One thing I think a lot of my fellow Americans have trouble with is currency … money … moola. No, not the problem of having month left over at the end of your money … that’s an age old problem that can happen to us all, from time to time.
What I’m talking about today is foreign money, that “coin of the realm” stuff, the money that’s different in almost every country on earth.
Whether they are thinking about moving to the Philippines or to any other country, a surprising number of folks I have talked to somehow have the idea that they will just continue thinking about expenses and dealing with bills and expenses in good old US “greenbacks”. “I’m not interest in that Foreign Exchange stuff:, they will say. “I’ll just use local currency on those rare occasions when I have to. Foreign exchange (often labeled ForEx or Fx) is for the investors and big money types, not little guys like me.”
Well it’s fine to think that way … and I certainly don’t advise anyone to start splashing around in the currency markets, trading blocks of Dollars or Pesos or Euros or whatever. But if you come here to live in the Philippines you will find out you “play” the Forex markets each and every day you wake up … and you are going to have to deal with at least two currencies in your day-to-day modest efforts at staying alive.
Actually the Philippines is much easier than a number of foreign countries to deal with this issue in, because it is legal to own foreign currency here, and you can open bank accounts in both Philippine pesos and US Dollars. There are so countries that won’t let you even have another country’s currency, try to confiscate it at the border, so in that respect, we’re very lucky.
But even though I have a bank account specifically for my US dollar holdings here, and if I want to, I could go to the bank when they open this morning and draw out ‘real’ US dollars in my hand, this is still a country that runs on Philippine Pesos and there isn’t a lot I can do with those dollars except put them back into a bank, or hand them over to some third-party money changer. I can’t go to the electric company and pay my bill there with them, I can’t hand them to a tricy driver or get food for lunch today at the market with them … regardless of my preferences, I have to deal with and think in Pesos each and every day.
But the way, a question I get often is, “Can I get Pesos from an ATM with my US debit or credit card? The answer is yes, in fact Pesos are all you can get from a teller machine in the Philippines (except for a few specific “inside the bank” machines in Manila, which I have been told about. nut have never seen). “Now wait just a minute” I can hear a few people saying. “My bank account in the US is in dollars, how can I get Philippine Pesos with that?”
Well that part is quite simple … but depending upon your bank’s policies and the agency they use for money changing, it could be expensive. For example, here’s a snippet from my US bank transactions when I used my US debit card to get 10,000 Philippine Pesos out of a local teller machine earlier this month:
On the day I made this Philippine ATM withdrawal the commercial bank exchange rate here in the Philippines was averaging so I should have paid about $ 212.59 over the counter at my Philippine bank for the 10,00 Philippine Pesos I received. Instead, I paid $211.86 from my US bank account for the currency itself, $1.69 to Master Card for the privilege of transacting business across international boundaries, $1.00 to my US bank “just because” and $ 0.43 to someone in the change for a “Currency Conversion” fee. The “effective exchange rate” to me then in reality was PhP 10,000/$ 214.98 or PhP 46.51 per US dollar. That means I paid, in total $2.29 or am extra 0.014% on this transaction for the convenience of using my US debit card.
If this seems a bit too detailed or even a shade on the ‘anal-retentive’ side for an every day transaction, fear not. I usually don’t go into this sort of detail every time I need some Philippine Pesos in my hand. But if you want to live here you are going to have to grasp these basics and at least work them out from time to time, especially on major purchases. Or, you will spend a lot of your time here living in the Philippines wondering where the money went. Over the course of a year, someone living in the Philippines on my optimistic $770 USD a month budget (see Live In The Philippines On $770 Dollars A Month? | PhilFAQS) would have lost nearly $130 or about 17% of a month’s budget if s/he did a whole year’s Peso changing in one “go”. Not so insignificant if you are trying to watch the pennies closely.
So, did you catch the mistake in language I just made. “Peso changing”? “Money changer” is a common enough term, and no one will look at you cross-eyed if you use it, but it’s a term of convenience. It’s used all the time but it really means something different than the definition of the words.
There is no such thing as ‘changing” money. It does not happen. To get Pesos if you have US Dollars in your hand you have to “sell” the dollars to someone who wants then and let them pay you in Pesos. If you want dollars … let’s say you are making a trip home and want money for your trip from the airport to where ever you are staying, you need to “buy” dollars .. meaning you hand over the equivalent price in pesos for dollars that the vendor is asking, and s/he will had you back ‘real’ dollars.
I know it sounds a bit overly detailed to say there is no such think as ‘changing” the money when the transaction of buying and selling I just described is very accurately termed an “exchange”, but it helps, in my view, to be accurate in the terms at the beginning in order to understand more complex terms properly.
Here’s a current chart that illustrates some of the points I am making. US dollars versus Philippine Pesos over the past three months. In other words the US dollar’s value expressed in Philippine Pesos on any given day … actually the value changes many times a day, as often as each an every transaction. The idea that there is an “official rate” for each day is another one of those “shortcuts” we use, and has a legal meaning in some cases after the fact … like at the end of the trading day in a particular country, but every time Dollars are sold for Pesos can be different than the last time Dollars were sold for Pesos .. it’s a free and open market and the laws of supply and demand are in full force.
Take a look at the figures below the chart from some extra illumination:
Last Trade: 47.35 Trade Time: 12:41PM ET Change: 
0.22 (0.46%)
Prev Close: 47.135 Open: 47.165 Day’s Range: 46.99 – 47.44 52wk Range: 46.195 – 50.700
Bid: 47.35 Ask: 47.38
The most important figures on this page are on the last line above. These figures change each and every time someone enters a sell order for Dollars. At the end of the day you are going to have to think frequently in your home country currency, in Philippine pesos and in US dollars as (well if the dollar isn’t your ‘native’ currency or if you earn money online, which is almost always a USD transaction.)
Some interesting thoughts on the foreign exchange state of mind here.
You can also learn a lot of fascinating facts about the ForEx business here.
(note, this leads to a sponsor’s page, if you buy something I make a commission. However, feel free not to buy, there are some fascinating live action videos here that will teach you a lot. You snooze, you lose, you learn, you earn
)
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Hi again;
Remember the Retired Air Force, who lived up the hill from me? He told me that all Philippine Bank were crooked. This he was sure of. His house was broken into and 26 Grand USD was taken. He showed those crooked bankers! I would never use the coffee can bank system.
I think banks here are honest almost to a fault in protecting their stockholder’s money, but they occasionally do some scary things with their data processing departments. That incident was resolved there on the spot … if I have time I am going to write a separate post about it … but one thing for sure … I don’t keep money in my house … with all the sometimes overblown issues regarding foreigner safety, I think home invasion crimes can be all too often real, and I leave no bait for them. Easy for me to do when my bank is very close to the house and open 7 days a week, mall hours. That’s pretty convenient.
RE: the coffee can system. A favorite family sroy involves some very rich old auntie on one side of the family or rhe other who kept all her money in a fancy metal strongbox .. then buried it for safe-keeping went she went on some long journey. Anyone rading this who doesn’t know the word “anay”? Yep. Termites in English. Munch, much, munch …. Mmm, tasty, Burp ….
Hi Dave;
See, you found the way you like to handle your cash, some never do. I like western Union as it’s fast. The $14.50 every couple of months beats ATM charges. The BDO sounds like a winner plan,
I bought my wife a new Cell Phone last month, the store wanted to charge 10% for using my Visa Card. I smiled, told the manager I was happy that he was making so much money, he could let a P10,000.00 sale walkout the door. I went two doors down, got the same phone, better price (p400.00 less) and no 10% charge. Voteing with your feet.
Yep. There is no one method that is _the_ method. If I had a deal where I could move money that cheap, I’d be on it in a heartbeat. Because the “lag time” with depositing with dollars can be a real PITA.
What is this BDO. Bank of xxxxxxx
Thanks..(my question mark doesnt work)
Banco de Oro. It is part of the giant SM corporation … the same guys who run all the malls. Very nice folks, even though I have had my issues. I use them for two reasons .. my local branch is in a Mall as are many others, so I have full-service banking 7 days a week, 10 am to 10 pm, with a few holidays per year excepted. The other reason I use them is they opened accounts for me without a permanent residency visa and ACR-I card (Aien Certificate of Registration). Under the law you need not be a permanent resident to open a bank account, but many banks have been requiring it as part of their own rules.
Hi Dave;
The NFCU charges a small ATM fee, I use a Visa Debit card for my bi-monthly shopping the Subic/Clark Duty Free, ($1.00 fee). I use a LandBank ATM account for real cash and pay no fee when I use their machine (I allways do). I pay $14.50 (Special deal for NFCU Members) every two months to Western Union to bring in $3000.00, to the P.I., and wait for a good peso rate, and then deposit in that LandBank Account.. It would have to be a very important need for me to every use a U.S. card in a local ATM. I once had a USD account at a local bank until I found out they charged me $20.00 to accept my money. If one takes the time to look around they’ll find the best way for themself, I hope!
The cheapest way to get your US dollars ,ovedit to have a dollar account in a bank here in the Philippines with no deposit charge. BDO is one. I write a check on my US SSFCU account, deposit it in my Philippine BDO dollar account and the job is done … for the price of the check, itself. Of course the downside is, I wait out the nearly one month of holding time. There’s no _best_ way, but this is a _cheap_ way.
Dave,
Thanks, as always, for a lot of good info. I am also charged a lot more then the fees you detailed here when I use my US debit card to obtain pesos over there. This is a big concern for me because I will be retiring there in early 2011 and am not sure how I will handle this. That and the devaluation of the US dollar are a big concern.
Have you (or anyone) noticed that almost no businesses in the Phipippines accept American Express? Only Visa/MC. They should amend the corporate “Don’t leave home w/o it” slogan and add “unless you go overseas”.
Is there a charge when you withdraw funds from your US bank into pesos and is it possible to auto-deposit Social Sec deposits into this bank? This seems like a much less expensive way to go. I’ll have considerably more then $770 per month but every one of them counts. Also, is setting up this “US dollars” account difficult?
Many thanks,
Mike
American Express in all forms is essential worthless here. There’s agood reason for that. They are essential a worhtless company. I refused to accepot teir crap when I ran a business in the US as well. They charge the merchant double or even triple what iother card companies do, and they frequently _Don’t_Pay_ for months at a time. No small business can live with thier nonesense.
In general you don’t want to use ant US-issued credit cards here. except as an emergency. You will oay a 5% or 6% servoce charge and then your credit card company will sock you with goreign currecny and cross border fees as well.
Can you have social security payments direct deposited? Yes, in certain banks. This is a whole blog post in itself, in fact I have written many on this money movement issue … you might find the search feature or the archives fruitful territory.
Is it easy to open a US dollar account here? Yes. Or no. A great deal depends up what visa you will be using to stay here, as well as where you will be living.
Id there a charge when you withdraw from aUS bank in pesos? That’s the whole article I just wrote … usung my mastercard Debit card from my US credit card in a Philippines bank’s ATM mavhine and getting pesos out in my money-humgry little hand.
Thanks for writing
Hi John,
Yes I am fortunate there. Actually I don’t use a bank, per se, I use a federally chartered credit union … they essentially have all the features of a bank minus one important one … they are not a corporation, can’t issue shares of stock and therefore can’t get into debacles as most of the big name banks in the US did this past year. Seriously, you would thank that fine old names like Bank or America, etc., had suddenly been taken over by teenage street punks who were too dumb to get into a gang because they couldn’t remember the secret password. Since they were too ignorant for street crime, they chose government assisted Wall Street crime instead. But they know how to ask for money and even bonuses for failing to manage their depositor’s money as if they deserved it. Check the US financial disaster, I am sure you won’t find a single federal credit union sucking TARP dollars. And mine is profitable as well, as are the biggest names like Navy FCU, Pentagon FCU, Ent FCU, et al.
Now some people tell me some other US banks are better … there are some with no debit card fees at all … but always check the rate, a friend found that his ‘no fee’ debit card was costing several dollars a transaction because of the Peso rate they were giving him. There is no such thing as a free lunch.
Some people basically live on their US (or Canadian or Australian, etc.) ATM cards and it’s a workable way to go, if you know the true costs, but I’ve faced too many “out of service” ATM screens to depend on that as our only life line. The only reason I made that transaction this month is I use my Security Service FCU card every two months or so, just to keep it ‘alive’.
Wow, your bank only hits you for $1.00 US as an ATM fee? You are getting off lightly. My Canadian bank takes away $5.00 CDN for everyone of my withdrawals outside Canada plus they add on 2.5% bank commission to the exchange rate. No wonder Canadian banks are so solid – they have all our money!
Bank of Montreal charged me $1.60….the problem is though…if you try to pull out the equivalent of $500 in pesos, there is a low limit from the Philippines ATM machine..and to pull out the $500 in increments of $100 each costs money each time…so you may in fact have to pay at least $10 in fees…
John…change your Canadian bank…and no, that is not why the Canadian banks have done much better than most banks in other countries..its because Canada has got some real good regulators….so one point for the Canadian government on this one..
ATM limits are another reason I don’t live off ATM’s … although, as I have sid, many do live here that way. Where I live .. near metro Manila, many teller machines have a P25000 per day limit, and my US debit card has a $600 a day limit, so that multiple withdrawal charges problem doesn’t come up too often … but farther out in the provinces? YMMV
Thanks,
What is the least amount monthly income would you say a person now could live on? I am 57 now, Canadian guy and fed up and want to move to the Phil. Just been 3 times for 3 weeks duration in 2001 and 2003. In 2001 , I had a conversation with a Brit in Cagayan de Oro, who said 20,000P per month would be adequate. I would want my own motorcycle and afford the odd beer, and appears renting is much easier than ownership, I dont need a mansion but want something someowhat civilised. When I mean a person, I mean myself and a women Your advise would be welcome…just discovered this site but find it very helpful. Vancouver is a nice city but not affordable for many of us!
Brook, I have probably written 20 or more articles, same subject. Start here, perhaps:
), the _last_ thing you need to worry about. The most important question is, can you d can you live comfortably 7,000 miles from homeland and family.
http://philfaqs.com/retirement-planning/real-cost-of-living-philippines/
Be sure to read some of the “Relayed Articles” posts under each article as well. In general it is way, way cheaper than Canada … depending on where in Canada you are comparing to and what season of the year. But cost of living is, if I may submit (as I always do
I would probably be living here even if it cost more than where I was living in the US … becuase it is where my wife is happy, I have a huge ado-tive family who makes me feel wanted, and I love making my own road rules and waving to the cops as I implement my plan LoL. So people drive themselves to early heart attacks just over traffic manners or the ‘Filipino Time’ issue. Many times, money doesn’t matter.