Finances

1. Currency

The official currency of the Philippines is the PESO, which is abbreviated as PHP. The symbol for the peso is a capital “P” with two lines drawn horizontally through the curve of the “P”.

The peso is broken down into centavos; one hundred centavos equals one peso. There are peso coins in denominations of 1, 5 and 10 pesos. There are peso notes in denominations of 20, 50, 100, 200, 500, and 1,000 pesos. As of February 2013, the exchange rate is about US$1:PHP40.00. This rate, of course, varies constantly but the peso has been fairly stable in recent years.

Changing money is easy. The best place is at an official moneychanger. DO NOT exchange cash with anyone who approaches you on the street offering to “change dollar”; certainly do not accompany any of these characters to a “private” place in order to exchange your cash! There are many reputable moneychangers in all tourist areas as well as in every shopping mall in the country. A reliable moneychanger will have their authorization from the Philippine Central Bank clearly posted inside their establishment. There is very little red tape involved in exchanging currencies. A passport is required, but is not always asked for. American dollars are the easiest currency to exchange; chances are that you will be able to exchange American dollars everywhere except in the most remote provinces. The process is not complicated–you give the moneychanger your dollars (or other currency, if they will accept it) and the money changer gives you back the equivalent amount in pesos. Conversely, pesos are easily changed into other currencies, again, the American dollar being the easiest.

Generally speaking, moneychangers give the best exchange rates, usually better than the banks. Exchange rates in the big cities will be pretty good, in provincial areas expect that the exchange rates will be significantly worse.

The official exchange rate–quoted in banks or on the internet- is always a bit different than the rate you will get at the moneychanger or at a bank. This “spread” is how the moneychangers make their money. Banks will often exchange your money only if you have an account with them. For example, Metrobank in Baguio sometimes gives a better rate than the moneychanger, but only to their customers, not to someone off the street. Banco de Oro, which has convenient branches in SM Malls all over the country, accepts walk in business for exchanging cash, and usually offers a competitive rate.

The problem with exchanging money at a bank is the amount of time and effort you have to spend filling out endless paperwork. If you have a large sum of cash to exchange, a bank is your best place to negotiate a better rate. For normal situations, it is easier and faster to use a moneychanger.

There are ATM machines available in the larger towns, often even in the larger provincial cities. Most of these handle international cards, but some will only accept local ones. The fees at an ATM are approximately US$3.00 per transaction.

There is often a limit on the amount of cash you are allowed to withdraw at any one time, despite the amount of funds you have available. It is always wise to use these machines either in the daytime or in well-lit areas at night.

2. Open a Bank Account

Many expats can arrange for their social security cheques to be deposited directly into their Filipino bank account from the source in their country of origin. Please refer to the section entitled EXPATS ABROAD for information which may be relevant to you in this regard as well as in regards to taxation in your country of origin as a non-resident, voting rights, and other information.

ELRAP urges you to keep most of your assets abroad in your country of origin! That is where you are familiar with “the systems” regarding your finances. Arrange only for what funds you will need to live comfortably to be sent to the Philippines on a regular basis.

3. Get a Credit Card

Credit cards here can carry a 3.5% monthly interest rate, plus very high late charges and fees. There is no charge if you pay the balance monthly, which is simple good sense.

Expats routinely hold local credit cards. Your first credit card is usually secured by opening an account at a local bank–and it doesn’t hurt to have a friendly relationship with the bank manager! The limit on your card will be equal to half of the deposit in your account-US$1,000.00 on deposit at the bank gets you a limit of US$500.00 in credit. After six months or so, this can be raised. Eventually, though, you will hold your credit card based on an established credit score.

In the Philippines, personal relationships count for a lot. A bank manager with whom you have a good relationship will often bypass small requirements to facilitate your needs.

I showed my bank manager six months of statements from other credit cards I had, and requested a small line just to get started. There was no problem at all. After a while, I decided to get a local non-secured card. By that time I had established one- year relationships with a few banks, so I had little trouble.

Make it a habit to carry at least two local credit cards – they are much quicker and easier to use than the foreign cards from your home country. Also if you use a foreign credit card your purchases might wind up costing you more as you have to factor in the exchange rate fluctuations (your peso purchases will be translated into your home currency) and you may have to pay fees for international use on your foreign card. On top of that, there is the distinct possibility that you may simply not be able to use the foreign card at all. For example, a credit card issued abroad may require prior authorization before it can be used out of country. If this authorization has not been issued before leaving your home country, the credit card company may suspect fraud and just shut your foreign credit card down. Period. Before leaving home, if you plan on using your credit card, it is not a bad idea to call your credit card company and tell them of your travel plans.

There is very little internet banking available in the Philippines, and that is the case as well with credit cards. Monthly statements from your bank or credit card company are not always available on line. The statements are usually mailed to you each month- which means they might not show up on time to meet your deadline for payment.

What works for me is this: I make it a point to know my deadline for payment by looking at past bills or else calling my bank or credit card company and asking them directly for the date of the deadline. About a week before deadline time, I call the bank or credit card company to get the balance due. Once I know my balance and the due date, I go make the payment. Usually payments like this are made in cash and in person, although I do have friends who pay in check and send that check to the bank with a trusted driver or secretary. I always pay in cash and in person.

The need to pay for your credit card bill in person is pretty much the norm around here. That is why I like the idea of having an account at BDO (Banco De Oro)-which is open during the same hours that the SM Malls are open (both companies are in fact owned by the same family, that of taipan Henry Sy). If that wasn’t a good enough reason, BDO also allows convenient payments online. The company still sends you monthly statements in the mail, though.

Keep your receipts, and maintain a file of all your paymentsto be sure that they are credited correctly. Despite the sometimes archaic system of making payments here, I find it amazing how mistakes made are usually fewer and smaller when compared to my experiences making payments in America.

“ More and more folks are retiring at an earlier age, while they are still healthy enough to enjoy their lives. The problem is, in the First World, even a couple in their late fifties that have a $500,000 investment portfolio, which includes their home equity and other investments, won’t have enough retirement income to take advantage of their hard-won freedom. ”

The FREEDOM HANDBOOK
By Bruce Silverman
http://funphilippinesretirement.com
“ELRAP is a friendly website! On our pages please--no vulgarity, and no politics or religion discussed!”