You get paid in dollars and spend in pesos: do you let the bank do the conversion?
It's the question everyone who earns a living abroad asks, and it's almost never answered with numbers. There are two hidden costs, and they go in opposite directions: the exchange rate at which the bank settles your account When you pay with the card, and the 2 VAT points that only debit cards give you.
You won't find a table here with each bank's spread. None of them publish it consistently, so any number would be made up or outdated. What we do have is the method for measure yours, which comes from your own bank statement and is accurate.
Step 1: Measure your real exchange rate
Look in your dollar bank statement for a purchase you made in pesos. Those two amounts are enough.
Look for a charge in pesos on your dollar statement.
It has to be a purchase you made in pesos and that the bank charged you in dollars. Write down both amounts.
I divided the pesos by the dollars
That ratio is the exchange rate that was applied to you on that purchase. It's not an average or an estimate: it's your number.
Compare against the scoreboard from that day
Compare it to the best selling exchange rate available that day. The difference, expressed as a percentage, is what the comfort of doing nothing costs you.
$ 38
This 5 % below the type of sale you set below. That's the part where doing nothing is costing you.
Step 2: Compare the three routes
Based on the same monthly expense in pesos, how many dollars does each route consume?
"I sell the dollars and pay with debit" is a good option for you: you save US$ 1656.6 per year.
You sell at the best rate on the market and the debit card charges you 2 points of VAT (1.64% of the price).
| Route | You find it difficult | Dollars per month |
|---|---|---|
I pay with the card and the bank converts The bank settles at its own exchange rate and, since it is a credit, there is no VAT reduction. | $ 80.000,00 | US$ 2105.26 |
I sell the dollars and pay with debit. You sell at the best rate on the market and the debit card charges you 2 points of VAT (1.64% of the price). | $ 78.688,52 | US$ 1967.21 |
I sell the dollars but pay with credit. You get the best exchange rate but you lose the VAT discount on debit cards. | $ 80.000,00 | US$ 2000 |
It does not include exchange house fees or card costs: these vary by institution and are discussed on their own pages.
The detail that almost everyone miscalculates
Law 19.210 reduces the VAT on purchases made with debit cards or electronic money by 2 percentage points. But Two points out of 22 is not "2% cheaper":
2 ÷ 122 = 1.64 %
That's the actual discount on the price including VAT. The credit card doesn't offer that discount, even if you pay in one installment.