Handling Money in the Philippines

When my plane first landed here in the Philippines it was around 1pm, midday.  By 3pm I had found my way to the nearest large Mall and found a legit Money Exchange office inside.  There I exchanged about two hundred dollars into Philippines Pesos.  Now I was ready to go get some items I needed for my new studio.  (pans, cleaning supplies, bug spray, etc.)   Since then I have made all my purchases here in Pesos on a daily basis.  It’s simply the easier way to do things and possibly avoid over-paying with Dollars, Francs, Yen or whatever you brought with you from home.

“Henry’s Rule of 40 and 2“

It’s slightly intoxicating at first to realize how much buying power you have.  You can get the latest Exchange Rates -Here- to see what your denomination gets you in Pesos.  (Or just use the hand converter along the right-side of this page.)   At this writing (Sept. 2012) the current exchange rate for $1 US Dollar is 41.66 Pesos.  Okay, let’s say you arrive here and for example’s sake exchanged $200 to Pesos.  This would yield you 8,331 Pesos!  Sounds like a lot of money, eh?  Well.. in buying power, it is, here in the Philippines.  To put it into perspective.. you are holding 8,331 Pesos; meanwhile the Monthly Salary for the average maid/housekeeper is roughly 2,300 Pesos.  So, in terms of ‘daily wages‘.. you are holding with $200 approximately 3 and half month’s wages for that housekeeper.

So now, you want to walk about town and buy stuff.  Everything is tagged in Pesos.  So, you pick up a package of sliced pineapple and it says “42 Pesos”.  This should be an easy one.. that equals roughly $1 Dollar.  Not a bad deal you figure so you put it in your basket.  Now, you stroll over to pick up a 1 pound bag of M&M’s and it says “280 Pesos”.  Is that a good deal?  Is that expensive?  Well, this is where I use what I call ‘The Rule of 40″.  Even though the exact exchange rate is 41.66 (today) it might slightly move up or down a few cents each day. So, to quickly figure out what I’m spending I simply divide by 40.  “280 divided by 40 equals 7”.  Okay.. so ‘ballpark figure’ this 1 pound bag of M&M’s is gonna cost the equivalent of $7 US Dollars.  Not a good deal unless you really, really gotta have those M&M’s.  As a general rule, if it’s imported from the US, it’s expensive.  Buy the local brands.. much cheaper.  I use the Rule of 40 mostly for anything I think is $5 or more.

Let’s go to bigger ticket items now and use the ‘Rule of 40‘.  You are looking at buying a small table with two chairs and it lists for 2,000 Pesos.  Hmm.. is that a deal or not?  Let’s see.. 2,000 divided by 40 equals 50.  So.. $50 for the table and two chairs.  If you are shopping at the Mall, expect that you are paying an inflated price.  They know most foreigners feel ‘at home’ in a mall and so the prices are somewhat inflated.  A complete sliced pineapple at the mall grocery store costs me up to 60 Pesos for just one.  Meanwhile, at the open marketplace I can get 3 complete/sliced pineapples for 90 Pesos.  Now, you might be thinking, “It’s only 30 Pesos, big deal.  Whatever.”  But that mall pineapple is costing you $1.50 for one, so to get three it would cost you $4.50.  But buying the same 3 pineapples at the marketplace only costs you $2.16.  That’s less than half the cost.  Clothes, food, appliances.. some of it you can only find at the mall but if you can find it elsewhere it’s usually cheaper.

For running around town, especially on the street.. dealing with Jeepneys.. street vendors, etc. you will be spending very small amounts so the Rule of 40 doesn’t work very well.  This is why I simply do a quick conversion by using “The Rule of 2” for small purchases.  As it turns out, with $1 US Dollar equal to 41.66 Pesos.. that means that, in reverse, each Peso is worth.. 2 cents.  So, when you ask the lady behind the bbq grill how much for a chicken skewer and she says “12 Pesos”.. that is equivalent to “24 cents”.  Simple, eh?  The Tricycle ride you pay 25 Pesos for is roughly 50 cents.  The bottled water listed as 18 Pesos.. 36 cents.  You get the idea.

Avoid Over-Paying

So now that you’ve got the hang of doing some ball-park conversions on the spot (you can always use your cell-phone calculator if you suck at math).. you’re ready to jump in a Tricycle and see what’s on the other side of town.  I love riding tricycles, they’re fun.. almost like an amusement ride really the way they weave in and out of traffic in a bumpy fashion.. kinda like the ‘Indiana Jones Ride‘ at Disneyland.  But because tricycles do not have a meter, the way cabs do, they are notorious for over-charging.  Some cabs will even try this but telling them, “No special price.. just use the meter.” usually settles it.  They don’t want to get reported and lose their license to operate for 2 months so they don’t give much of an argument and turn on the meter.  But tricycles, it should only cost me about 20 Pesos (max) to get from the mall to the ferry port.. about 3 miles.  But it’s always a bartering session with these guys and I usually end up paying 50 or 60 Pesos.  Some call it the “Skin Tax” but.. I’m not White so it’s more like a ‘Kano’ or ‘Foreigner’ Tax if you ask me.

Apparently, from what I’ve heard from the ‘old-timers’ here who actually speak the local dialect, they have no problem getting the actual 15 Peso rate per zone.  It’s supposed to be posted inside each tricycle but even when it is the drivers prefer to ignore it.. unless you speak the local dialect and realize you’re not fresh off the plane without a clue.  I really hate to get into a 2 minute bartering session so I’ll often just say, “Thanks.” and move on to the next Tricycle til I get a reasonable price.

Another way to easily over-spend is by forgetting that you’re dealing with PESOS.  As you look in your wallet deciding how much to spend for dinner.. you see three 100 Peso bills.  Mentally, you need to get out of the habit of thinking, “Oh, I’ve got three $1 bills.”  It says “100” on it so it’s easy to think of it as one dollar.  But in actuality that 100 Peso bill is worth $2.40.  The 500 Peso bill is NOT a $5 bill.. it is worth $12.00.  And that 1000 Peso bill is NOT a ten-dollar bill.. it is worth $24.00.

All of this must become second-nature so don’t be surprised if it takes you a few weeks to get into this habit of seeing your Peso bills differently.  One guy wrote that he stopped for a 200 peso meal (about $5) and left a 500 Peso bill behind to cover that and the tip.  He didn’t realize until later that he actually paid $5 for the meal and another $7 for the Tip.  (At least the waitress was likely pleasantly surprised.)

And all of this is ESPECIALLY important if you plan on doing a night of drinking.  I don’t know about you, but my math skills seem to evaporate after four margaritas.  Even though you look at the menu or receipt and ‘see’, “Hey!.. only 500 Pesos for a pitcher of margaritas!  Bartender!!.. another pitcher, por favor.”  Well, those pitcher’s are not $5.. they are $12 each.  But your bank statement or wallet will let you know all about that the next morning.

“You’re holding up the line!”

One last comment on spending and converting while at the grocery store.  As it is the lines at the grocery store move excruciatingly SLOW.  There will be 20 registers, all open, that’s not the problem.  The hold-up is that they scan everything and if the bar-code doesn’t read properly they enter the 15 or so digits manually.  After MUCH time to stand and observe this procedure I’ve come to the conclusion that 1 in every 6 items does not scan correctly.  There may only be four people in front of me, each with less than 15 items.. and still I’ll stand in line for 20 to 30 minutes.  It’s like the long lines during Christmas time.. but without the holiday music.

So.. do NOT be one of these guys who holds up the damn line over a dispute of 23 Pesos on a 1,500 Peso load of groceries.  We’re talking about 46 cents for crying out loud.  It’s NOT $23.. it’s 46 cents and my life is worth more than 46 cents than to have it shortened by standing in line as someone berates the nice (usually hot-looking) cashier girl over 23 Pesos.  Just.. let it go.  Be happy.  And definitely.. get out of the line so I can enjoy my pineapple.

As for Peso COIN money.. there are mainly three to keep track of.  The silver-colored coins are the 1 Peso Coin.  Worth about 2 cents.  I keep those in a separate jar as they are kinda useless.  Often I’ll just tell the cashier to “keep it” if it’s just a few single Pesos.  The all-bronze colored one is kinda thick, about the size of a quarter and is worth 5 Pesos (about 10 cents).  And the slightly thinner coin is Silver on the edge with a Bronze colored center.. this is worth 10 Pesos (about 20 cents).  When I leave the house I usually grab some 5 and 10 Pesos to bring along since those are useful for Tricycle rides, baked goods, hanging rice, skewers.. inexpensive stuff so I don’t have to break a larger bill.

Safety First..

On Mactan it’s a fairly small community and so far (knock on bamboo) I’ve had zero problems with anyone acting ‘shady’.  But, people are people and there’s always some whack-job in the bunch so.. all that stuff you know you should do when getting money at the ATM?.. be on due diligence here.  ESPECIALLY if you are in the ‘big city’ areas and at an ATM on the street.  Personally, I only use the ATM’s at the Mall where there is a security guard within 20 feet.  I never have a problem.  If I need money, I don’t get it and then walk home alone.  I get it first, walk into the mall and go home later.

Another little tip I employed during my many visits to the border towns of Mexico.. have a ‘high’ and ‘low’ pocket system in place.  By keeping your small bills in one pocket and your large bills in another (or tucked in a wallet pocket).. you don’t expose your wad when all you need is a few pesos for the tricycle at night or at the register just before you’re about to  walk home.  It’s standard protocol for traveling.  If I take out an especially large sum for immigration fees or whatever, I hide it at home until I need it.  No need to be out walking the streets with $200 US in my pocket.  That’s four month’s pay (or more) to someone else.  So.. stay alert, think ahead and be safe with your money.

Getting A Philippines Bank Account:

If you only plan to be here for a few weeks you can skip this part about having a bank account.  But if you plan to stay even if for just a few months I highly suggest you get a Philippine bank account so you aren’t hoarding money in your apartment, hidden away in your sock drawer because.. ‘nobody would ever look there‘.  Yah, right.  There are several major banks here that provide ATMs at most major malls.  This is key so that as you bounce around from place to place you can always access your money a little at a time.  Or you can use your Philippine debit card.  What you do NOT want to do is get in the habit of using your overseas credit or debit card from your home-country or you will find that you’ve likely been hit with all kinds of overseas charges for every withdrawal.  And that sucks.  So, be sure to get a Philippine bank account for easy access to your money when you need it.  When you are ready to open your account, you will need the deposit money.. your passport, address in the Philippines and (2) 2×2 photos of yourself.  You can get the photos done at the mall very cheaply.

You’ll want to make sure your Philippine bank is part of either the MegaLink or BancNet network.  This will allow you to get your money from the most ATM’s possible.  As for banks, the image here shows the major ones.  I spoke with my girlfriend before getting an account.  She has accounts in at least five banks for business purposes and her recommendation was Banco de Oro (BDO).  I’ve been with them and I believe it was the right choice.  Every major mall I go to has either a BDO branch or ATM machine inside.  The smaller malls have Bank of the Philippines (BPI) branches or ATM’s and since both are on the MegaLink network I can use their ATM’s without any surcharge to my BDO account.  (And yes, the ATM’s operate in English.)

When you go to the bank you will have several decisions to make.  Most specifically, whether you want checking, savings or both.  Personally I have done just fine with only a savings account and use my debit card.  A $100 (USD) minimum balance is required if I remember correctly.  Your second choice is whether to maintain a ‘Peso’ account or a ‘Dollar’ account.  I keep a Dollar account so I easily know my balance without converting.  I can also access my account online as well as add ‘load’ to my cellphone or internet card via my BDO account online.  When I go to the ATM’s, it only distributes Pesos, which is fine since that’s all I use to make my purchases here.  I don’t need ‘dollars’.. it only complicates things.

Now, you might hear a bit of debate on newsgroups about not having an overseas account because it “complicates your taxes” and such.  From what I’ve seen from the IRS site, this applies if you have over $10,000 total in your account and is a short form added to your usual taxes.  So many ex-pats have gone years without mentioning it on their taxes is what I gather.  The penalties can be up to $100,000, but that is dependent upon how much you were ‘hiding’ in your overseas account. However, if you don’t want to wonder or worry about it you can get the required Tax Form -Here- and you can read a FAQs page about it -HERE-.  You can also read a very good article on it here, at the Wall Street Journal.  The debate over this has gotten so tense that several have even stated they preferred to renounce their U.S. citizenship rather than be taxed on money they earn overseas.  But most ex-pats rely on their social security from the U.S., so such drastic measures only apply to those with highly profitable businesses operating in the Philippines.  For them, they not only have to supply information on their own accounts, but also any account used jointly with a Filipino business partner.  Many times the Filipino partner does not want to be included in any way  to the American IRS (I don’t blame them) and that limits partnership opportunities.  In addition some smaller Philippine banks won’t give accounts to foreigners because they themselves then have to report to the IRS.  Bottom line, it’s up to you to decide your comfort level with this, whether to file the IRS notice or not.

Now, I’m not recommending this of course, but.. just hypothetically speaking;  If you were to have access to a Philippine bank account which did not have your name on it because it belonged to oh.. someone like, your trusted fiance’ or girlfriend, well then the paper trail to you doesn’t even exist.  But, that would be skirting the IRS requirements of course and I’m not suggesting that.  Besides, who do you even know in the Philippines that you trust enough to put your money into their account, knowing that they would not screw you over and keep the money?  Technically, you would have no ‘signature authority‘ over the account so, it could be said that you wouldn’t have to report it anyway.  Just something to think about.. hypothetically.

Transferring Your Money

There are several ways to move your money from your home-country account to your Philippines account.  First check with your own online banking to see which Philippine banks your current bank does online transfers with.  Also check how much the charge is for making the transfer.  One method some ex-pats use is via PayPal as an intermediary for money-in that is transferred to either their Philippine bank or PayPal debit card.  There might be fees for usage so, look out for this method.  What I have found, after looking into Wells Fargo and BDO is that the easiest, cheapest way is to do the transfer online via Xoom.com .  They charge about $7 for a direct deposit to your BDO or other Philippine account and it only takes about 45 minutes.  Many people use Western Union or Sigue but that requires someone in your home-country doing some footwork.  With Xoom.com, you do the whole thing yourself online.  Easy-peasy.

Getting used to using a foreign currency really doesn’t take much adjustment.  Just double-check what you’re paying and use a calculator if you need to and you’ll be fine.  As I mentioned before, the best deals are out on the street and most especially in or near the Province areas.  In the bigger cities, you’ll still get a good exchange on your money.. you just have to pay more attention and be willing to haggle the price more often.  While it’s cheaper to cook at home, usually you can get something for lunch at less than $3.  The Philippines is a great deal over-all.  From Super Malls to beautiful beaches and the simple province life.. it’s all here to enjoy at a great exchange on your money.

Henry V.
www.lifegoeson.net