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Whether you are visiting or planning to live in another country, arriving prepared will avoid a lot of woes. Colombia may sound exotic, but it's not as if you will be landing on another planet either. Let me make the transition a little easier by giving you the rundown on everything everybody needs to know! Today let us tackle money, which some attribute all evil to, but be that as it may, it is also a necessary evil!
I tell everybody that whatever their destination may be to not bother using currency exchanges either at home or abroad and especially not in any airport. Currency exchanges will make money two ways: they will give you an exchange rate way below the official one, and then charge you a transaction fee. They prey on your worries that you will be stuck with no local currency at the other end, when in fact almost any airport in the world will have ATMs in their arrivals hall that will accept foreign bank cards.
Travelers' checks are not as practical as many guide books claim, since they will not be widely accepted except in major hotels where you are actually staying and therefore you might wind-up cashing them at a bank, where they will charge you a princely percentage for the privilege. That said, a travelers' check as a backup emergency plan is not a totally bad idea.
Wiring money via services like Western Union will also be very costly because they also make money both on the exchange rate and hefty transaction fees on the sender's end, plus there is always the possibility the office you go to retrieve the money in Colombia will refuse to tender the cash on a technicality, such as a slight difference between your full name and address and the information provided by the sender (or an error by the wiring company's employee). Only use wires as a last resort! Cash advances against major credit cards will also cost you dearly, so that too is only good in a worst case scenario.
Speaking of credit cards, I also recommend not depending on them! First and foremost, whether it be Colombia or anywhere else, you should never use them in anything but the most reputable businesses and never let anybody take your plastic out of sight! Card cloning scams are everywhere, as I learned during a visit to my hometown of Montreal, where I used an American MasterCard check card in my favorite restaurant and stupidly let the waiter take it with him away from my table. Two months later, three transactions at Montreal gas stations totaling over 2500 dollars (they were using tankers, no doubt!) were made against my card, sending it into negative territory and triggering a rash of 32 dollar daily overdraft penalties as well. I got very penny back but it took longer because it was a check card as opposed to pure credit.
The other problem with making credit card transactions is that the local merchant's bank may very well apply its own inflated exchange rate on your transaction and then charge your own bank in your currency rather than the local one, whereas your bank would normally handle the conversion. What happens then is that what should have been a 30 dollar transaction could cost you 40 in the end. This is not the fault of the merchant and in fact they usually do not even know that this is how it is being handled (and they do not get the extra ten dollars you were charged!). Thus, the best policy is to use cash for all your transactions once at your destination.
The best way to get cash in your host country these days, including Colombia, is to use your bank card in ATMs. American check (debit) cards, use either Visa or MasterCard and will give you the official exchange rate. Typically, they will charge you a transaction fee each time you use the card (unless you use it at an affiliated bank's ATM), and a currency exchange fee as a percentage, typically three percent for US banks. To reduce your banking costs, you should try to withdraw the maximum allowable at the particular ATM. In Colombia, Bancolombia, the country's biggest bank, only allow you 400,000 pesos per transaction at its ATMs, while Davivienda allows you 720,000 and Citibank 800,000, so it's obviously more advantageous to use the latter two. If you are planning to reside in Colombia, you probably want to take with you several ATM cards, in case one gets damaged, lost, or stolen. Your home bank cannot and will not send you a replacement card outside the country now matter how much you beg them!
Furthermore, you might want the cards you do bring along to be from the banks that offer the lowest combined transaction and exchange fees. For this, you will have to ask the banks directly. For example, Citibank will charge you only a 3% fee when you use their ATMs in Colombia, but that is still more than the combined rate of 2.26% Bank of America will apply using any bank's ATM there! While a couple dollars more per transaction may not sound like much, you may have to go to the ATM in Colombia six to ten times a month, so that becomes 12 to 20 dollars more in fees, or 144 to 240 dollars a year!
There is an abundance of ATMs in Colombia's big and even smaller cities, and most will accept cards that use the Cirrus, Plus and Others. Foreign banks that have a strong presence here other than Citibank, is Spain's BBVA (their ATMs will not work with US cards). Just as anywhere else, I highly discourage you from using any automated teller close to the street. It is infinitely safer to use an ATM in a mall, but even then be very mindful of who is watching. Thieves are known to follow people after using an ATM and are also known to not hesitate taking your life if you resist. One way to minimize risk is to use the ATM and then go do your shopping in the same mall rather than exiting to the street right away. I have not been the victim of any crime in five years living here, but I practice what I preach regarding public safety so that probably has a lot to do with it!
As I mentioned earlier, I have lived here for five years, but in that time I only had a bank account locally for a brief time. In my situation, where my funds are earned abroad and not in pesos, there is not much use in a local bank account. Using ATMs with my foreign cards has worked well for me, but obviously for any foreigners with a local income, a local bank account becomes a necessity. Presumably, if you are employed in Colombia, you will have a national identity card, or "cedula" as it is also known. This document is a requirement in order to open an account at a bank in Colombia.
Obtaining a credit card from your Colombian bank can be difficult unless you have a long enough credit history in Colombia. Your credit rating in your country of origin means absolutely nothing here, but then again, your US credit history does not in Canada and vice versa! As anywhere, obtaining a consumer loan or mortgage depends on your Colombian credit history as well as your income level, although the requirements tend to be lower than in places like the USA. That said, interest rates in Colombia are much higher than in places like the USA, both on loans and savings. There are some oddities in banking transactions, in that any time you withdraw cash from your Colombian bank account, you will immediately be taxed 4 pesos on every 1000., while if you use your debit card enough, you will be refunded a portion of the Colombian sales tax you paid on your purchases, monies which will be deposited directly into your account. These are government programs, not your bank's!
The Colombian peso (COP) has seen many ups and downs in the past five years, ranging from over 2600 pesos per US dollar to as low as just over 1600, but more often than not the trading range has been between 1700 and 1900. What this means in practical terms is that your cost of living in Colombia fluctuates wildly when financed through foreign currencies. I have seen the rent on our townhouse go from 500 to 670 USD within the same year at one point! Still, the solution is not to convert vast amounts into pesos at the outset, because not only you will be killed by fees on the buying end, but you will also likely lose badly on the selling end, the day you have to go back home.
If you are absolutely sure you are going to spend the rest of your life in Colombia, then of course the dynamic is different, but on the other hand Colombia is still an emerging economy and its money is speculative and inflationary, whereas bellwether currencies like the Euro or the US dollar have a purchasing power that is rather stable in Europe and the United States, respectively. Be pragmatic, but also think long term is what I suggest!
Please note that if your bank is not in the US or in a country using the Euro, it is likely your currency is thinly traded against the Colombian peso. What this means is that your bank might charge higher fees for exchanging COP. Check with your bank. One solution is to open an account in the USA (this is legal), but that would make absolutely no sense if you are not going to live in Colombia and / or do not have a legal US address (say a winter home in Florida), because US banks cannot send your ATM cards to a foreign address and the temporary one they give you is, well, temporary!
You can check the value of the Colombian peso against other currencies on popular sites like xe.com, though my own blog, ocolombia.com lists the major ones on every page.