Currency in North America

Canada: The Canadian dollar (CAD) is abbreviated by $ or C$.  It is divided into 100 cents. Some businesses near the US–Canadian border and in big cities accept payment in US dollars, with change given in Canadian dollars, but their exchange rates are high, it is better to use a credit card or get cash exchanged elsewhere.

The most common ATMs in Canada are Cirrus, Plus, Maestro and Star. Most public places like airports, bus, train and ferry stations have ATMs. However, if you are going more countryside like Newfoundland get cash beforehand.

MasterCard, Visa and American Express are widely accepted in Canada, except in remote, rural communities where they want cash for most things. You will need a credit card in order to book a room or rent a car for a security deposit.

Canada’s federal goods and services tax (GST) charges 6% on most everything.  People call it the ‘gouge and screw’ or ‘grab and steal’ tax.  Most provinces also charge a provincial sales tax (PST). New Bruswick, Nova Scotia, Newfoundland and Labrador combine the GST and PST to = (HST) Harmonized sales tax of a whopping 14%.

If you’ve booked your accommodations in conjunction with another service and it appears all on one bill you should be eligible to get 50% of the tax refunded from your accommodations. The GST/HST Refund Application for Tour Packages form available from the Canada Revenue Agency.

Mexico: The peso ($, MXN) is the currency of Mexico. The peso is subdivided into 100 centavos. The name was originally used in reference to pesos oro (gold weights) or pesos plata (silver weights). Peso in English means weight.

If your bills are torn, missing a corner, scribbled on or worn it can be difficult to exchange or use them especially will small businesses.  Make sure if you receive something like this that you demand a new one bill.  Carry small bills.

US coin money has no value in Mexico and will not be accepted, but paper bills are accepted and sometimes preferred.  If you pay will US bills any change you receive back will be in pesos and you won’t get the best exchange rate.

The exchange rate between pesos and US dollars use to be consistently 10:1 until 2010.  Now the exchange rate is 13:1.  A lot of businesses still try to convert at the rate of 10:1 which gives them a profit.  An easy way to do the math for 13:1 is multiply the pesos by 7 then divide by 100 = dollar cost within a few cents.  80 pesos x 7 = 560 divide by 100 = $5.60 US for easy head math.  Or 80 pesos divide by 13 =$6.15 for actual math.  Don’t let them try and charge you the old rate of $8 US dollars.

Some banks which are affiliated with Mexican banks don’t charge ATM fees, or a minimal one. If you bank with Citibank in the US, the Mexico affiliate is Banamex.  If you bank with Bank of America the Mexican affiliate is Santander.  For Canadians, Scotia Bank the Mexican affiliate is HSBC.

ATM cards can only be used to withdraw cash from ATMs.  If you were to lose one, without the pin number it is useless to you or a stranger.  Some debit cards can also be used as a credit card (although not available to Canadians as of yet).  If this were to be lost or stolen you would need to cancel the card.

VISA or MasterCard are accepted in a lot of businesses, but not all of them.  If the vender accepts American Express the will most likely charge you an extra fee.  Som places don’t accept credit  ‘Lo Sentimos – No Tarjetas de Crédito’.

United States: The United States dollar, U.S. dollar or American dollar is the official currency of the United States of America.  It is abbreviated by $ or US$ (USD).  It is also divided into 100 smaller unites called cents.  It is the currency most used in international transactions according to Wikipedia and is one of the world’s dominate reserve currencies.

How to Exchange Currency:

  1. Decide how much money you want to exchange.  Remember you don’t have to exchange all your money at once.
  2. Find the current currency exchange rate.  To find your currency rate, start with the currency you hold in hand, not the foreign currency.  The most up to date rates you will find is on the internet, but you can also look in a local paper.  Don’t always trust the exchange booths to give you the real exchange rate.  If you are online, do a search for a currency calculator.  The currency you hold will be at the value of 1.  The exchange rate is the value next to the currency you are exchanging (the foreign currency).
  3. Calculate how much money you will have after the exchange.  Multiply the money you have on hand by the exchange rate to get the money you will have after the exchange.

a=money you have before the exchange

b=the exchange rate

c= money you will have after the exchange.

a*b=c  (money before the exchange x the exchange rate = money after the exchange)

a=c/b (money before the exchange = money after the exchange / the exchange rate)

For example:  You want to convert US dollars to British Pounds.  As of the revision, 1USD = .65446 GBP.  Your exchange rate = .65446.  If you want to exchange 500 USD, then 500 USD x .65446 = 327.23 GBP.  That is how much money you will have in pounds after the exchange assuming you got a fair rate of exchange.  Or if you have a smart phone and can do the calculation right before the exchange.  Just enter 500 USD into the currency calculator and you will get 327.23GBP.

Work backwards: If you want to buy something worth 800 Euros and want to know how much that is in your currency (for example: USD) then first find the exchange rate.  Remember to enter in your currency at 1 and you will see that the Euro is .77598 (rate is from the time of revision).   Calculate  800 EUR / .77598 =  1,030.96 USD.

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Currency in General:

Exchange rates (or foreign exchange rates) between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency.

Floating exchange rates are determined in the foreign exchange market by supply and demand.  Currencies trade 24 hours a day (except the market closes for a while on the weekends), this means that currencies can fluctuate often. Valuations are determined by the currency flowing in and out of a country and interest rates.  If there is a high demand, its value will usually increase.  Demand for a currency is created by tourism, international trade, speculation, risk factors, mergers and acquisitions and other economic factors.

A pegged exchange rate or fixed system is when a country’s currency doesn’t fluctuate day to day.  They often peg their currency to another currency which is usually the US dollar. Their government has to work at keeping their rate stable.  They have to hold large reserves of foreign currency to mitigate the supply and demand.  Developing countries may use this system to prevent high inflation. Fixed systems can lead to black market exchangers who go against their government and trade on the side according to the market’s supply and demand.  If the government doesn’t take care of the pegged rate, they may end up with a worthless currency.

The buying rate is the rate at which money dealers will buy foreign currency from you (the currency you came with), and the selling rate is the rate at which they will sell the currency to you (they sell a currency that is foreign to them back to you, aka your local currency). The quoted rates will have an allowance for a dealer’s margin (or profit) in trading.  In other words instead of quoting the real exchange rate, the dealer will charge you for his fee by quoting you in a way that is less favorable to you.  If the dealer is quoting you with the real exchange rate, then he may add on a flat fee or a % for his commission.  Sometimes they do this without telling you, so always ask what their fees or commission is before the exchange.

Different rates may be quoted for exchanging cash, using a traveler’s cheques for the exchange, or exchanging via debit/credit cards.  They will usually charge you a higher fee for the traveler’s cheques because it takes more time, however some prefer it over cash since cash is easier to forge.  Sometimes a credit card transaction may cost you extra because they may be charged by the credit card company.   Instead of charging your credit card at an exchange rate, get cash out with the ATM and avoid the middle man.

Exchange rates are often expressed in terms of U.S. dollars. The U.S. dollar and the Euro make up about 50% of all currency exchange transactions worldwide.  The British pounds, Canadian dollars, Australian dollars, and Japanese yen together with the US dollar and Euro make up about 80% of all trading.

Do Your Research: Call your bank and your credit card provider and ask them what foreign transaction fees are associated with charging your card in another currency.  Ask them what fees are associated with withdrawing a different currency from an ATM.  Ask them what fees are associated with using an ATM not affiliated with your bank. Some credit card companies and banks charge higher exchange rates than others.  Make sure you also notify them that you will be traveling abroad so they don’t put a hold on your account for suspicious activity.  American Express no longer requires you to notify them, but make sure you notify all other credit and debit card providers.

Be Prepared.  If you are in some countries you may find that most people don’t even accept credit cards, so be prepared and take some cash, one or two credit cards and one debit card.  You don’t want to carry too much cash in case it is lost or stolen.  Try to separate the cash, so it isn’t all in one wallet.  If you don’t have enough cash you may be stuck paying really high exchange rates.

Make sure you know your pin numbers before you leave.  Being home you may not use the ATM very often to get cash.  If you forget a pin number and you use all your cash because the country you go to wants cash for everything like restaurants that you didn’t really think about, you may have a hard time getting cash.  Not having a pin number you can’t withdraw cash from the ATM.  If you don’t bank with any of the banks that are available in the country you are visiting you may find yourself needing cash, but not being able to get it.  Don’t bother calling the bank or credit card provider because they don’t have access to your pin numbers.  You may be able to get money wired to you through a Western Union but if the country doesn’t have a Western Union or if it is hours away that doesn’t do you any good.  Last resort you may get your hotel to charge extra on your room and give you some cash back, however you will most likely be charged a hefty 10% fee and most likely you can only withdraw a couple hundred dollars per day.

Know the Current Exchange Rate: Your best defense against getting a bad exchange rate deal is to know what the exchange rate is.  It can fluctuate several times a day, so check it before you leave home and while you are there.  You can find it in local newspapers or online. Don’t trust the street kiosks to give you the correct rates.

Credit/Debit Cards: Charging your credit card (or debit card) to purchase something with another currency generally is the best exchange rate.  Your credit card will charge you a fee if you charge it to another currency.  American Express tends to be more expensive than Visa or MasterCard.  Call them to check their rates.  Not only will the credit card company charge a fee, but depending on where you go, the merchant may also charge a transaction fee for use of credit.  Out of the US, a lot of places may charge a fee for American Express, but not Visa or MasterCard.   Always ask the merchant before you charge something.  If you are charged a high transaction fee and a merchant fee, then getting cash from an ATM is the better way to go.

ATMs: Getting cash from an ATM with your debit card will charge you the same exchange rate that the banks charge each other, without the middleman adding extra exchange fees.  However the ATM and your credit card provider will usually charge you a fee for using the ATM.  Sometimes it is a flat fee every time you use it, and other times it is a percentage of how much you withdraw.  Usually the more you withdraw, the better the rate you get.

Make sure you don’t use your credit card to get cash withdrawals from an ATM (cash advance). You will be charged the ATM fee, the exchange rate, and a high interest rate on the cash withdrawn.  It doesn’t give you the interest free for a month leeway to pay it back like it would if you made a charge on your card.  Use your debit card instead so you aren’t charged the interest on the cash withdrawn.

Only take out the cash you need for the day or the next day if you will be around a lot of ATMs.  You don’t want too much cash in case it were to get lost or stolen.  You may pay a little more in fees, but you won’t be stuck with excess when you are headed home. If you end up with excess cash, you will most likely want to change it back into your own currency.  This just means that you not only paid for the exchange rate (plus fees) to change it once, but twice.  And you are more likely to be exchanging this last minute at the airport where their fees are way too high.

Remember if you use an ATM not affiliated with your bank you will be charged a fee from your bank and from that ATM provider. Some ATMs will try to charge US$5 per transaction, in this case go to another ATM.

ATMs can be targeted for crime.  Cover your credit card when inserting it into the ATM in case a hidden camera is around.  If the ATM eats your card see if you can pull it out with tweezers, if it is connected to a bank see if they can get it out for you, otherwise cancel the card.  Make copies of all your cards, and leave some at home in case you need to get the numbers to cancel in a hurry.  Always stuff the cash in your wallet as soon as you can and try not to count it in public.

Banks: If you need to get cash and you cannot find an ATM, go to a bank or post office to withdraw or exchange currency.  You have to go during business hours and they can take longer especially if you don’t bank there, however you will save on the exchange rate.  Banks can offer different rates, so shop around.

Travelers Cheques are becoming less and less popular.  The benefits to them are that if there were lost or stolen, you can cancel them like you would a check and get your money back.  The downside is some places out of the country won’t accept them.  You may need to go to a local bank to get cash it, and you may be charged a fee. It may also take a while for the transaction, probably more time than you want to spend in a bank while on vacation.

You can get American Express Travelers Cheques and at the American Express Offices you can cash them free of charge.  Make sure that you look at their directory so you know if they will have an office near where you will be going.  They are difficult to cash anywhere else.

Exchange Kiosks: Avoid the exchange kiosks and booths you see at the airport, train stations and around tourist attractions including hostels and hotels.  They are usually open after banking hours which is convenient but you will pay for the convenience in their higher exchange rates.  Some may say they don’t charge a foreign transaction fee, however the exchange rates will be more expensive, more than usual in replace of the transaction fee.  You pay the fee one way or another.

In some cases, usually in big cities away from transportation, smaller kiosks will offer better rates than banks.  Shop around and compare rates.

Bargain, Bargain, Bargain: You won’t be able to negotiate exchange rates with banks, but if you are stuck with an exchange kiosk or small vendor you may be able to haggle a better exchange rate.  This is why it is so important to know the current exchange rate.  Your chances are better if there is more than one vendor in the area.  Shop around as well; don’t settle on the first one you see.

Know the ‘Real’ Rate or Net Amount: Sometimes the posted rate will be the ‘sell’ rate.  When you are exchanging money into the local currency you will be charged the ‘buy’ rate.  Or sometimes the rate posted is only applicable to very large or very small transactions.  Watch out for hidden flat fees that are added to each transaction.  Watch out for extra commissions based on the amount of the transaction as well.  You can ask them the net amount (amount you receive after all fees are paid) you will receive before you commit, shop it around then settle on the best one.

Using a Foreign Currency: Some places may accept another currency as well as their local currency.  Some places like Mexico may prefer the US dollar over their local currency. If you use another currency make sure you know the current exchange rate so you don’t pay too much.  This happens a lot when you get your change back in the local currency; they just exchanged your money for a fee without even telling you.

More Tips:

A calculator on your phone, or a hand held one may come in handy with exchange rates, and what is even better is an iPhone with internet access if you have it available.  In case you don’t have internet, it is smart to know how to convert the exchange rates in your head, on paper, and with a calculator.

There are apps available for currency converter calculators or exchange rate calculators, but you will still need the internet for it to be current.  This way you won’t have to do a search for it every time you use it and will save you a step.

Be careful with rounding the exchange rates even to a tenth because if you are trading a lot of money it can add up quickly.

Be very suspicious of someone offering you lower rates without a booth (or even with an exchange booth) especially if they are approaching you.  They may give you counterfeit money, rob you, short change you, or simply being charging way too much.  Most countries require a license for currency exchangers.  They should have a certificate or government stamp of approval. If it seems too good to be true, it probably is.

When figuring out the exchange rate, always start with your currency first (the currency you hold in your hand not the currency you want to exchange it for).  The lower the exchange rate is the less it is favorable to you.  For example:  If you have 1,000 USD and the exchange rate is .5555 then you will have 555.5 in the foreign currency.  Compared to if the exchange rate is 1.333, than you would have 1,333 in the foreign currency.

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