Modern banking

21 Jan

Problem: I need to move a lot of money (about $4,000) into my newly-opened bank account in Peru (denominated in Peruvian nuevo soles) to pay for language school. I have the money in my bank in the States. I just need to move it. And… I need to convert most of it to Peruvian nuevo soles (PEN). There are several options:

  1. PayPal doesn’t work with bank accounts in Peru. Sadly, not an option.
  2. I heard that MoneyGram offers efficient transfers; however, someone would have to withdraw the money on the US side and go to a MoneyGram agent (Wal-Mart?). I would have to do the same in reverse, leaving me carrying more cash than most people here make in a year in a country known for pickpocketing. But with good security and an agent with high enough limits, this could work.
  3. Withdraw the entire amount on successive days from the ATMs of one of the two local banks that charge no ATM fees (Caja Arequipa and ScotiaBank). Due to local withdraw limits of ~$250 per ATM transaction, this would require at least 8 trips with multiple transactions and would incur excessive ATM use charges of ~$50, which, combined with the bank’s 1% charge for foreign transactions, would cost about $90, or >2% of the total. It is reported that CapitalOne doesn’t charge the 1% foreign transaction fee for US accounts, so for small amounts of money, it’s the way to go. However, I despise CapitalOne because of their credit card practices and couldn’t bring myself to open an account. And for larger amounts of money, limits still get in the way.
  4. Wire the amount in Peruvian nuevo soles. Isn’t this what wiring money is all about? I located a Peruvian bank which charges a flat $18 to receive foreign wires. This is better than most, which charge 0.5% of the wire amount. My US bank also has one of the lowest international wire transfer fees, only $45. Since my bank always gives an excellent rate to withdraw soles from ATMs, I figured the same might be true of wires so I could send the wire in soles for $63, or 1.5% of the total. This is cheaper and safer than using ATMs, especially to send larger amounts. Unfortunately, my bank uses an intermediary bank that charges a whopping 2.5% for currency conversion, bringing the cost to $163, or 4% of the total. Completely unacceptable.
  5. Wire the amount in dollars. This avoids the currency conversion penalty on the sending side. Unfortunately, since my Peruvian account is denominated in soles, the local bank will convert the wire into soles at the bank’s rate, charging roughly the same 2.5% + fees, or more than 4% of the total. Unacceptable.

Fortunately, after a trip to the bank with the shortest line ever this afternoon, I found a solution. I will now tell you the modern, cost-efficient way to transfer money across borders. I have opened two accounts at the same Peruvian bank, one denominated in dollars and the other in soles. I wire the money in dollars from the US to my local dollar account, go to the bank window and withdraw the amount of the wire in dollars, walk toward the door and take literally two steps outside the bank, change the money into soles at the spot exchange rate with one of the three uniformed people sitting on stools outside the bank by the little booth, then take two steps back into the bank to deposit the money into my soles account. Total cost: only the wire transfer fees of $63 and a tiny bit of risk. Since the same people sit on the stools outside the bank every day, they are probably not cheats, and if they are, I know where they work. A security guard with a gun normally stands in the doorway of the bank within view, so it’s a reasonably safe location. This little bit of risk saves me well over $100 in useless fees, and if there are problems with the bills of either party, the bank officials will be quite interested in them.

Lessons learned:

  • Even banking in Peru still works better with paper.
  • As I used to work on Internet banking software, I have a vague recollection that wire transfers were a major profit center for our customers (banks). Now I know who was writing my paycheck all those years.

In other news, today was Vicki’s birthday. At lunch, we celebrated with oven-roasted leg of lamb (yummy!) The language school had a cake for her, as did Daniel (good job, son). Fortunately, Vicki’s birthday this year fell on a Papa John’s 2-for-1 day, so we had friends over and enjoyed our favorite pizza. It tastes exactly like it does in the US, maybe even better. It’s the first time I can remember picking up pizzas using a bus and taxi. The nearest PJs doesn’t deliver to our area. There is a closer one opening soon, but it would no doubt be too dangerous to walk half a mile with hot pizza 🙂

Also today, I met with one of the two universities where I have been invited to teach computer courses. Despite some bureaucratic snags, things are moving along. i will spare you the details until they can be enjoyed in all their glory.

Oh! And Michael got engaged yesterday, but you already saw that on Facebook. The wedding will be next January, which is during our summer break and thus the ideal time for us to travel (albeit US winter could be a bit of an adjustment). This should get us home for Christmas and Daniel is already counting the days.

4 Responses to “Modern banking”

  1. Yvonne January 22, 2014 at 12:18 pm #

    David, yours is the ONLY blog that I always read and I always take the time to read every word. You are a gifted writer!

  2. Todd January 22, 2014 at 12:22 pm #

    Transfer via Bitcoin could be an option.

  3. michael CHANDLER January 22, 2014 at 4:48 pm #

    Ah! the engineer in you found the most efficient way. Clever! I remember in Bangkok, I had to make 4 trips to the ATM each month to pay the rent. The bank gave us a good exchange rate and our paycheck also deposited there so there were no transfers.

    Our bank here in Loulvul gives a $10 restaurant gift card when you open a new account. See what you are missing in Arequipa!

    Congrats on the new teaching jobs. Pizza’s taste better when made with TLC. That tells me something about Peru!

    Love, Dad


  1. Modern Banking 2 | The Chandler Far Southern Times - January 22, 2014

    […] I discussed my scheme for minimizing the fees associated with sending a wire from the US to Peru in the national […]

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