Getting the Best Currency Exchange in Costa Rica

There’s no getting around that Costa Rica can be expensive. One way to lessen the blow is by managing the currency exchange rate.

Use a credit card with no FT fees.

The best way to ensure an optimal currency exchange rate is using a credit card with no foreign transaction fees and paying in the local currency. Credit card companies can generally negotiate a much better rate than any other method available to you.

Paying only with U.S. dollars.

For a while in Costa Rica’s past, the exchange rate was pegged at 500:1 to the U.S. dollar, and many restaurants have simply gotten used to using this rate because it’s easy to calculate. However, the real rate has moved more in favor of the U.S. in recent years.

Most places in Costa Rica are cash-only and will accept U.S. dollars, but at an oversimplified exchange rate of 500:1. Be especially wary of menus priced in USD, because it usually means you could save a couple bucks by paying in colones.

This principle also goes for using credit cards. You always want to ask the vendor to charge you in the local currency whenever possible. Some tricky places we’ve been to has automatically charged us in USD at the usual 500:1. Some restaurants that accept credit cards only charge in USD, so it might be helpful to ask before you even order.

Exchange your money at a bank.

The guide from our shuttle from the airport to Tamarindo told us the best place to exchange our U.S. cash for colones were banks. We went to a local bank on March 11, 2015 and got the exchange rate of 528:1 CRC/USD (which is about a 1% conversion fee over the rate Google gave that day of 534:1). As a general rule, you’ll pay less when using cash, and it’s also a great way to open vendors to negotiating on price.

Weigh the benefits.

If you are an American, you’ll want to carry cash in both currencies (U.S. dollars and Costa Rican colones) then ask if you can get  a lower rate by paying one or the other. At one hotel, we were told that if we wanted to pay in colones, they would simply convert the nightly cost in dollars at a conversion rate of 540:1.

Since we got our colones from the bank at the lower rate of 528:1, we’re better off paying in U.S. dollars. If the hotel rate was offering to convert our bill at the currency exchange rate of 500:1, we would come out ahead by paying in colones.

As mentioned earlier, if you are paying in colones at a cash-only restaurant that uses the oversimplified 500:1 exchange rate, you are slightly better off taking the weaker rate from the bank than the restaurant’s hack-and-slash conversion.

Use ATMs if your bank doesn’t charge exorbitant fees.

In situations where you cannot use a credit card, being able to withdraw your money in the local currency is the best possible option.

I did a quick experiment on March 21, 2016 to see if I got a better rate withdrawing colones from the ATM or from “selling” dollars to the tellers at the local bank (exchanging dollars for colones). In other words, I wanted to know if my home bank would negotiate a better currency exchange rate than I could with the bank.

What I Did

I withdrew 50,000 colones from the ATM which incurred a 2,569.75 CRC transaction fee. The withdrawal, including the fee, appeared as a $99.38 cash advance on my checking account.

52,569/$99.38 yielded an exchange rate of ~528.97 CRC/USD. The exchange rate that the teller was buying dollars at (in exchange for colones) inside that same bank was 529.00.

Conclusion

The closing exchange rate for that day was 533.88 CRC/USD, which reflects a 1% transaction fee whether I use my bank (Fidelity) or the local bank to convert currency.

A note on choosing banks:

I have a “Cash Management” checking account with Fidelity which allows me to use any ATM anywhere in the world (1% foreign transaction fee) and reimburses me for ATM fees. Charles Schwab offers a similar deal. I highly recommend shopping around to find a bank that works with you, the style in which you travel, and the kinds of countries you visit.

My Cash Management Account from Fidelity allows me to withdraw cash for free from any ATM that accepts Visa.

I have no affiliate or material relationship with Fidelity, and get no benefit if you go with them or not.

Have a tip or question about maximizing currency exchange? 

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