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Jul 20 2011

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Investing in Colones Certificates of Deposit

While we pay our rent in U.S. dollars, we pay for everything else in colones.  For the last two years, we’ve been using our debit card from our U.S. bank to withdrawal dollars for our living expenses, then walking into a local bank to exchange much of it into colones.  The exchange rate has gone up and then down, from 493 colones to the dollar, to as high as 583. Right now it seems to have stabilized at around 500 colones to the dollar.

Bank of America, our U.S. bank, was charging us $5 for every ATM transaction, and the local Costa Rica bank charges an additional $1.50 to withdrawal up to $400.  As our monthly budget is around $1,700 per month, we were paying way too much in bank fees.  Paul talked our U.S. bank into waiving the ATM charges for a year, but the year is almost up and we’ve been considering ways to eliminate those ATM fees altogether.

Our solution is opening up a saving account with Coopenae, one of Costa Rica’s many credit unions. We chose Coopenae because it has been in business since 1966, is stable, growing, and has one of the lowest default rates (less than 1%) on loans in the country.  Our plan is to move funds from our U.S. saving account to Coopenae, and then invest most of the funds in Certificates of Deposit.

There were two considerations on the minus side:

  • the issue of changes in the exchange rate – if we convert our dollars into colones today, and the dollar goes up tomorrow, we wouldn’t get the most for our money;
  • savings accounts here aren’t “insured by the FDIC” like in the U.S.

As of June 24, 2011

But on the plus side, and it’s a BIG plus, the interest rate on colones CDs is 11.75% for 12 months!  And, no more ATM fees…woohoo!  We can use our Coopenae debit card at any Costa Rican bank ATM without any fees.

We started the process of working with both Bank of America in the States and Coopenae on the wire transfer, but I have to say that it’s not been easy. Bank of American wouldn’t initiate the wire transfer without us going in person to the branch in Baltimore. But Coopenae has been great to work with.  Instead of a wire transfer, we wrote a personal check for the CDs. The best part is that, even though it will take 3-4 weeks for our check to clear, they opened the CDs the day we wrote the check and we started getting interest right away. That’s just incredible (and it wouldnever happen with a U.S. bank)!

Another plus is that Coopenae has an English-speaking financial advisor, Asdrúbal Zamora Corrales (azamora@coopenae.fi.cr), and he has been a huge help in getting everything set up.    We look forward to seeing our investment pay off over the next year. You can visit the Coopenae website at http://www.coopenae.fi.cr/.  (Hint: Though the site is in Spanish, you can set up Google translate through your web browser and read most of it translated into English.)

 

 

 

 

 

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