Dollars AND Soles - Why?

Answers to your qestions about moving to, and living in, Peru,
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StephenUK
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Dollars AND Soles - Why?

Postby StephenUK » Wed Dec 02, 2015 4:28 pm

I still don't understand why we have to use 2 currencies in Perú or which is the best to use.

Some hotels, tours, shops etc., ask for dollars and others for Soles. If we have a choice, which is usually best/cheapest, please?

Why do we have to use US dollars when Perú has its own currency? Because I don't know, it doesn't make any sense to me - especially if there is no US connection with the individual or company.

Any ideas, please? Thanks.


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sbaustin
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Re: Dollars AND Soles - Why?

Postby sbaustin » Wed Dec 02, 2015 4:46 pm

Your question is a personal question based on the currency you earn in and the amount of effort you want to go into looking for the best rate on the street.
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StephenUK
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Re: Dollars AND Soles - Why?

Postby StephenUK » Wed Dec 02, 2015 4:54 pm

Thanks, but why is it personal? Sorry, I don't understand. Perhaps I should be more clear. I earn in GBP in the UK and we visit relatives in Perú and will possibly live in Perú, or at least take long visits when I retire in a few years.

I just don't understand why I must take US Dollars and Soles when we go. It is difficult to know how to budget the mix of dollars and soles we must exchange to take with us.

Hopefully this is clearer, but thanks again.
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Re: Dollars AND Soles - Why?

Postby sbaustin » Wed Dec 02, 2015 5:54 pm

StephenUK wrote:I still don't understand why we have to use 2 currencies in Perú or which is the best to use.

Some hotels, tours, shops etc., ask for dollars and others for Soles. If we have a choice, which is usually best/cheapest, please?

Why do we have to use US dollars when Perú has its own currency? Because I don't know, it doesn't make any sense to me - especially if there is no US connection with the individual or company.

Any ideas, please? Thanks.


I'm guessing it has to do with the stability of the dollar vs the sole historically. You'll find rent a lot of times in dollars. You'll find places give you a price in dollars but will convert it to soles when you pay especially with a credit card. It is what it is as they say.
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Alan
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Re: Dollars AND Soles - Why?

Postby Alan » Wed Dec 02, 2015 8:23 pm

Hi Stephen,

The dual currency system is a legacy of the hyper inflation of the late 1980´s. Even now people don´t entirely trust the Nuevo Sol ( "nuevo" because it replaced an earlier Sol) and hold savings, or take credit, in dollars. This is especially true among older people who have vivid memories of that period.

You should be able to buy everything you need in Soles here, but like Sbaustin says, the exception is payment for rent (in the higher end districts), and house and car purchases -- the so-called "big ticket" items.

I think the best advice in your case is to bring pound sterling and exchange it here for soles, or dollars, as required, or simply withdraw either currency from the many dual-currency ATM´s.

BTW, Peru is not the only country with unofficial dual currencies, Poland, Israel, Turkey are others important economies that also need to juggle, though to a lesser extent than Peru.
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Re: Dollars AND Soles - Why?

Postby adrian Thorne » Wed Dec 02, 2015 10:10 pm

Normal everyday spending is virtually always in Soles. Generally it is the larger purchases where Joe public like the feel of dollars. Stirling is not the best currency to exchange in Peru. I have done the hop so many times I have lost count, but I never exchange currency before coming to Peru. You should never carry large sums of cash anyway. I use a bank debit card, in the airport ATM for a small amount of Soles on arrival and a second B.S. card tucked away in a separate little hiding place, just in case. I have Brit. BC Visa and a RBS M.C. for larger purchases. The pin system is well established now and in fact lately International cards and PayPal can be used for many on line purchases. The need for bringing large sums to cover your needs is no longer necessary and far safer.
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Re: Dollars AND Soles - Why?

Postby mickd » Thu Dec 03, 2015 7:15 am

As a fellow Brit, if you look at the Martin Lewis Money Saving expert on the internet, you will see that he recommends the Halifax Clarity Card, which gives the best rates of sterling exchange rates on the day of each use of the card. The card is free, and is so convenient to use, simply agree to pay off all the debt each month from your UK current account, and it's excellent. I have been using this card for several years now when coming to Peru.
i hope that this is of some help to you.
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Re: Dollars AND Soles - Why?

Postby Sergio Bernales » Thu Dec 03, 2015 10:14 am

Just expanding on Alan's remarks, the Nuevo Sol replaced the Inti, which replaced the original Sol, both of which suffered crippling rates of inflation. Just to give you an idea of how bad it was, the Inti reached 5,000% inflation in the late '80s. So, given that kind of recent history, it's no surprise, even now with the relative stability of the Nuevo Sol, that people often prefer US dollars.

As it's also the world's reserve currency, the dollar is also one of the best way to to keep hard-earned money safe in countries that have historically suffered from inflation, bad governance and a lack of trust in their institutions. Even in the past year or so, you can argue that holding dollars has been better than Soles, as the exchange rate has gone from 2.8 Soles to the dollar to almost 3.4. That's almost a 25% increase. So for example, if you changed 1,000 soles into dollars lat year around September, then those same dollars will now buy you nearly 1,250 soles.

For everyday purchases, you're best using Soles, as everyone says. If you use dollars in shops, you'll be paying the shops' exchange rates, which are usually terrible (in effect, you're paying to change money twice, through a low exchange rate, once from Sterling to dollars and once again from dollars to Soles) I also wouldn't recommend bringing Sterling. It's not as easy to change over here as dollars and you won't get very good rates.

As Adrian and Mick said, it's better to get a good debit card and take out Soles from a cash machine as and when needed, as you don't want to walk around with thousands of pounds on you, or you can also make purchases with a credit card that doesn't charge for overseas usage. The rates your bank charges will usually be more competitive than what you can find in Peru.

To avoid fees, do as Mick says and look for a credit card that doesn't charge for overseas usage, such as Halifax. The Post Office also has one.

http://www.postoffice.co.uk/credit-card

Best debit card with no fees is:

http://www.nandp.co.uk/current-account/
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Re: Dollars AND Soles - Why?

Postby StephenUK » Fri Dec 04, 2015 2:54 pm

I understand a little better now, thank you to all.

It took me 49mins on the phone today, mostly listening to terms and conditions for the Halifax range of products, but I have now applied for a Clarity Card for starters! It does look good, thanks to Mick and Sergio.

I'll still take quite a bit of cash but it will all be split up as securely as possible, because the exchange rate is much better as far as I can see. For example Travel FX, who I found reliable a previous time is 4.78 soles=£1 today, mailed for free with buy back after ( I don't get commission for mentioning the name!).

We'll find out before we go if the hotels we have chosen accept credit cards just in case.

We have got shafted before when we have been asked to pay on dollars and we only had soles on us and had to accept given rubbish exchange rates, so I learnt a lesson there!

One interesting point... I have found Azimo excellent to transfer money from UK to Peru, US dollars by cash to a recipient's bank or collect cash, so here's a possible alternative possibly if you have access to internet. I haven't tried this method yet. However I have used this method from UK to Peru very easily.

I hope this helps others?
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Re: Dollars AND Soles - Why?

Postby Sergio Bernales » Sat Dec 05, 2015 12:38 pm

Hi Stephen, although 4.78 soles to the pound is better than what you'd have got six months ago, it's not that great. I'm currently getting 5.07 with my Norwich and Peterborough debit card and there are no fees to take out money from a cash machine outside the UK. I understand that it's annoying to change current accounts, but you can always keep your old current account open - all you need to do with N&P is transfer £500 per month to avoid a £5 charge for using the account. You also get a good insurance policy with it in case of loss or theft of personal items, including the card.

If you do decide to use your current bank, check what their exchange rate is for soles and what their fees are for withdrawing cash using a debit card, as it might be cheaper to pay the cash machine/ATM fee if the exchange rate is sufficiently high enough (compared to 4.78) and you avoid having to worry about carrying wads of cash with you. Remember you can also take out dollars from most cash machines in Peru, if you need them, which will also be converted competitively by your bank.

By the way, I did a quick calculation to work out whether it is cheaper withdrawing cash using your debit card with a fee, versus the exchange rate you've been offered. I used to pay a £3 charge with my old bank, I don't know if that's what all banks charge, or even if that's still the case with this bank, so maybe someone else can advise.

700 soles - maximum withdrawal I can take out from BCP:

At 4.78 soles to £1 - 146.44

At 5.07 to £1- £138.06 plus £3 fee - £141.06.

So you save yourself a just over a fiver with each withdrawal. if you're doing several withdrawals a month, well, it adds up.
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Re: Dollars AND Soles - Why?

Postby gringolandia » Sat Dec 05, 2015 11:32 pm

Alan answered the question very well.

I would only add that some vendors and landlords buy their inventory and take out home mortgages in USD, therefore that's the way they want to be paid. Not that they won't take soles, but since they're going to have to turn around and convert it to dollars to extinguish their debt then you could end up paying a price based on a less than ideal conversion rate.
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Re: Dollars AND Soles - Why?

Postby StephenUK » Sun Dec 06, 2015 1:29 pm

Thanks

As time is running out for this latest visit (as often it does!) I have followed other members' advice of applying for a Halifax Clarity Card for now and will probably get cash from www.bestforeignexchange.com as the rate is better than a lot, with good reviews, at PEN4.83 to £1 today. Halifax is 4.5016 and Travel FX is 4.78. Even with free postal delivery, bestforeign.... works out significantly better. Plus you can order USD at the same time as PEN for one delivery charge.

The Norwich & Peterborough option sounds very good, but to change quickly is not possible and I'm not sure I can face the complications when I already run a Halifax Reward account (so the Clarity credit card should come in time) and a Santander 123 which gives 3% interest up to £20k in the current account plus cashback on Council Tax plus oyther bills. Probably worth looking at when I get time.

Thanks to all your help I'm becoming more aware of the options.

BTW I took USD travellers cheques in my early days and they were hopeless. Few banks would accept and hours waiting about. Not one of my best ideas! I understand they are secure. But really not worth the hassle.

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