person, the physical exam seems like long deserved closure. 

All kidding aside, be prepared with the proper documentation and you will find the experience of opening a Costa Rica bank account to be straight-forward and 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 Nacional savings account that included a MasterCard debit card (tarjeta débito) was quick and easy.  I took all of the above documents into the local Banco Nacional branch in Coronado on a Thursday, deposited $100.00 and picked-up my debit card the following Wednesday.  The customer service woman spoke some English and there were no issues other than the short 15 minute wait.

Transferring Money To Costa Rica: 
Wire me not, Debit me good.

At the beginning of this blog I mentioned I was still learning 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 am living in Costa Rica while a majority of my money remains in the U.S. 

Since moving to Costa Rica I had been operating financially from my U.S. bank issued Visa debit/check card and local Banco National savings account.  If I needed money, I would simply draw 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 bank account transfers.  As my debit account would deplete, I'd move money via online 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 Major Purchase:  I'm in Costa Rica and I need a car.  I'm not worried about paying for a car within my budget because 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 easy it is to wire funds at the stroke of a computer key.

Thinking there are no money issues, I go car shopping and enter into an agreement to purchase a car at a cash price.  After making a deposit on the car, I return home to initiate the transfer of necessary funds to my Costa Rica bank account.  I go online and find that my U.S. bank requires an original signed authorization for all International wire transfers.  I call my U.S. bank for FREE with my magicJack VoIP device and explain I am in Costa Rica and need to remotely transfer funds via an online or verbal request.  To make a long story short - this is not an option.  My U.S. bank insists that I print the online International Wire Authorization form and "mail" it with an original signature to their main office in Utah.  The timeline is 4-10 days to initiate the wire with an additional 3-10 business days until the funds are credited to my Costa Rica bank account.  On top of that, my U.S. bank is charging $40.00 for sending the wire and my Costa Rica bank will charge a yet unknown fee for receiving the wire.  The reason the receiving fee is still unknown is because almost two weeks after starting the process ... I still don't have the money!

After my frustration melted away, I had a moment of clarity; why don't I just draw the money I need to buy the car off my U.S. debit card into my Costa Rica bank account.  After all, this same process had been working for the paying my son's tuition when the bank credited money to his schools Banco National account.  So I go to the bank, take my paper number and wait for the customer service woman to see me.  She doesn't speak English, but that's alright, I'm prepared.  I had brought my questions on a piece of paper printed in both Spanish and English from my new powerful and Costa Rica language specific Word Magic computer translation software. 

The customer service representative informs me that for a $1.00 fee my Costa Rica bank can draw up to 90% of my debit 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 all over again, but this time I was the direct beneficiary.  Cash IS still King, but Debit 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 de Costa Rica account if you plan on spending any amount of reoccurring time in Costa Rica.

Costa Rica Home Mortgage Loans and Real Estate Financing:  
What's Old is New Again!

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

However, with U.S. banks writing down 10's of billions of dollars in bad mortgage debt, shuttering complete mortgage operations from 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 remain conservative providers of real estate loans for those that meet strict lending guidelines requiring fully documented income, pledged/sourced assets and payment reserves.  Those that qualify for Costa Rica real estate bank financing do so knowing they are not at risk of foreclosure and the banks know they are not at much risk of having to write off the loans as bad debt.

Real Estate financing that has in the past been reserved only 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, Costa Rica 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*.