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Many of Corcons clients have chosen the Dominican Republic for their own banking or investment needs. US Dollar or EURO savings accounts, bank certificates of deposit (90-day or longer) or commercial paper investments (90-day or longer) are both locally tax-free and also offer the opportunity for higher rates of interest than what may be found elsewhere. As an example of the rates available for a 90-day time deposit (minimum US$ 10,000 or EURO), one can expect 5% or more for a bank CD and up to 9% for a commercial paper investment (90 Days). All interest for such deposits is paid monthly, and may be direct deposited to your bank savings account.
Should it be appropriate for you, investing in time deposits denominated in the local currency, the Dominican Peso, could offer yields up to 12% for a bank CD or up to 15% for commercial paper. Again, such interest is also locally tax-free, and the minimum term is 90 days. You may deposit funds or make withdrawals via bank wire transfer, or any personal or other kind of check drawn on any banking institution regardless if a US or EURO bank or not. This is of course assuming the funds are in US dollars or EURO (which you may send directly to the bank for deposit). In addition, you of course may conduct your business in person as well or utilize the debit card / secured credit facilities as explained below.
Many of the local banks Corcons work with offer US Dollar or EURO savings accounts, US Dollar and EURO Certificates of Deposit, ATM debit card facilities and a secured VISA & MasterCard program. In addition, US Dollar checking accounts are now available as well.
If you would like to have some sort of investment or bank time deposit providing the maximum tax-free monthly interest that is possible. It is also understandable that you would like to have some convenient way to access your interest as well. You may of course consider commercial paper over a Bank Certificate of Deposit, but since it is not a direct investment with the bank it can be somewhat more cumbersome to work with regards to transfers and so forth.
One idea then is to establish a US Dollar or EURO savings account (US$1000 or EURO minimum at most banks) and establish a US dollar or EURO bank certificate of deposit for US$10,000 or EURO. Interest rates are tiered in the Dominican Republic, so the rate of interest will be structured according to the amount of the CD. For a US $10,000 or EURO deposit, at the moment you can expect 5% or so depending upon the bank, as the fixed rate of return. My suggestion would be to take a 90-day CD, with the option to re-new at whatever the current rates are at that time.
Using the interest bearing $ 10,000 or EURO Certificate of Deposit, apply for a secured VISA or MasterCard. Line of credit granted is 80% of the deposit, which in this case is US $ 8,000 or EURO. Please note that this is a regular VISA or MasterCard, which can be used at any establishment worldwide that accepts such credit card and also at ATM teller machines, as well. If a credit card issued from a Dominican Bank is used outside of the Dominican Republic then the charges, regardless of the country the card is used in, will usually be billed in US Dollars or EURO. If used inside of the Dominican Republic, then of course the statement or card charges will be billed in the local currency, which is the Dominican Peso.
When the card is used outside of the Dominican Republic, all charges are automatically billed in US Dollars or EURO. When used inside of the Dominican Republic, all charges are billed in Pesos (the local currency of the Dominican Republic). Since I am going to assume that you will be using this card exclusively outside of the DR, then your bill will always be in US Dollars or EURO. When establishing the card, you have the option of requesting that your monthly charges be paid in full from your US dollar or EURO savings account. You also have the option of having your statement held by the bank and faxed to you on demand. Your account officer would then obtain your monthly credit card statement and hold it in your file pending your instructions (if you wanted it faxed to you, etc.). Unless you instructed otherwise, the bank would also then pay off your card charges in full each month from funds available in your US Dollar or EURO savings account.
The interest from your certificate of deposit is tax-free and can be direct deposited to your US Dollar or EURO savings account each month (to be applied towards your card charges accordingly). In addition, your account officer can arrange wire transfer or US Dollar or EURO Bank Administrative check should you wish this as well.
In this scenario, all of your CD certificates account balances and card charges will also remain in US Dollars or EURO. There is no currency conversion to Pesos required in this example.
NOTE: US dollar or EURO checking accounts are available through many of the bank’s offshore subsidiaries. This is of course a separate application form, but you may handle this all through your account officer as well. The minimum required opening balance for the checking account is normally US $3,000 or EURO.
With regards to using an ATM debit card, another option is to establish a US Dollar or EURO savings account plus a Dominican Peso savings account. The minimum for a US Dollar or EURO savings account is $1000 or EURO, and the minimum for Peso savings account is the equivalent of US $100 or equivalent EURO(or less).
Request an ATM DEBIT card, which would be connected to your Peso savings account. The ATM card may be used to access funds at any ATM machine worldwide, which was a member of the associated card network. Some banks now also offer a Debit Card that works directly the US Dollar Savings Account as well (ask your bank as not all currently offer it).
You may of course establish a Bank Certificate of Deposit in which currency you prefer. If you prefer to establish a Peso CD, rates are of course higher than interest rates in US Dollars or EURO. Regardless, since the ATM debit card can often only be used in conjunction with your Peso Savings account, any and all interest payment credited from your certificates or deposit would have to end up in your Peso savings account accordingly.
If you have a Certificate of Deposit or investment in Pesos, then this can be direct deposited to the Peso savings account accordingly. If you have investments in US Dollars or EURO, then of course a currency conversion would have to be done accordingly for the interest to be credited to the Peso savings account.
What is the plus or minus to this? The one benefit is that the interest rates are higher in Pesos and you would have the opportunity to earn a higher rate of return in Pesos than in Dollars or EURO. The "downside" to this is the fact that you would be subject to any currency exchange rate changes as they occur.
In my opinion, if you will not be spending the bulk of you time in the Dominican Republic, keeping your accounts strictly in US Dollars or EURO (as outlined in Option A would be the best way to go). This is so you have no “exchange rate” issues when converting pesos back to dollars or EURO in the future.