Banking and Currency Costa Rica

The monetary unit of Costa Rica is the colon (pl. colones).  At the time I am writing this, the colon is valued at about 510 colones to the dollar.  To see today’s valuation, click here.

Travel Tip!  When traveling in Costa Rica, shop at stores that have price tags in colones.  Yes, this IS a bit less convenient, but my experience has been that restaurants, stores, anywhere, that mark prices in dollars have much higher pricing as they are catering to tourists.

Banks in Costa Rica –

Also see our  BLOG for updated information

Banks in Costa Rica fall into two categories:  National (State) Banks and Private Banks.

The differences are very important.  National Banks have some security as deposits are insured, somewhat like the Federal Deposit Insurance Corporation (FDIC) in the USA.  How well this would work if a national bank went under remains to be seen.

Offshore banking in Costa Rica Private and public banks

Offshore banking in Costa Rica is not necessarily the kind associated with tax havens and illicit financial schemes. In fact, the Costa Rican authorities cooperate with international agencies in preventing money laundering and reporting possible drug related transactions. That said, Costa Rica’s banks must also follow the local laws regarding banking privacy. Offshore bank accounts in Costa Rica offer you privacy and asset protection. Below is information about the state owned banks, private banks and Costa Rica’s banking system.

Offshore bank accounts: Overview of Costa Rica’s Banks

Costa Rica’s financial sector includes the Central Bank, 3 state-owned commercial banks, 19 private commercial banks (including one jointly owned state bank), 1 workers’ bank, 1 state-owned mortgage bank and 4 mutual house-building companies, 15 private finance companies and 27 savings and loans cooperatives. In addition, there are 30 investment and retirement funds or trusts run by both state and private commercial banks and the state insurance company.

Offshore banking Costa Rica: How safe is your money? Regulation

The Central Bank of Costa Rica makes banking policy in Costa Rica. The SUGEF (the General Supervisory Agency of Finance) enforces compliance with Central Bank policies. The legal reserve requirement on sight deposits is 15 percent. Total assets may not exceed 11 times a bank’s equity, and the legal lending limit is 20 percent of total capital per customer.

There is no deposit insurance on private banks, but the Costa Rican government backs the state owned banks. Banco Anglo Costarricense was closed by the Central Bank’s examiners office in 1995 after incurring US$ 200 million in losses due to bad loans and dubious investments in Venezuelan bonds that subsequently disappeared. Criminal proceedings were successful against members of the bank’s board and management, many of whom are serving prison sentences. Not one depositor lost money in this scandal.

How safe are the private banks?

Private commercial banks are relatively new to Costa Rica, since only the state-owned banks could offer checking and passbook savings accounts to the public until the banking law was changed in 1995. This law also granted private banks access to the Central Bank discount window and emergency loan facilities. It also requires private banks to fulfill one of two requirements: (1) opening four branches in rural areas and depositing the equivalent of ten percent of demand and short-term time deposits (30 days or less) in a state-owned bank; or (2) depositing the equivalent of 17 percent of demand and short-term time deposits (30 days or less) in a state-owned bank.

Offshore banking from Costa Rica

Many Costa Rican banks have subsidiary or affiliated banks registered offshore. These offshore entities are not permitted to capture deposits or lend money within Costa Rica, though they cater to Costa Rican clients. Recent reforms stipulate that any SUGEF-regulated holding company or financial group owning 25 percent or more of the equity of an offshore entity must include the offshore assets on its balance sheet. However, SUGEF does not have regulatory authority over the operations or individual accounts of the offshore entities.

Offshore banking Costa Rica: The State Banks

There are 3 state owned banks: Banco Nacional de Costa Rica, Banco de Costa Rica, BanCredito (formerly Banco Credito Agricola de Cartago). BICSA, is a strange animal, as it is a private commercial bank jointly owned by the three state commercial banks and is chartered in the Bahamas. It has branches in Panama and Miami and a representative office in Costa Rica. Banco de Costa Rica is the most profitable and possibly best-run state commercial bank. Banco Nacional is the largest state commercial bank in both assets and number of location, although Banco de Costa Rica has nationwide coverage also. Banco Credito Agricola de Cartage (now known as BanCredito) is the smallest state bank. Recently Banco Bacioanl and Banco de Costa Rica announced a plan whereby clients of either bank can use the resources of the other. I have not had a chance to test this yet.

These banks offer you the advantages of being safer for your money, since the Costa Rican government backs them. They also have better coverage; practically any town in Costa Rica has a Banco Nacional and/or a Banco de Costa Rica too. They have a wide range of services. The disadvantages are mostly the long lines that occur in busy locations and on peak days (Monday morning, Friday afternoon, 1, 15, & 30 of each month, etc.) Although they may have an English speaker on the staff in the larger branches, smaller branches are not as likely to.

The Private Banks – – – – Banks Reviewed Here

The private commercial banks are relatively small. The largest in assets are HSBC, BAC San José, and ScotiaBank, Citii.

BAC San José offers a good mix of fast service, numerous locations (including several mini-branches in supermarkets) but they have SERIOUS issues dealing with foreigners! Read this. They probably sport the best looking and most efficient banks in Costa Rica.  They are a part of Grupo San José, which owns Credomatic, one of the largest issuers of credit cards in Costa Rica. Nice web site or not, they clearly have issues with foreignors… so deal with them at your risk.

The private banks offer you several advantages over the state banks, shorter lines, faster service, more English speaking staff and more agility in bringing new products and services into the market. The greatest disadvantage is the lack of deposit insurance. You will have to look closely at the corporation and its behavior when you use a private bank. That said, the government regulations do offer a measure of protection and your funds are safe under normal circumstances with any of the larger private banks.

Internet Banking in Costa Rica

Banks in Costa Rica have started offering Internet banking over the last several years, now it is widely available. Most of the state banks offer services online and many private banks do as well. The common services are: account balances, up-to-the-minute account statements, transfers between your accounts in the same bank, transfers to other people’s accounts within the same bank, interbank transfers, requests for new checks and savings passbooks, and payment of utilities and other services from your accounts.

Many companies have accounts that you can deposit into at one of the state banks to pay for services that you use, this includes the utility companies, cable operators, security services and even some private schools. A good option is to open an account at a private bank that offers transfers over the internet to an account in the state banks. BAC San José offers this service, so you can do your normal banking there and take advantage of the faster service and English speaking tellers. When you want to pay bills you transfer the necessary amount over your account online and then pay the bills at one of the state banks. I mention BAC only because they offer a 0% fee for next day interbank transfer and transfers between accounts within the bank are free.

Offshore banking Costa Rica: Monetary Policy

The Costa Rican colon is freely convertible into foreign currency and contracts may be negotiated in any currency. The Central Bank establishes exchange rates through auctions and a well-publicized policy of daily mini-devaluations. The Central Bank may authorize SUGEF-regulated institutions to set their own exchange rates under certain conditions. There is no divergence between Central Bank exchange rates and those prevailing in the market. The Central Bank records inflows from exports but places no requirements on where those proceeds must be deposited. Dividends and transfers may be remitted freely.

The Central Bank is authorized in emergency situations, at its discretion, to introduce and regulate the use of short-term measures to alleviate economic imbalances or liquidity crises. Such measures include imposing surcharges on imports, limiting credit growth of financial entities, increasing the minimum legal reserve requirement (up to a ceiling of 25 percent), fixing the maximum intermediation rate (spread between lending and deposit rates), centralizing currency transactions in the Central Bank, and obligating the sale of currency derived from exports to authorized entities.

The Central Bank must, however, comply with limits on these extraordinary measures, which can only be imposed for one year or less, and which cannot be applied in a discriminatory manner among financial institutions or among sectors within the portfolio of each institution. The sum of the surcharge duties and other revenue generated by the extraordinary measures are to be used by the Central Bank to amortize the monetary stabilization account.

The Superintendency of Financial Markets (SUGEVAL) was created in 1998 to supervise and regulate the Costa Rican stock and bond markets, relieving SUGEF of this responsibility.

Bank policies are stringent and just opening a new savings or checking account is a lot of fooling around. (see below).

Banking in Costa Rica, though theoretically private (secret), is not.  Costa Rica cooperates with most if not all Latin American banks and with the Federal Reserve in the USA.  Clearly this has to do more with money laundering and fraud, but just the same, do not feel your bank records are kept confidential to foreign governments.

Checking and Savings Accounts

Checking and savings accounts can be opened, but there are restrictions.  As these vary by bank, I will not include them, but take my word, it is not a 10 minute process as it is in other countries.  Many banks restrict checking accounts especially.  In all cases you will need, at the minimum, a passport or cedula (Costa Rican ID card), 2 or more local reference letters, a letter from your US bank if you’re moving here, a cedula juridica (corporate ID) ID, a personaría (guarantee of your authority signed by a Notary (NOT just an attorney) and maybe more.  Many corporate deposits most be for a minimum amount.  As there are a tom of banks here and each have different, and changing rules, I will let you do the investigation.

Credit Cards and ATMs

Credit Cards are widely accepted in Costa Rica at most upscale stores, hotels, and for most travel services.  Credit cards always assure you will receive the best exchange rate.

Be very careful, however, as credit card number theft is not unusual.  When signing, cross out a block of 4-8 numbers on your receipt.  Mkae sure you are given you copy of the receipt, and check the (preferably on-line) charges made while you are here.

Also, credit card transactions may NOT be confidential.

Use of credit cards issued in a jurisdiction that does not have banking secrecy can easily be traced, as a record is kept of each transaction. Recently the Internal Revenue Service in the USA was successful in forcing MasterCard and American Express to turn over all transactions for 1998 and 1999 for cards issued in Antigua, the Bahamas and the Cayman islands.

Visa was forced to turn over transaction records for a period of three years for cards issued in Anguilla, Antigua, Aruba, Bahamas, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Cyprus, Dominica, Gibraltar, Guernsey, Sark, Alderney, Hong Kong, Isle of Man, Jersey, Liechtenstein, Luxembourg, Malta, Nauru, Netherlands Antilles, Panama, Samoa, St. Kitts, Nevis, St. Lucia, St. Vincent, Singapore, Switzerland, Turks & Caicos and Vanuatu.

This was possible as processing is done in the US. Visa and MasterCard keep only card numbers, expiry date, credit limits and transaction records. American Express, on the other hand, keeps all client information in the US. A settlement agreement between American Express and the government of the US allows the tax agency to collect information such as passport and driver’s license numbers of clients, in addition to transaction information from American Express.

ATM’s are all over the place in San Jose. Use them to withdraw cash in colones which can be very important if you’re shopping in small shops.  It is better to negotiate with cash (efectivo).  Why be careful? Because you may pay healthy charge to use them. Most a charge a fair rate for the exchange, but some do not tell you how much is the charge, and you will not know exactly how much until you see your statement. I have seen charges as high as $5 for a withdrawal of $100. They probably got this idea from your local US banker!

Credomatic Costa Rica and Online Credit Card Processing

Credomatic is an issuer of credit cards in Costa Rica and is also the processor. They are also owned by BAC.   While providing good service for terminal transactions, the concept of on-line processing for web sites has just recently arrived. Currently, BAC San Jose and Banco Nacional are the only ones doing this and early results from users are not overly enthusiastic.

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