Money in Mexico and how to prepare for your next trip-Dollars or pesos…

On April 21, 2010 there have been changes in Mexico regarding acceptance and the ability to use US dollars.  This is a positive change for the area, and we encourage the changes that are taking place.

HISTORY OF US DOLLARS IN MEXICO

For many years, international visitors have had the luxury of arriving in Mexico and using their home currency for payment.  This was a luxury for Euro-holders and US dollar holders and in some cases Cdn Dollar holders.  Businesses have been very accommodating to accept foreign currency for the sake of making payments easy for visitors.  Though the economic reasons and political reasons for this acceptance is long, what it meant for visitors was an easy way to hop on a plane, pay for things and not have to worry about ordering foreign money from their home bank in preparation for their travels.  Mexicans are nice and they will do almost anything to make your vacation easy.  I don’t know of any other country whereby shop keepers know the DAILY exchange rate of many different currencies.  This has always astounded me.  But it is the reality of this tourist destination.

FOREIGN CURRENCY RULES PRIOR TO 2010

Any business could post their prices in different currencies, with the exception of bars and restaurants who legally had to post their prices in pesos. Hotels, tourist activities and retail stores could post their prices in any currency that they wished to.  Mainly the US dollar price is posted due to the percentage of Americans who visit the country.  Silly thing is there is a huge amount of Canadians who are visitors to the country, but US dollars have been the currency of choice, like many other countries in the world.  Any one could bring down US dollars, and change any amount of US dollars in a local bank with no problems.  There were no limits, no issues, no questions and everyone could change the amount that they wished.  The funny thing that always amazed us was the NON-US residents that would exchange their home currency into US dollars and then into pesos when they arrived, which gave them a double-edged sword, they would lose a bit each time they switched currencies.  Canadians did not realize that they could walk into a Mexican bank and change Cdn dollars into pesos..with no issue.  But all of that is now changed.

NEW RULES AS OF APRIL 2010

The new rules regarding the use of US dollars effects both visitors and businesses.  This changes the payment environment for all, BUT, with some education and preparation this does not really effect people very much.  The effect is when you don’t now the new rules and continue your travels to the area and are surprised to find out and have not been able to prepare.

This post is about educating people about the changes so that you can prepare. It is not about whether this is fair, or not fair, whether it is right or not right.  We are indifferent to the changes, money is money.  We want you to know what the rules are and how you can prepare and let you know that things are changing.

Change #1 You can only exchange up to 500 USD per week with a passport at local banks.  This applies to visitors and local businesses.  Some banks are not even exchanging or accepting foreign currency at the moment.

Solution #1  Order pesos at your local bank before you arrive and bring some with you.  Your exchange rate will be very good at home and you will gain more pesos than you have ever down here.  Now that is a savings for you.  Most international banks  will need  some lead time so order in advance.

Solution #2 use the local ATM machines for your daily money needs understanding that there are limits to the amount you can take out each day.  Most ATM’s have a limit of 250 usd to 450 usd per day.  The exchange rate is good and you can then just take out what you need and not have to carry cash around with you.  It is much easier to pay for things in pesos and you will get more bang for your buck or euro.  ATMS do have a small service charge so think through your withdrawals.  It is better for you to withdraw once a day than three times a day.

Solution #3 use your credit card.  Debit cards are not a huge commodity here, but most businesses now take credit cards with again a small service fee.  Local banks charge businesses a lot for the use of a credit card machine so some small businesses have to add the fee on so they can stay competitive with the businesses that will not or can accept credit cards.

Change #2  Businesses can not deposit US Dollars into their bank accounts even if they hold a US dollar account.  This effects local businesses a lot.  And this change will directly affect visitors.  Let me build a visual for you.  If your hotel bill was 1500 USD for the week and you paid in cash, then the business owner could not use that money for 3 weeks. HOW?  If the money can not be deposited then the business has to go tot he bank once a week to change 500 usd each week as per the rules.  Then once it is turned into pesos then it can be deposited into their account so they can pay employees, suppliers, etc.  Your 1500 usd bill really would not be realized for 21 days, which makes it hard for some small businesses.  Businesses may get to the point of not accepting US currency or any foreign currency as they have bills to pay.

Solution This new rules may encourage small businesses and banks to make credit card machines and debit card purchases more available to people.  Also you may find that many businesses now post their prices in pesos so be well equipped with the rate of exchange.  Employees are still happy to do the math for you, but be prepared to pay in pesos.

These changes are new and change is always hard for people to accept.  But we would like to bring some important observations to your attention.  There is not a country in the world that accepts international currency as readily as Mexico has.  It seems that it is time for a change.  I can not go to Europe and pay with US dollars, and nor would anyone think to do so.  I can not go to Canada and pay for items in US dollars in most areas and most would not try to do so.

This change is going to make Mexican banks re-look at some of their policies, credit card charges being one, bank service fees being another and debit card use being another.  The new rules will actually make it easier for traveller in the next few months not more difficult.  It will ensure that travellers understand the US dollar to Mexican Peso ratio better, visitors wont use the 10 to 1 rule anymore as they have been for many years when really things are even cheaper than they perceive.  For an example.  If something costs 700 pesos most North American visitors think that equates to 70 USD or CDN but it really is 54 USD, an instant savings of 16 USD!

The best thing to do is to travel with your credit card, your ATM card and some pesos and you will be able to get what ever you wish when you want to and not have to struggle with different currencies while on vacation. YOur vacation will take on a whole new meaning, even if your flight is only 1 hour or 2 hours, you will now feel like you are in a foreign country on an adventure.

The final lesson is this, and many forget this little tip.  If you are left with Peso bills at the end of your trip, you can walk into your bank at home and change them back onto your home currency….how great is that!  Nothing is wasted, nothing lost.  If you bank has a foreign exchange counter, you can obtain your home currency back for any peso bills you have left over…or you can save them for your next trip!  The choice is up to you.