¨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 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 increases in value over time versus the local currency).
However, Fifty-Plus Nomads should use local currency for a couple of reasons.
- The dollar is sometimes weak. (Throughout most of the George W Bush administration, most foreign currencies, even the Mexican peso, were strong against the U.S. 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.
- Have to take the time and effort to exchange the dollars into their currency.
- Most merchants can’t save dollars until they have enough to get a favorable exchange rate or to benefit from the strength of the US Dollar. Large hotels in places like Cancun love US dollars because they can save the dollars until they can get the most favorable exchange rate. (They also use the dynamic currency exchange rate for tourists, which means you lose 7% on every transaction).
- Many locals are not used to US Dollars. They can’t spend dollars in local stores, nor can they put the dollars in a local bank account.
- Most importantly, you will not get a favorable currency exchange rate from most merchants abroad. It is generally better, instead, to use credit cards and ATM machines.
When Can You Use US Dollars While Traveling Outside the US?
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.
- 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 10-15% 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 (like Puerto Vallarta or Cancun).
- 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).
- 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.
- Want to avoid getting stuck with a lot of foreign currency after the ship sails away for the next port.
Some Additional Money-Related Posts
- Lessons From An Express Kidnapping in Puebla, MexicoIn January 2020, I was a victim of an express kidnapping in Puebla, Mexico. I discuss what happened to me and what I learned about travel safety from the incident.
- How Many Taxes, Fees, and Other Charges Do Consumers Pay For Airfare, Hotels, and Other Travel Services?The amount and number of travel taxes, fees, and other charges added to your bill will probably surprise you. Many are hidden and like everything else, taxes keep going up.
- The 3 Reasons Travel Prices Are So Radically Different than Other Products: Perishability, Capital Costs, and Yield ManagementHave you ever wondered why travel products seem to be priced so crazily? Learn the three economic factors that contribute to the pricing of travel products: perishability, high capital costs, and yield management.
- Round the World Tickets 101: Are They Worth the Trouble or Not?Once in my life, I bought a round the world ticket. My experience was favorable but I think the number of times these tickets are useful for most travelers is fairly limited for the reasons outlined in this post.
- Paying More than Locals As a Foreigner: How to Deal with and Avoid ProblemsWhen I was younger being charged more for things than locals used to piss me off. Now I simply acknowledge it as part of traveling in third-world countries. I find the less it bothers me the less I attract aggressive vendors, too.
- Money Safety Tips While TravelingThis post offers a few simple tips to avoid problems with travel safety and money issues while traveling.
- Pros and Cons of Using US Dollars While Traveling AbroadOne of the most pervasive myths about traveling is that everybody wants the US dollar. The fact is most people do not want the dollar. Most of the time when they do want the dollar, you will lose money on the transaction. The few times that people do want the dollar are discussed in this post as well.
- Foreign Exchange Fees: A Guide to Help You Avoid Paying Them UnnecessarilyUnless you are careful, you will spend 7% more on foreign exchange conversion fees than you should. By making a few simple changes, I avoided these fees and saved myself $18,000 during my five-year, round-the-world journey.
- ATM and Credit Card Tips: How to Keep Money Problems from Ruining Your Fifty-Plus Nomad LifestyleHow to avoid problems finding ATMs, using ATMs and credit cards, and making large ATM withdrawals abroad.
- A Guide to Currency Exchange, ATM, and Credit Card Fees Abroad: How to Avoid Getting Ripped OffFind out several useful tips to avoid paying unnecessary foreign currency exchange, ATM, and credit card fees while traveling around the world or living abroad.
- Using Foreign Banknotes and Coins: 3 Tips to Avoid Problems3 simple tips for travelers and expats to avoid problems with foreign coins and banknotes.
- Top 7 Budget Travel Food TipsSome of my favorite food-related experiences were also very inexpensive. Sometimes, modest hole in the walls restaurants, kiosks, and street carts can feature some of the country’s best chefs.