Money and Banking

Many people write to me about living in Costa Rica, asking what it's like, how to move here. Mostly, they ask about schools and money. Schools are pretty covered on the blog; money has not been. A complicated topic, I'll tell you what little I've learned in the past year.

Just before we moved here, we called a few local experts and asked about banking, how to open an account, buying a corporation, things like that. One guy asked where we were from. When we said, "Florida," he said, "If you are a U.S. citizen, I can't even talk to you about opening an offshore account." And he hung up.

This was unnerving to say the least. We aren't money launderers or criminals or in hiding or the "t" word... we were just people moving to another country. Now, any account you open in another country is an "offshore" account. Did he mean, as citizens of the free-est country in the world, we weren't ALLOWED to open an account in another country? That doesn't sound that "free" to me.

By the way, when you move to Costa Rica and start asking questions about money, banking and corporations, everyone assumes you are seeking tax shelter. Probably because that's why they moved here. But nobody says it out loud. Hey, we'd like to have an income to shelter. Someday.

Costa Rica is a "tax haven" country. Tax haven is a sort of 007 phrase, conjuring up a picture of dark, smoky bars, martinis and Humphrey Bogart. According to Wikipedia, it's not mysterious at all. A tax haven is simply "a place where certain taxes are levied at a low rate or not at all." People mistakenly think it means "a country to which you can run and hide if you owe tax money in your own country." NOT. Or at least NOT with a huge degree of confidence.

The guys over at Escape Artist say running to Costa Rica to hide is like hiding naked on a white horse in the middle of NYC playing a trumpet. Actually, that might work in NYC. If you are looking to hide, though, don't come to Costa Rica. I'm not sure where you'd go. You might find out at Escape Artist. Good luck. In the meantime, here's the skinny:

Q: Can the taxing authority in my former country get my money in Costa Rica?
A: Not according to the laws here. But in reality, if they want it badly enough, particularly if it's Uncle Sam doin' the yearning, maybe. Your SS# is not attached to your bank accounts, but your passport number is. Your passport number is attached to EVERYTHING in Costa Rica. It gets burned into your memory pretty quickly... You can start a corporation, open a commercial account and deposit your money there. But your name is attached to your corporation and all those records are online.

Q: What is a shelf corporation?
A: An aged corporation. This is a corporation that was opened by someone else and literally put on the shelf for a few months to a few years. There are lots of reasons for this, as explained here. An advantage not listed there is that the creator's name is listed in the online records. If you buy it from the creator, yours is not online, providing you with a bit of privacy.

Q: Do you have more privacy in Costa Rica?
A: Yes. Although there are a ton of laws here, there is little enforcement. It's pretty much live and let live. My experience with customs earlier this week was a huge eye-opener in so many ways. As horribly frustrating as it was, the depth of these bureaucratic roots is what will keep Costa Rican citizens so refreshingly free. Unlike in the U.S. where progress is now defined as having every bureaucratic database connected. Costa Rica may never be connected like this. Ever.

A NOTE on the whole privacy thing: Safes are rated not by how strong or heavy they are, but by how many minutes it takes to break into it. You want a 10-hour safe, not a 10-minute safe. Likewise, your degree of privacy these days is simply determined by now long it will take a really good private detective to ferret out your privates. OK, you know what I mean. Every layer you put between you and The Other is helpful.

Q: Did you open a bank account?
A: No. Too hard, when we first got here. Plus no FDIC. And finally, just not enough security. It is hard as hell to open a bank account. Although, these days, it's almost as hard in the states.

Because Costa Rica is a tax haven and privacy is guaranteed under their constitution, money launderers and drug lords and the T guys use countries like these to do banking. So when you want to open an account, they are suspicious. Even of me, blondie. Even of our landlord who did her best to help us open an account. She is a) fluent, b) a 30-year resident of this town, c) had a ton 'o money in this bank and d) had had it there for 30 years. After four hours, we could not get the account open. Fate.

They want your passport, a lease, a utility bill, two letters of recommendation from another bank which for us meant two U.S. banks and some other stuff. Four hours. Apparently, if you have an attorney, they can help speed the process and walk you through it. But it's no walk in the park.

Q: Is there online banking?
A: Yes, to pay local bills. As far as I know, you cannot go online and wire money internationally - you have to go into the bank to do that. Don't use online banking unless your Spanish is good. You don't want to screw this up over a mis-translated phrase... Besides, paying bills is easy enough here.

Q: How DO you pay your bills here?
A: I have all my utility and service account numbers written down on a piece of paper in my purse. On the first and 15th of each month, I go into one of the many places you can go to pay your bills (pharmacy, grocery store, payment center, many places), hand them the list, they look up the accounts, give me a total, I pay cash and KEEP THE RECEIPTS. I meet my landlord once a month to pay rent.

Q: How do you get your money to Costa Rica?
A: You can wire it and you can deposit checks, but they take weeks to clear. They do clear, but be prepared to wait.

Q: How do you get your money out of the country?
A: You can wire it out or get a check from your bank. Both ways are expensive and time-consuming, but do-able. You can keep your money in a cd here and earn interest equal to about 20% less than in the U.S. Better than a poke in the eye with a sharp stick. Way better.

Q: How do you pay bills and spend your money?
A: We have a debit card from our U.S. accounts. We withdraw money at ATMs and pay for our groceries and gas with that. There are ATMs everywhere. American Express is not welcome everywhere here, but Mastercard is pretty widely accepted and most ATMs are good with Mastercard.

You don't write checks here - most places don't take them. It's a cash country. KEEP YOUR RECEIPTS. I throw away my receipts for groceries and gas; I keep all other receipts. We use a U.S. account to pay credit card bills and our AFLAC insurance, send money to our moms, things like that. We keep a U.S. credit card so we can shop online, buy airline tickets... so we need a U.S. bank account to pay those bills. You can get a Costa Rican bank credit card, but the interest is pretty high. We still are bombarded with offers for credit cards from the states. Um, don't tell them I don't have a job.

Q: Do I have to bring my money into Costa Rica?
A: No. ATMs give us cash on our U.S. credit and debit cards. We've used the U.S. credit cards in all the stores here, on the southern Pacific coast and in Nosara. You could probably live here forever and never have a local bank account. In fact, we are banking on it. The only caveat is if you are living in the jungle. Then you will probably want a Banco Nacional or Banco Costa Rica account. BN is the biggest government bank here with the most branches. And the longest lines. BCR is the only bank in Puerto Viejo which was a surprise, but our PayPal card worked there.

I'm sure there's more, but my mind is suddenly blank. God, I hope it comes back. If you have questions, please ask. I will answer and add to this list! Meanwhile, it's another great day in Costa Rica. Pura vida!

Comments

[Julie]

I enjoy your blog very much! It is currently one of the many blogs/forums feeding my addiction while we wait for our own move to Costa Rica. So - Thanks!
Re: bank account - We went to a BN branch armed with our passports, letter from our mortgage company and 2 banks in USA, and a letter of recommendation from ARCR. Perhaps a couple of hours later, we had an account! (yay) Then we wired $$ from USA, waited 3 days, and went back to BN - another couple of hours later, we had CDs.
BUT! We found out later (after leaving CR) that there was "a small problem" - but we could fix it when we return. Well, right before our next trip, the account mysteriously closed. hmmm should we worry about the money? (!!)
We then spent one afternoon at BN with everyone trying to figure out what happened. The next morning, we returned to BN with another letter of recommendation from ARCR, and several hours later, our account was fixed. Whew!
Just confirmed last week that it is doing what it is supposed to be doing.
I'm READY!

[Saratica]

Yes, the whole banking thing was so mysterious... I like my money where I can touch it and get to it, so I definitely wanted it here. My language barrier made it difficult to be relaxed. And I was anxious about changes in government, banks going under - no FDIC here - but the truth is, it could all happen anywhere. And Costa Rica is very stable. So I'm in! See you soon...

[Randy Pigott]

I too am enjoying your blog with great interest. We are backpacking thru Mexico and Central America shortly with sites set upon CR. We plan on spending about 6 month in the country looking at property locations. My question is simple, while using ATM's to access money in the states, what kind of charges are you seeing from both ends? Is that the best way to go and not have to carry a lot of cash on your person. Also, what is the largest amount of cash that the ATMs allow you to receive per transaction?

Thanks a bunch

[Saratica]

DON'T carry a lot of cash. Petty theft is rampant, although by the time you get here after backpacking thru Mexico and central America, you will have heard this frequently.

The charges and amounts you can withdraw vary from bank to bank. Usually $200-$400 each time (sometimes you can withdraw $200 four times... makes no sense) and $1-$2 charge for each transaction. The fees are relatively high, so you want to get as much as you can each time so you minimize expenses... but you have to weigh that with how much you will end up carrying.

You might want to join the Costa Rica Living Group (http://groups.yahoo.com/group/CostaRicaLiving/) if you haven't already. There was quite a discussion a few months ago about ATMs and charges. If you are a member (free, of course), try searching ATM and see what you get.

Have fun!

[WolfieCR]

There is no FDIC (there is a project but that will take years to pass if it does at all) however ....

The goverment banks are guarranteed by the bank, so your deposits are safe (unless the goverment does go bankrupt in which case we will have even bigger problems to worry about), there was actually a goverment bank that went bankrupt about 12 years ago.....the goverment paid everyone their $

There are some banks (I know BAC San Jose does have that option) to do wires internationally online (but you have to register each account you want to transfer and sign a release, so that later on you cant cry wolf and say "I didnt transfer to that account"), its probably not worth the headache

Personal suggestion: dont use your ATM card to pay gas or bar bills, logic behind that is that since they take the card to process the charge.....it might happen that they write down the number /exp date/security code etc and later on try to pass charges to the card......you really dont need that headache. I pay almost everything with my cc except that (and bar bills because of the same reason)

[Saratica]

Thank you, Wolfie. I'd forgotten to mention that about the government banks being guaranteed. And excellent suggestions about the ATM!

[teri]

I am so impressed how quickly you are learning. People back home just don't realize how it is here. There is a system here, you just have to figure out how to make it work for you. Anythings buy-able and possible. You go Macha! A blonde with a big smile goes a long way here. I'm so happy you are adapting quickly to your new country. You have MY respect!

[teri]

Add on:
Be careful with really important receipts...make your own copy (even laminate it). Their ink on printed receipts has a way of disappearing over time on the paper (nice trick).
Pay cash for everything. Withdraw cash/colones using an ATM card but keep your credit card #'s PRIVATE, unless it's an emergency.
Have two accounts, one for colones and one for dollars and keep the $bulk in the dollars account (doesn't devalue). They do close accounts with no activity (with no notice) so don't forget to exercise the colones account.
Don't transfer more than $9999.99 from the U.S. For some reason, anything over $10k is flagged for the IRS.
I'm glad they make it hard with the money situation. It keeps people honest.

[Saratica]

Thanks, Teri! Lots of good advice. didn't know that about closing inative accounts... And anything over $10K is an amount the U.S. government picked to alert them to terrorists, drug dealers, money launderers, etc. Right. Everyone knows honest people don't have that much money!!!!