exchange rate question

[Bill123]

Let me see if I can ask this question and see if anyone can answer it. It's kind of a tough one.

But before I ask it, I want to remind you that today marked the record for the highest dollar to peso exchange rate in history. The interbank rate is over 2500 to the dollar. Who knows, but it may even go lower!

Ok, my questions.

When you use a visa card for a purchase in Colombia, you are getting the advantage of Visa's huge amount of transactions. Because of this, they no doubt get the best exchange rate possible, which is called the interbank rate. This rate is passed on to you, but you do end up paying Visa a 1% fee, and also for most credit cards (but not all) you will pay your own credit card issuer a fee of about another 2%.

Now, let's switch to ATM cards, particularly the plain ol' ones without any visa symbol on it. They are of course tied to either your checking or savings account. As far as I know there are no percentage fees charged to you as in the credit card example above. There may be a transaction charge, but these can be avoided if you have the right card.

What I am wanting to know is: What is the basic exchange rate that you get when using the ATM card to get your own cash from a machine. In the credit card example above, you get the interbank rate. But with an ATM card, I doubt you get this.

The reason I ask this question is that it is very possible that even though the credit card charges fees of from 1% to 3%, that it still may be cheaper to use your credit card than to use your ATM card. And a lot cheaper if you have one of the cards that only charges the 1% visa fee only.

I have this sneaking suspicion that the base exchange rate is much worse for ATM transactions than for purchases with your credit card. I am also thinking that the exchange rates for ATM transactions may vary greatly between the different banks.

Does anyone have their receipts of both types of transactions that they can look it?
Just tell me dates of the transactions....one for an ATM transaction and one for a credit card purchase. And then I will figure it out from there and report on it.

Thank you.

[Jim]

Bill123,

Your question had lots of detailed questions which I am not prepared to answer but let me tell you the following:

I am probably as cheap / economical / value conscious as anyone you'll meet.

I have found using my Visa and ATM cards in both Costa Rica and Colombia to get me as good or better a rate as if I had taken dollar bills to the bank, changed them to pesos and paid in effectivo (cash).

If you get screwed on fees from your ATM or VISA it is because you use the wrong bank in the USA. I drive five miles out of the way to save $.02 a gallon on gas but I use my visa or ATM cards without blinking an eye.

Peace,

Jim

[Bill123]

Trust me....I am cheaper than you!!!

Allow me to comment on your post. I basically just had two questions...what is the base exchange rate for ATM use and what is the base exchange rate for credit card purchases?

And by the way, you should always be able to get better rates than taking cash to a bank or any other method of exchanging. One exception may be if you can exchange cash in one of the under-the-table exchanges in Colombia, but they are very hidden and a bit dangerous to use since they are illegal.

Also, as I said, do not use banks that charge you ATM fees...I use cards from my credit union and get five free uses a month for transactions outside of the country. And as far as credit cards go, you can find some that don't charge the 2% fee, which is now a very common fee on purchases, in addition to the 1% fee Visa itself charges.

But again, I am trying to find out the base exchange rate that one gets for both types of transactions. I am under the sneaking suspicion that getting cash out of an ATM machine has a much higher exchange rate than the rate we get for purchases. This is why I wondered if anyone had any receipts for both types of transactions that they saved.

It may very well be that it may be better to use your credit card for purchases as much as you can. And to use your ATM for cash as little as possible. This may be especially so if you have a credit card that doesn't charge the 2% bank fee.

One caveat to that is that it is a little dangerous to leave your credit card number all over time, but then again, you have protection for that I guess if someone uses it unauthorized.

So all I really need is for someone to tell me the date of a credit card purchase down there, the bank, and the amount of pesos you charged and the amount of dollars you were billed and I can then figure this out and report on it. I already have an example from the ATM side of things.

thanks.

P.S. I will admit I won't drive miles for gas that is 2 cents cheaper though, so maybe you ARE the cheaper one!!

[Bill123]

Here's an update...the peso has fallen again to its all time low...to 2,600 to the U.S. dollar.

I have done some more work on the above topic and here's an update:


For credit card purchases:

Take today for instance. Today's interbank rate is about 2,600 pesos. That represents the rate one gets for exchanging millions of dollars at a time. One would think that Master Card and Visa would be able to get this rate since their customers, i.e., us, do tons of transactions a day...in every currency. But since the currency is so volatile, and since there is a bid/ask spread on money, they get less. Today they are providing the money to their member banks at 2,513 pesos less a 1% fee, for a total of 2,488. Now, the member bank, who gets the money at 2,488, passes it on to you. Most banks then charge a 2% fee, so we, the customer, get 2,438 pesos on our statements. And since I use a credit card from my credit union, I don't have to pay the 2% fee, so I would get the money at 2,488 pesos...a great rate!

For cash from an ATM machine or by putting in your pin number for a purchase at a point-of-sale terminal:

It works about the same. But I don't think you have to pay the 1% fee. But member banks usually still charge their 2% fee..except again, my credit union does not. So I think I would get the money at the 2,513 rate. Remember to take out the most possible at a time...for instance, at ServiBanco machines the maximum is 500,000 pesos each time.

Finally, if you use your ATM card for a purchase (the one with the visa or master card symbol on it), but put it thru as a credit card purchase, where you have to sign, it will go thru as a visa-type transaction and the 1% will be charged, but again, you can avoid the 2% fee if you have the right card. Complicated eh?

The moral of the story....is to use an ATM card from a member institution who doesn't charge the 2% fees, such as my credit union, and get cash from ATM machines. Not only do I get the best rate, with no fees, but the first five transactions do not even have the $3 average ATM use fee...and in the case of my credit union, the fee after the first five (per calendar month is only $.75.

For purchases, just use the cash you got at the ATM machines. But if you want to purchase with a card, use a credit card from an institution that does not charge the 2% fee...or better yet, use your ATM card if there is a point of sale terminal.

Finally, realize that all of these methods are better than taking U.S. cash or even traveler's checks down there. There is a possibility that you can get better exchange rates with cash, but only if you can find the illegal places that launder cash. And it's best to stay away from these.

Bill

[Bryan]

Very informative Bill and thanks!

[In the Know 2]

I have used my ATM card to get cash and I am charged $3.00 for each transaction. My ATM is free at my bank only. Nevertheless, the exchange rate I get at BanColombia is always better than changing cash or traveler's checks at the bank teller window and even if I make 10 withdrawls for $3.00 each $30.00 total I still come out ahead.

BanColombia only lets you make 3 withdrawls every 24 hours with a $250,000 limit each time I believe. Also, if your personal ID is more than 4 digits it may not work but I could be wrong?

The worst thing I ever did was go to a Bank in Colombia and ask for an advance on my credit card. Dumb! Got hit for a large fee
and some interest. No problem in making purchases with the credit card IF the accept it!

[Bill123]

The problem with paying a $3.00 fee on a 250,000 peso debit card ATM transaction is that you are, in effect, paying about an additional 3% for the transaction. This is in addition to the 2% your bank is no doubt charging you. Also, the least you should probably do is use a machine that allows larger withdrawals. For instance, on my last trip Servibanco allowed 500,000 peso withdrawals.

But again, see if you can join a credit union. First of all, they are so much better than banks for your personal accounts. Also, as in the case of my own credit union, they do not charge for use of foreign ATM's for the first 5 transactions per month. And less than a buck for uses over 5. Finally, they don't charge that 2% fee either.

And you're right, NEVER use a credit card to get cash from a machine.

[Brighton]

Bill_123,

I don't know if you're still looking for some actual exchange rate info, but here's some figures from a Bogotá trip. It was my first trip (Aug 2 - Aug 11) and I'll post more info this coming weekend:

1) ATM w/draw 8/2, 500,000 COP = $193.17 USD = $2588.39 COP per USD
2) ATM w/draw 8/8, 200,000 COP = $75.83 USD = 2637.48 COP per USD
3) ATM w/draw 8/10, 300,000 COP = $114.37 USD = 2623.06 COP per USD

Notes: The first and third w/drawals were from the Shell station across from Charlie's Place. The second withdrawal was from an ATM at a Colmena office. The second withdrawal was kind of annoying as the max they would allow was 200,000 pesos and it cost me $3 USD (the per transaction fee levied by my local bank). These were all VISA debit/checking account transactions as opposed to credit card cash advances.

David

[Bill123]

Hi David,

That is good information, but you didn't put the dates the transactions actually went thru the system. This isn't the date of the transaction, but usually some days later. Exchange rates are figured on the day it goes thru the system and they change every day. But generally, I think you got some great rates.

Also, you mentioned you used a Visa debit card. This means it went thru the Visa system and you got 1% below the "banker's sellers rate" for the particular day, as well as paying your own bank's 2% charges. And the per use fees.

But of course that is better than taking cash out from your credit card.

On my next trip I am going to try using both a Visa debit card AND a plain ol' ATM card (one without the visa symbol). I will use them both on the same day at the same ATM. I want to see if the rate is any better when not using the Visa debit card. I think it will instead be run thru one of the other systems that show up on the back of the card. I am just not sure if they charge a 1% fee too like Visa does for cards with their symbol on it.

Either way, I manage to avoid all ATM per-use fees by using a card from my credit union (for the first 5 transactions per month) and only I think 75 cents or 95 cents for any past that. Also, they don't charge that 2% additional fee!

And importantly, ALL of these methods are better than what you get for cash or travelers checks. And it is so easy too.

[Brighton]

Bill,

Sorry, I meant to list the bank's activity date in my first post. From my bank statement:

Trans 1, 8/2 Fri pm, bank posting date 8/5
Trans 2, 8/8 Thu am, bank posting date 8/8
Trans 3, 8/10 Sat am, bank posting date 8/12

I will admit to being a little confused about the whole VISA debit/check card vs. "plain old check card" thing. I don't think my bank offers a choice...they just said to find a machine in Colombia with the PLUS network symbol.

I do appreciate the previous "money matters" posts. Without them I would not have known that traveler's checks are not the best deal and I'm glad I confirmed that my credit card, MBNA, only discounts 1% from the interbank rate (versus 2% from many other providers).

Finally, most people know that the cambios are not going to give a very good rate but I was surprised at how BAD the rates were in the hotels. While wandering around to look at potential hotels, the Dann Carlton, Dann Norte and San Simon all had signs saying their rate was 2150-2250 pesos to the dollar. That's not very good compared to the 2588-2637 pesos I received via my ATM.

David