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October 20, 2017
Currency Conversion
Currency conversion isn't really as simple as it seems. Like, let's start out with Pesos. And, depending on where you look, you'll probably see that the exchange rate is something like this:
1 USD = 19 Pesos
Now, just to keep things as confusing as possible, both the US Dollar and the Peso share the same currency symbol ($).
So, you think...."OK 1 dollar = 19 pesos. Got it." But it really is more complicated than that. Because, what you really need to be able to do, is convert from dollars to pesos in your head, but also be able to convert from pesos to dollars in your head. And, you need to do it on a moment's notice.
Because, often times, if you're buying something, they'll quote you a price in pesos and in US dollars. So, you've got to be able to do the math lightning fast in your head, and choose the lowest cost option.
For instance, you're on the street, and a vendor sells you a souvenir.
You say: Quanto es? (How much is it?)
Vendor: Cicno dollares. ($5 USD)
You say: Quanto es en pesos? (How much in Pesos?)
Vendor: Ochenta pesos. ($80 Pesos)
So now, you begin to see that it's a little more complicated than just a piece of paper that says 1 USD = 19 Pesos. Now, you've got to do some math in a hurry to get the best deal.
If we divide $80 Pesos / 19 = $4.21 USD.
So, it seems like the best deal is to pay in local currency and pay $80 Pesos ($4.21 USD) instead of $5.00 USD.
Generally, this is true. Generally, you're better off paying in the local currency.
But, I just wanted to point out that you're not just going to be converting USD to Pesos by multiplying by 19. You have to be able to convert Pesos to USD by dividing by 19, and you've got to be able to do it effortlessly, on a second's notice.
So, it's a good thing to practice converting from USD to Pesos, and from Pesos to USD, so that you can do it easily on a second's notice. Otherwise, you're going to get reamed.
As a general rule, you are usually better off paying in the local currency.
Also, the best exchange rates will always be from your bank (when you pull cash out of an ATM), or from your bank (when you charge something on your credit/debit card). This is when you get the best exchange rates.
The currency traders are about the lowest people on earth. They give you the worst deal you could ever imagine. They should be avoided like the plague.
However, if you're leaving a country, and you don't plan on ever returning, and you don't really have any reason to keep that country's local currency, then generally, what I do, is just hand them your cash and take what they give you. Like....if you're going from Mexico into Guatemala, there will be currency traders at the border. And, if you've got like $2,000 pesos, you may as well take whatever the currency traders give you (in USD), as you won't be able to spend the currency once you get back to the USA.
So, generally, if I have any local currency, I just have the currency traders convert it into the next country's currency, as you go from country to country. It helps, in this case, to know what the correct exchange rate is, because they will certainly lie to you and rip you off. But, as you cross from country to country like a monkey swinging through the trees, you sort of learn to keep track of the local currency conversion rates and try to get the best deal that you can as you cross border after border.
Posted by Rob Kiser on October 20, 2017 at 8:00 PM
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