Chile Economy Chile Travel — 28 November 2011

Having navigated the banking system in Chile for sometime now I feel confident in explaining it to you. Here is what you need to know to open a banking account in Chile, get a credit card, or transfer money back and forth from the USA or other country.

RUT

First know that anyone who plans to spend anytime in Chile needs to apply to sii.cl to get a RUT which is like a taxpayer identification number.  A foreigner will get a provisional RUT. If you seek Chilean residency when they will give you a different RUT number called a RUN.  Its basically the same thing.  This number has nothing to do with social security which is called “AFP” here.

Money Transfers

They way I send money from the USA to Chile is to use xoom.com.  The way I send it the other way is to use AFEX but you can also use paypal which has recently started operating in Chile.  Do not be naive about this–understand how much you are being charged by the money transfer companies.  Money transfer companies will charge you twice.  First, there is the obvious transaction fee which is tacked onto the transaction and clearly listed there.  More difficult to understand is the profit the money transfer company will make by paying you something which is different from the currency markets exchange rate.  AFEX does not charge you in this way–instead they charge you a fee and nothing more.  Xoom on the other hand charges you both ways.  Let me illustrate this with three examples.

XOOM:

On November 18 I sent $100 USD from my bank in the USA to my bank in Chile.  Xoom deposited 49,437 chilean pesos (CLP) into my account.  What was their profit?

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 paid.

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:

On March 4 I send $1,000 via XOOM. XOOM paid me 464,037 CLP which is 464,037 / 1,000 = 465.03 pesos per dollar. On that date the market exchange rate was 473.25. XOOM charge me a transaction fee of $9.99.  So their exchange rate profit was:1000 * (472.25 – 464.04) = 8,210 or 8,210 / 473.25 = $17.35and their overall fee for sending $1,000 was (9.99 + 17.35) / 1000 = 2.7% which is roughly the same as the American Express charge card example given below.  So XOOM is reasonably priced when the dollar amount sent it large.

 

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.  They then sent to my account a wire transfer.  The advantage of using AFEX is you can do all of this from your computer and do not have to physically go to the bank.

In this case we have to think of the exchange rate conversion  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 dollars.

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%.  So AFEX is fairly priced.

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.  So you can say PayPal is not reasonably priced.

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.

 

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 shown as follows on the bank statement:

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.

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.  In Chile there are no ATM fees and no fees to us a debit card.  The checking account will have a monthly maintenance fee.

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 of x quotas.  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 are normally 48% here on credit cards.  I was able to get a credit card only by depositing an amount into a account as a guarantee.  Still this is necessary.  If you read what is explained 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.

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(15) Readers Comments

  1. 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

  2. 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.

  3. 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?

  4. 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.

    • There is no added interest for the installment (cuotas).

  5. 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.

    • 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.

  6. 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

  7. 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.

    • I recall from a few years back, that Banco de Chile, with offices in Miami and New York, offered checking accounts for chileans living in the US. You could call them.

  8. 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?

    • 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

  9. In order to get a bank checking account, you have to demonstrate 6 mos. of employment salary, and have a RUT card.
    Now, vista accounts, and Banco del Estado’s RUT account (a vista account, not to be confused w the government ID/tax card) are there precisely for the purpose of providing a limited bank account for all those not able to get a regular one.
    I have a Banco del Estado RUT account. I cash my salary checks at my employer’s bank, and then deposit the cash into my BE account, tedious, but I need the cash for the (AFEX wire transfers, recently banned peso cash purchases of USD) Chile Express (Western Union) transfers back home.

    The BE RUT account allows me to buy almost anything, it’s a debit card which works as well as a credit card.

    I can buy online, pay my groceries at the supermarket, pay my utility bills online… Even transfer money to somebody else’s personal checking account.

    Although, not having a bank checking account has some major drawbacks:
    - No regular cell plans, it’s expensive to buy prepaid minutes.
    - No credit, anywhere.

  10. I am a first generation American who just recieved my RUN number(through Jus sanguinis) and will be getting my Chilean passport next month. I am a U.S. military veteran who is 100% disabled and recieve monthly payments for my injuries sustained from military service for the rest of my life.

    My question is, what is the best way to open a Chilean bank account? I have $20,000 usd that i want to deposit and continue to deposit at least $1000 usd every month. I plan on leaving the US sometime soon due to its descent into tyranny and would like to know what my best options are. If anyone could help or at least point me in the proper direction it would be greatly appreciated.

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