They say a picture is worth 10,000 words’
Which One should you have bought a year ago?
I’m no expert, but looking at what the major US stock indexes have done this year and what the gain I could have made on trading Philippine pesos would hav ebeen gives me some thoughts.
I’m looking into a no-risk way to capitalize on this trend. I’m not sure, but I’ll certainly keep you posted.
Yesterday I published one of my regular Question and answers columns regarding a number of issues about getting money to the Philippines, managing your money while you live in the Philippines as well as getting your bills paid in the Philippines.
I left out a short section I should have included regarding money transfer services,and a couple other news items and questions have come up since yesterday, so here are a few updates:
Money Transfer Services: These are businesses set up in the USA and a number of other countries mainly to allow OFW’s (Overseas Filipino Workers) to send money back home. But there’s no reason anyone else can’t make good use of them, and they do provide a helpful means of moving money. There are a number of them you will see often, Xoom is oneof the larger ones, I personally recommend an outfit I have used for years now known as Remit Home. (not to be confused with “Remit 2 Home”, one of their competitors).
These folks are located in California and are licensed by all 50 US states as well as the government of the Philippines to move money, easily and quickly for a fee. Their fees are much less than wire transfers from bank to bank, but tyically more expensive thna getting money via a debit card.
To use one, you set up a US source … a bank account or a credit card (if you source via a credit card each transaction will be a cash advance, so be very careful about fees you credit card company may charge) and to ‘enroll’ a destination in the Philippines. This can be a person with an address … for having money delivered to the door, a cash collection counter, available in many shopping malls and even some banks or your own Philippine bank account. One time fees for up to $1,000 USD are about $10 USD. If you set up recurring transfers there are discounts. I find these guys very useful and reliable, the money comes out of my US account via a standard ACH (Automated Clearing House) debit and shows up immediately in my local BDO (Banco de Oro) account … all easily monitored online.
There si, of course, the old standby, Western Union. They provide similar services, have a n offcie on what seems ike every other street corner in the Philippines and move the money in seconds. They do, however, charge like a wounded bull for this convenience … their cheapest rate from the US is about $19 per transaction and it ramps up steeply as the amount transferred increases. But for an emergency there is no faster, more reliable, 24/7 means and no greater availability here.
Cost of Money: Although I see it changing rapidly … I don’t get any more ‘zero percent balance transfer’ offers now, seems like the offers are now 2% or more, the US still enjoys, by far, the world’s cheapest lending rates. Now if there’s a connection between that and so many banks going belly-up, I’ll leave it for someone smarter to decide.
But my point is this, if you are thinking about using credit much here in the Philippines you might want to think a little harder. Friend Bob just published a good article on this expensive money. Apparently the loans there in Davao City are a bit more restrictive than here in the near Metro-Manila area … here’s a page will a lot of loan information from a bank I trust, but when I say it’s a little cheaper here, I’m only talking about a percentage point or two.
Don’t expect home loans much below 12%, and that is with 20% cash down. Don’t expect terms longer than 20 years. And, this is one that will really wake up my fellow dual citizens (US citizen and Senior citizen ;-)), don’t expect to get a loan if you are over 60. Some lenders won’t loan unless the borrower will be under 60 at the time the loan is paid off!
Bob referenced his own article called “Cash is King” as well, and I find nothig at all to disagree with … this is not a country for borrowing money. Bring cash, or, if possible, source you loan back home … it will not be cheaper to borrow money in the Philippines.
Thanks to several readers who just sent in questions on thus subject, I’ll try to lump a few of the common interest items together here, please feel free to ask more about anything I fail to cover adequately. I really get a charge out of the help I am getting from everyone on this questions and answers theme, thank you all!
Where to Keep It: Of course the best answer to where do you keep your money has a lot to do with where your money comes from. In my case I have two government annuities, both paid by an agency known as DFAS (Defense Finance and Accounting Service). DFAS makes direct deposits to banks in the US and about 42 other countries. At present, the Philippines is not one of those countries. Full list of IDD (International Direct deposit) countries is here. This means, for sure, I need a US bank account(or some other approved country bank account) in order to get paid.
I also receive Social Security Retirement Benefits. The SSA is more complicated in their overseas regulations than is DFAS, depending upon citizenship and status one might, or might not, be able to receive payments directly in the Philippines. I chose not to even try. I just have it Direct Deposited in my US bank.
I also receive income from a number of my online business ventures. Many of them, are US based, several are not. Currently almost everyone I receive money from on line feeds through my PayPal account which is also tied to a US bank account. Mostly I just leave my money in PayPal and pay for things I buy with it … it’s a very convenient quasi bank, open 24/7. A few sources, Google for example, make direct deposits to my US bank. Most of these companies will not make direct deposits to Philippine banks.
So, case closed as far as needing a US bank (or home country bank for my Australia, Britain, German, et all readers).
But what about using a US bank like Citi Bank with offices here and just transferring as required? Good idea, however, it isn’t normally possible. Citi Bank US and Citi Bank Philippines are two completely different entities. Likewise a suggestion I received from a reader a while back … use HSBC. Hmm, last time I looked HSBC was the Hong Kong and Shangri Banking Corporation. US-based? ;-). Not hardly … the US HSBC operations are just one arm of a huge international banking empire. You can have an HSBC account in the US and you can have an HSBC account here, but there are virtually no HSBC branches outside Manila and I don’t know what costs may be involved in transferring. I need a local bank, so that’s what I use.
It is my understanding that you can use PNB (Philippine National Bank) of New York as a direct deposit source and transfer simply to your PNB account in the Philippines. I don’t know the details and/or any charges involved, but I also don’t have PNB account so I will leave this as an exercise for the reader
OK, so have a Home Country Bank and a Philippine Bank, but the hassles! Actually I find the only ‘hassle’ if you will is the already well known and well lamented Philippine banking laws that allow Philippine banks to hold foreign checks for as long at 45 days. This is annoying and counter-productive to trade, but it’s a fact of life and unlikely to change soon. Personally, I just ignore it.
Every month I write a check on my regular checking account in my US bank. There is no charge at all for this service beyond whatever I paid for the original checkbook.v I just took a look and I seem to have at least a 15 years supply of checks … each little 25 check ‘pads’ will last two full years, after all. By the time I run out of US checks the currency will probably have changed to Chinese Yuan anyway, so no problem.
I deposit (by the way, in the Philippines we call this making a “depose-it”, say to the teller that you want to make a “deposit” and you will likely get a blank stare ;-) More on the “common language” here.
This requires one simple deposit form and a trip to the personal service counter where the helpful teller will accept the check and enter it into my passbook … I don’t get monthly statements, all my accounts here are passbook based … I always have access to my account data. I can easily view my account online at any time and see which checks have cleared and which are ‘in the queue’.
What About paper Statements and Mail: This is an issue to some, indeed. US military retirees and civil service retirees have access to a volunteer organizations here in the Philippines known as RAO’s .. (Retired Affairs Offices). There are three major ones and satellite offices spread across the Philippines. You can receive and send US mail via these kind folks and I do use them.
But what about the folks who don’t have these services? And what about people like me who really want to get off all paper possible. Not really a problem. If you are still in your home country planning for a move, take inventory. What financial-related paper do you get every month?
Bank Statements? Why? If you are planning to continue with the bank sending you paper statements, and they do not have a useful online account service, dump them … almost any bank has perfectly useable online access these days, I can log on and check activity in either my US or Philippines accounts 24-7. If you use a smart home budget program, like Quicken or Microsoft Money they can do the information gathering for you. You want paper? Print a statement once a month … the statement the bank prints and the one you print all come from the same computer.
Bills? Well how many of these are you going to have after the move? Which bills do you get that you can not access online? My US bank has a free bill pay service which will let me pay any company or individual in the USA, one-time or recurring. If the receiving party is set up for electronic transfer it happens in one business day, if electronic transfer isn’t possible, the bill pay service will mail a check. I currently have only two annual bills I pay in the US, aside from that I pay no one there. Almost all banks have equivalent bill pay systems, if they don’t, change banks before you move … they are back in the buggy whip era. For those who keep a tight reign on their money, the bill pay service will also integrate with a book keeping program. If I did business with someone who would not give me online access I would just change my address to a US-based mail forwarding service. There are dozens of them available. Most will, at your direction, open mail upon your instruction and read you the amount or even fax you a copy … along with their normal service of receiving mail, bundling it up and sending it to you by courier at you own agreed upon time and method. I just don’t see a need for paper to travel from the Us to the Philippines or back again very often.
What about just using your US bank and living off your ATM Card? This can certainly be done. Many folks do this routinely. Different banks have different charges but there are a number of US banks with free ATM withdrawals. My bank isn’t free but if I use my US ATM card in a teller machine here I pay, on average, about a one peso per dollar loss on the ‘street’ exchange rate and $3.67 total in ‘cross border’ charges. Truthfully I don’t know my daily limit, I know it’s at least $500 a day which is enough for me.
I don’t feel comfortable in using the ATM card as my only lifeline, but it is certainly an important backup … I use mine about every three months just to keep it ‘alive’.
OK. As usual I have written more words that I intended to …if only all of them actually imparted information ;-). This should help some of you with your planning, please ask if there is anything I didn’t cover … the concept of writing yourself a check seems to throw a lot of people off, but it works for me. Just part of Living Here in the Philippines.
One of the things you learn right away if you are going to live in the Philippines is that ForEx (Foreign Exchange trading) is no longer something you read about in the papers or hear about people taking university classes in. It becomes part and parcel of your everyday life.
Don’t worry, though, the majority of expats seem to be able to ignore ForEx issues with aplomb. I’ve watched discussion for year now about issues like credit or debit card charges where people claim their particular card is free, or only charging them a certain amount, when the truth is the merchant is charging them significantly more … by exchanging the currency at a different rate. usually people don’t even want to get into this very deeply, because “it only amounts to a few cents:.
Well, to each individual transaction it may only amount to a few cents (although Visa has just finished paying off $336,000,000 USD in money the court determined they wrongfully took from patrons by charging the wrong rate) so those pennies can really add up.
I’ve written often here in recent time about the price of gas and diesel fuel … see Pesos per Dollar, Pesos per Liter, My Waistline — All 40 Plus and Still Going Up — No End In Sight for a few examples if you missed any.
If you refer back slightly over a month ago you’ll see that my cost per US gallon for diesel fuel was about $4.12 per gallon.
Diesel has risen more than 6 pesos per liter since then, so based on that it should be about $4.67 a gallon or more these days … but I just filled up for 54.47 per liter or about $4.51 USD per US gallon … an increase, but a much smaller increase than it might have been.
How can this be? easy. In the earlier example the peso per dollar was sitting at 44.07 to the US dollar. Today it is running 45.7 or so. A peso and a half per dollar makes a significant difference to those of us who earn in dollars.
They (ever wonder who “they” really are?) say the Philippine Peso per US Dollar rate should stabilize at about 55 to 1 in a few month’s time. Perhaps it will. Or, perhaps it won’t.
“They” may be among those ‘experts” just a few months ago who were predicting the peso would ’settle out’ at 33 or so to the US dollar. Hmm, wonder how much “they” bet on their own advice?
What do I recommend? Cautious optimism (I was born with it) and, above all, learn what is going on, what the plus and minus sides of each venture are, and what your personal risk tolerance is … before you make a move. Only a couple months ago I remember being involved in discussion with several of these guys on-line who were apparently willing to bet the Peso was going to go to 33. How would you like to have to pay 45.7 of those 33 per dollar pesos for each dollar you needed to buy today?
By the way, if you want to learn the ForEx business … and potentially make money at it, this is an excellent offer I just came across. yes, it has one of those huge sales pages … why, because they sell product, that’s why … and it requires a purchase (although there is an excellent free newsletter you can sign up for as well), but there is also a limited time offer 75% off coupon and an ironclad money back guarantee, so it’s exceedingly cheap education in this potentially very lucrative business … where you will be, finance-wise at this time next month or next year is totally your decision. Step One to ForEx Success! is here.
Just looked at the clock and calendar and realized I have been sitting here blogging and neglected a trip to the bank … I have to go and fit that in pretty soon, I guess right after lunch before I take my usual siesta.
Many people have talked to me before and I have written a bit about how foreigners typically handle their money here when your home, and sources of income, are far away "across (one of) ‘the ponds."
My income (from some pension funds and from my Internet entrepreneurial efforts) is all US based. I’m blessed with a comfortable income … but when your money is 7,000+ miles away there is a definite problem in spending it here in the Philippines. Here’s what works for me. Others may have some different methods top contribute, which I’ll be happy to hear about.
Actually, I have use a federal credit Union … SSFCU, I’ve been with them for years and they offer great customer service and a fully-staffed 24 hour help desk that has always given me the right answers the few times I needed to seek assistance. I’m lucky enough to have a US mailing address here in the Philippines because of my military retired status so the address for checks, paper statements and such is no problem. If you will have to use a Philippine address you’ll need to contact your current institution directly and see what their rules are.
I get paper statements sent every month strictly for paper trail purposes .. I do all my banking with SSFCU’s excellent online banking services. Many other banks and credit unions today equal or exceed their level of services … so for bills you may have back in the US and such it’s very easy to make and manage payments online.
I’m very lucky because one of my sons still lives in the US and let’s me use his mailing address. this make sit very easy for me to actually deal with individuals and businesses in the US as if I were still a resident there. If you don’t have a family member you can count on, there are a number of commercial mail receiving/forwarding services that you can set up as an alternative.
In today’s world the telephone is really a key to all sorts of personal business. There is also no reason at all not to have a US phone number and do basically all your business via the phone. Vonage, Skype, Yahoo! and dozens of others all have plans that let you have a US number that people can call that will ring in your home in the Philippines … either on a ‘regular’ phone, your computer, or both.
It would certainly be possible to live without my bank here in the Philippines (I use BDO, Banco de Oro … the bank of gold) but I find it very convenient to have a local bank and wouldn’t care to be without them. I do have American friends here, though, who have been here long-term … some nearly 30 years … and have never had a Philippine bank account. They live off their ATM cards from US banks, mainly. If you shop around there are a number of US banks that do not charge at all for ATM use, so this method can work for many of you.
The reason I personally won’t rely on ATM card use alone is because even as a dyed-in-the-wool Internet enthusiast I don’t trust the ATM network to be ‘up’ all the time. If you read the news today you can imagine there are a lot of people in India, as just one example, who are getting a lot of "Unable To Dispense Cash" messages. I do have an ATM card from my US Credit Union and I do use it a few times a year to withdraw cash (Philippine pesos at that day’s current exchange rate). This is my back-up, secondary means of getting cash to live on.
My primary method? The first of every month I write myself a check from my US credit union and physically deposit it in my local BDO dollar account. Aside from a trip to the bank … which is easy, since it is in the local mall … the inconvenience of that method is, the checks take 45 days to clear. That is, if I write a check today, 1 February, it is not going to be available for withdrawal for my account until the middle of March. Sometimes it takes a little less time .. in December the check I wrote on 1 November showed up about the 8th as I recall … but it’s not really an area of concern … I keep more than a couple months living expenses in the dollar savings account so I am never hanging around the bank, breathlessly waiting for my check to clear.
Of course I mentioned these transactions are in dollars. As required I just ask my bank to transfer dollars to my Philippine Pesos savings account, which takes just a few minutes … and with BDO i get a tiny ’sweetener’, something like an extra .05 Pesos per dollar changed to help make up for the atrocious exchange rate.
So that, in a nut shell is how I live. Write myself a check from my US bank every month, deposit that check in my Philippine bank, and spend money (either cash or ATM card) that’s in my Philippine bank to pay my bills and buy my lechon manok 
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