In a previous article, we mentioned how the adoption of ATM use by visitors and expats in Mexico (and world-wide) has made traveler’s checks obsolescent. As the use of ATMs by foreign visitors and residents has ballooned, banks have been gradually racking up the charges they make for use of ATMs in countries other than the one the card is issued in.
Banks have always made money on international withdrawals from ATMs (it’s called the “spread” and is the difference between the wholesale rate and the rate it applies to your account when you withdraw foreign currency) and of late, banks have been introducing other charges in addition to the money they make on the spread. Banks have to pay Visa, MasterCard, AMEX, et al, a fee for each transaction, and the local bank also charges – so these fees are passed on to customers.
A number of readers contacted us last week to tell us that Bank of America, who previously did not charge a fee for their customers who withdrew Mexican pesos from Santander bank (affiliated to BofA) have introduced, with immediate effect, a 3% “Foreign Transaction Fee”. Pensioners who are withdrawing cash in pesos from their Social Security payments made to U.S. accounts are now being charged this fee that costs them $30 for each US$1,000 withdrawn in pesos.
Most banks already charge at least twice for foreign currency withdrawals (the spread and an additional fee), so the new fee imposed by Bank of America is not a pioneering move that others will follow – the others are already there. The matter has upset some expats who live in Mexico and opened Bank of America accounts precisely because of the absence of foreign exchange fees for withdrawals at Santander. In response, they have begun a petition at Change.org, which you can see here. Customer pressure can cause banks to change policies–if sufficient numbers of customers express their intention to close accounts and go elsewhere.
If you are withdrawing more than $1,250 a month from ATMs with a 3% charge (which is roughly the ‘standard’ these days), you might consider making a wire transfer of foreign currency to a Mexican bank account and withdrawing pesos from your local account, as the ATM fees would equate to roughly the same as what major US banks charge as a minimum for international currency transfers (~$40).
A number of internet-based currency transfer services have emerged in the last few years, offering their customers lower cost international transfers than banks do; so it’s very probable that international currency transfers will become less expensive in due course as these services become established and trusted.
Our article, “A Fair Exchange” discusses the various ways of exchanging foreign currencies in Mexico, including the advantages and disadvantages of each one.
Feel free to share your ideas and alternatives about currency management methods in the comments below.
See Also: Money in Mexico
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