¨Money often costs too much.¨
Ralph Waldo Emerson
Why it is Usually NOT a Good Idea to Use US Dollars While Traveling Abroad
I am always surprised how often I find tourists (even some who are not Americans) who believe that vendors overseas prefer US dollars over the local currency. They assume since the US dollar is a strong currency that everyone wants the US dollar. (A strong currency is one that increases in value over time versus the local currency).
However, this is usually a faulty assumption for a couple of reasons.
- The US dollar is sometimes weak. (Throughout most of the George W Bush administration, most foreign currencies, even the Mexican peso, were strong against the US dollar).
- The majority of vendors do not even accept US currency because the vendors:
- Do not have enough US dollars to get a reasonable exchange rate; and
- Have to take the time and effort to exchange the dollars into their currency.
When Can You Use US Dollars While Traveling Abroad?
As a result, most travelers can only expect that vendors will even take US dollars when they visit cities:
- On the US-Canadian and US-Mexican border,
- In Mexico that have a lot of American tourists like Cancun or Puerto Vallarta or
- With a large number of cruise ship passengers (and then only when the ship is in port).
Even in these cases, it is rare you will receive a reasonable exchange rate from vendors. Usually, it will cost you 10 to 15% more to use US dollars than if you used the local currency.
Let’s look at why it is usually a bad idea to use US Dollars even where they are accepted. Assume, for example, that you use US Dollars in most Mexican beach resorts.
- Most vendors merely convert the prices using an exchange rate that is easy to calculate without a calculator. For example, for several years, there were 12 Mexican pesos to a US dollar. Most vendors quoted prices in US dollars based on 10 pesos:1 dollar exchange.
- In other words, if you wanted to buy something that cost 120 pesos, the vendor would ask you for $12 US dollars. (120 pesos/10 pesos).
- However, if you paid them with pesos, you would have only paid around $10 for the same item (120 pesos/12 pesos to a dollar).
Where is Using US Dollars a Good Idea?
I seldom use US dollars outside of the country.
That said, there are places where US dollars are useful, including countries where:
- Locals use US dollars (like Costa Rica and Haiti) for many large transactions;
- The US dollar is the official currency (El Salvador, Panama, Zimbabwe, Ecuador and some islands in the Caribbean);
- The exchange rate is pegged to US currency. (In Belize and Barbados their currency is worth 2 for a US dollar);
- The local currency is fragile (Cambodia, Liberia, Nicaragua, Myanmar, and Somalia) or is temporarily weak (I found this to be the case in Argentina in 2014); and
- It can be hard to find functional ATMs (most of sub-Saharan Africa, some former Soviet republics, and Haiti). (Note: You can find more on this subject in travelers’ forums like Lonely Planet’s Thorn Tree forum) .
I also often use dollars in ports on cruise ships because I:
- Usually do not spend a lot of money in ports, and as a result, the fees are relatively high for a small ATM withdrawal;
- Do not want to waste time finding an ATM;
- Can usually easily find vendors that accept credit cards and dollars; and
- want to avoid getting stuck with a lot of foreign currency after the ship sails away for the next port.