Personal banking at the large state-sponsored institutions in Costa Rica is not for the squeamish. There are many horror stories among expatriates about frozen funds, incorrect account information, blocked debit cards, lost term deposits, excessive red tape, etc. Most of the time, these problems can be avoided in the first place with the assistance of a bilingual account executive who really cares. Asdrubal Zamora of credit union COOPENAE tells us more about this:
About 30 years ago, I remember going to a state-sponsored bank and standing in line for over an hour. More than 15 years later, I returned to that bank and endured a similar experience. In late 2013, I happened to visit that same bank and noticed that the building had been nicely remodeled, but the long lines and slow customer service had not changed at all, which did not surprise me.
Over the years, I’ve had the opportunity of listening to expatriates in Costa Rica talk about their experiences in dealing with state-sponsored banks. I am going to share some of them, and I should mention that they are not the usual complaints about long waiting lines, dubious service and excessive red tape: The following experiences are caused by the sad fact that major language and culture barriers persist at state-sponsored banks to this very day.
1 – Residency Status and the Future of Personal Banking in Costa Rica
Every day, I get inquiries by expats who ask about the possibility of opening a personal account or a fixed term deposit such as a Certificate of Deposit (CD). In general, this will require a residency permit; in fact, even some who opened bank accounts in Costa Rica with just their passports in the past may have troubles using the SINPE transfer system these days.
What everyone should be aware of is that inquiring about the possibility of opening an account is a good first step. Each case may be different, and there may be a chance to open an account, but it is highly recommended to do it. The current political climate is ripe for the creation of new taxes and levies, which in the future may very well apply to expats who wish to open bank accounts. Personal banking in Costa Rica is bound to get more restrictive and invasive in the future, which is why expats should try to get their accounts now so that they can be grandfathered later.
2 – The Frustration of Debit Cards Not Working Overseas
One of the most unfortunate situations travelers can run into is having their debit or credit cards declined abroad. Imagine going back home and trying to access funds deposited in Costa Rica, only to find out that it is impossible. On top of that, there’s also the likelihood of the card being blocked upon return.
Account executives must be notified when a debit card is intended to be used outside of Costa Rica, but this is something that many expat account holders are not aware of because they are never notified inasmuch. There goes the language and cultural barrier again, but the fact is that must be done at all banks, I always tell my clients to contact us before they travel to activate their cards overseas, and to also keep all their purchase and payment receipts, which must be attached to all claims and chargebacks within one month.
3 – Zombie Certificates of Deposit in Costa Rica
An expat couple once contacted me for assistance in transferring their CD, which was issued by a state-sponsored bank, into a COOPENAE account. On the maturity and expiration date of the contract, they personally went to their bank and were not able to get cash in their CD. The problem? It was set to renew automatically; the account holders were expected to notify the bank well in advance to prevent this feature from being triggered.
The couple was able to withdraw the funds and terminate the CD the next day; albeit by having to pay an expensive penalty. This is what I tell my clients: If you are going to be away from Costa Rica when your term deposit matures, it is better to be able to renegotiate the terms than to have renew by default. In terms of customer service, the bank should be making an effort to contact the CD holders beforehand to notify them of the upcoming maturity and expiration.
4 – Exorbitant Credit Card Rates and Unreasonable Collateral
Credit card rates in Costa Rica tend to be extremely high. We are talking about 23 to 52 percent, depending on the bank. Under such terms, I cannot recommend them. Still, some people like them and such was the case with this expat couple who wanted to transfer their money from their bank into COOPENAE so that they could take advantage of certain investments that were performing well at the time. It turns out that their money was tied up because their CD served as a collateral for their high-interest credit card!
Naturally, the couple’s request to cancel their credit card and liberate the funds in their CD was denied by the stuffy state-sponsored bank, which had created a Catch-22 situation by using the term deposit as collateral for the credit card. In the end, I went to the bank and performed the required, yet confusing, steps on behalf of the couple: Paying off the balance on the card with funds outside of the collateral, terminating the credit account, turning over the CD to my clients, and finally having them endorse it to my bank. It is important to remember that physical bonds in Costa Rica are as negotiable as check.
The lesson here is that complex personal banking transactions such as putting up term deposits as guarantees for credit cards should not be attempted by expats who are not familiar with the language or the system. It’s ok to handle certain basic transactions in rudimentary Spanish or English, but more involved procedures require bilingual assistance.
5 – The Case of the Lost CD and the Four-Year Wait
So an expat CD investor asked for a replacement since he lost the original paper certificate. It should be noted that CDs in Costa Rica, whether they are issued by a state-sponsored or private bank, can be obtained in physical or virtual (electronic) formats. Investors who take their physical CDs are responsible for their safekeeping.
By law, investors who lose their physical CDs in Costa Rica must wait four years until they see get their money, and only after filing a report with OIJ, sitting down with a notary to issue a public affidavit, and publishing the latter in the newspaper of record. This should not have to happen since:
- Banks should be encouraging virtual CDs, which are eco-friendly and cannot be lost.
- Virtual CDs promote savings and disciplined investing since they cannot be negotiated as checks before maturity.
- Banks should offer physical CD investors to keep custody of their paper certificates in their safe or strongbox.
For more information about COOPENAE’s services and investment options, please contact Mr. Zamora directly.
Originally posted at http://news.co.cr/how-to-avoid-personal-banking-disasters-in-costa-rica/34452/