On that day the currency markets paid 509 CLP per USD. This historical exchange rate is found here so that we can see what they should have been.
For each dollar I sold them XOOM gave me (49,437/100)= 494.37 pesos thus charging me (100 * (509 – 494.37) = 1,463 chilean pesos or roughly 1,464 / 509 = $2.88. In addition they charged me $4.99 transaction fee.
So their overall fee for sending $100 was (4.99 + 2.88) / 100 = 7.8%. This is outrageous. Granted this is a small amount. That fixed transaction fee for sending money will go down as the amount you send goes up but their profit from the currency conversion will remain the same. To illustrate we have another example:
AFEX:
Now going the other way on October 4 I sent $2,670 USD to the USA via AFEX. I did this by making a transfer directly to AFEX`s checking account in the amount of 1,408,864 CLP.
In this case we have to think of this the other way around as this time we are selling pesos and buying dollars. So for each pesos that I sold them on that day they day gave me 2,670 / 1,408,864 = 0.001895 Chilean pesos
On that day 1 peso bought 0.00194 US dollars according to the currency exchange markets and the web site given above. So for each pesos that they bought they charged me ( 0.00194 – 0.001895 ) * 1,408,864 = 63 pesos or hardly nothing at all. So AFEX does not seek to profit from the conversion rate. Instead they charged me 14,000 CLP per transaction (roughly $28 usd) or in this case 14,000 / 1408864 = 0.009 or 0.9%. This is a large dollar amount but in this case the transaction fee was quite reasonable at less than 1%.
PayPal:
On November 30 I sent $200 USD to a person in the USA via Paypal. This transaction resulted in a $207.79 USD charge on my MasterCard with BBVA bank in Chile. So the total cost to send $200 was $7.79. Or 7.79 / 200 = 3.9%. In addition PayPal deducted $8.80 USD from the $200 I sent to the recipient. That additional fee obviously costs the sender nothing but does it add to the overal transaction cost. So we could say that to send $200 costs ($7.78 + $8.8) / $200 = 8.2% which is a lot.
Foreign Credit Cards and Debit Cards
First thing to know is if you are using a credit card or debit card denominated in US dollars or Euros in Chile is: stop doing that! Look at the two examples below and you will see that you are payIng anywhere from 2.6% to 4.6% transaction fee when you do this. If you are in Chile for any length of time then go to a bank and ask them to open a “cuenta vista”. This is a kind of a limited checking account but you will not be able to write checks. Instead they will give you a debit card. Do that and make your purchases in pesos.
Here are the two examples from personal experience:
American Express:
$104.00 purchase
$2.80 transaction fee in dollars
= 2.6% transaction fee as a percentage
Wells Fargo Visa debit card:
ATM withdrawal $305.01 USD.
In this case Wells Fargo charges two fees. One comes from them bank and the other from VISA. They are:
intl ATM WD service fee $5.00
intl service fee $9.15
Together they equal (5 + 9.15 ) / 305.01 = 4.6%. That is a lot of money to be paying on purchases and taking your own money from your own bank account.
Checking Accounts
Most Chilean people do not have a checking account especially if their have unpaid debts and their names are listed in the American system run by Equifax called “dicom” in Chile. If you do not have residency the bank might tell you that you cannot open a checking account only a cuenta vista. But if you have work contract and can prove your affiliation with the private pension system here (called “AFP”) then you can get one. Anyone working here as an employee is required to contribute to the pension system.
Chilean Credit Cards
When you buy anything here in Chile with a debit card or credit card the merchant will ask how “how many cuotas” or “how many payments.” This means that the merchant will change your bank x number of times once for each quota. My understanding of this is it allows the merchant to charge you interest in addition to the bank charging you interest. Watch out as interest rates in Chile are extremely high by developed world standards. For example they can be 50% here. I was able to get a credit card only by depositing an amount into a account as a guarantee. Still this is necessary as if you read what is above you know you are throwing away money using dollar-denominated plastic here in Chile. If the bank gives you an international credit card then charges in dollars will be separated from charges in pesos and you pay each bill separately.
Steve
What does this mean: “When you buy anything here in Chile with a debit card or credit card the merchant will ask how “how many cuotas” or “how many payments.” This means that the merchant will change your bank x number of times once for each quota.”
If you have a purchase for $50 (i know it would be in pesos), they would break it up in different payments? Are they charging you extra for using a Chilean credit card?
Does this also apply for the cuenta vista debit cards also?
Another question if you please? I’ve heard you cannot open a bank account in Chile unless you’ve lived there a year and have residency status…. Is this true? Thx
admin
It probably depends on your bank. I had problems opening an account with a provisional (i.e. tourist or foreign business interest) RUT at both BBVA and Santander until I got a residency RUN. But I did this within one year so there is no one year rule.
Regarding cuota yes it is exactly that: they break it up into payments. If you ask for three cuotas they would charge your credit card three times. I have seen this system in Colombia too.
I have never bought anything with cuotas so not sure if it works with a debit card. I don’t see how it could since there is no guarantee to the merchant that the funds would be there in three months with a debit card. But with a credit card presumably the merchant could put a hold on your account thus reducing your available credit to guarantee payment to themselves.
Steve
Thx for the response.
I’m confused though.. Why would anyone ask for multiple cuotas if this results in highers fees to oneself?
Also, I was under the impression that debit cards draw directly from a “live” account. An account with funds directly in it. Isn’t this desirable?
admin
I imagine people ask for cuotas because it is like paying on an installment plan. Here in Chile I see people doing this even whenn buying groceries. Also like so many other transactions people might not be aware of the fees they are paying.
Note that I updated the example I gave here to include paypal. End result: paypal appears to be by far the costliest way to transfer money.
snonpareil@yahoo.com
I am a retired expat living in Santiago. I have a temporary residency visa. I would like to open a bank account here. Conducting business would be a thousand times easier if I could, but I have found Chilean banks unable/unwilling (not sure which it really is) to open a bank account for a foreigner who only has a temporary visa. They have all told me the same thing, that I have to wait until I have permanent residency. Since that is almost a year away, I feel very frustrated.
Do you know of any bank that is “foreigner-friendly”? If you have any suggestions, I would love to hear them. Thanks in advance.
admin
When I was in the USA HSBC bank was advertising that if you put $10,000 USD into an account there you could could open a so-called global banking account and be able to transfer money bank and forth accounts in the USA and Chile but I was not able to open such account over the phone. HSBC bank according to their web site http://www.hsbc.cl/1/2/ in Chile has only 4 branches here but you could try there. For Americans there are really no American banks operating here so you cannot just go to their branch here and open an account. American Express no longer even has an office here and distributes their cards through Santander and CorpBanc. Citibank renamed its branches and instead operates by owning 30% of the Banco de Chile. The only international banks operating here are Santander and BBVA from Spain although Santander Chile is really separate from Santander of Spain. Point being your status in another country will not really help you here unless maybe you moved here from Spain and even then not sure if they will help you without a Chilean residency. But HSBC is truly a global bank with branches in New York, London and of course here. They are a British bank formally from Hong Kong I think. Their name means “Hong Kong Shanghai” bank.
snonpareil@yahoo.com
Thank you! I will check with HSBC.
Steve
Forget HSBC…….
Dear Steve:
Thank you for your recent email to HSBC Bank USA, N.A., with our experience and knowledge, no one is better placed than HSBC to help you make informed choices about managing your money and planning a secure future.
While HSBC Bank is located in many countries around the world, we have actually just recently ceased to offer local personal banking services in Chile. This means that there are no locally offered personal banking accounts, no branch offices and no ATM facilities. I apologize for any inconvenience this may cause.
Our Customer Relationship Center is always available, 24 hours a day, 7 days a week, to meet all of your banking needs. Just email us at globalinfo@us.hsbc.com or call 1-800-975-HSBC (1-800-975-4722). If you are outside the United States, you may call us collect at +1 716 841
0838 to speak with one of our International Representatives.
Regards,
Andrew Stadler
International Client Consultant
International Banking Center
Oriana Labra
Dear Steve,
I am a chilean with permanent residence here. I travel every year to Chile and I would like to open an account there where i would not be charged exorbitant fees, i transfer funds from the US and withdraw from atm’s. I have chilean ID, and a permanent address. Any recomendations?
Muchas gracias.
Naturefairy
Okay as always I’m so confused when anyone offers banking advice on CHile. If one cannot open an account without certain things then when you arrive in Chile what is the easiest way to get money for rent, food etc without emptying you bank account in a few days? You can only carry so much cash.
Not every expat is a rich retiree with lots to open an HSBC account. Many like myself are young expats just getting started. BTW, my plan is to come as a tourist, then apply for a temp residential VISA via a job. I’ve been told I can get my RUT with this, but if I still cannot open a bank account, how can I pay for everyday things like food, rent, etc?
Walker Rowe
What you need to know is in the article there so read again please. The point is you cannot open an account here without a job. So what you need to do is transfer to yourself cash using xoom.com is the cheapest way to avoid the heavy fees on your credit or debit cards. Plus you can use your debit card to take out cash and just pay the heavy fee. And yes you can get a temporary RUT number.
regards.
Walker