As a retired American living in Mexico, I carefully watch the exchange rate between the U.S. dollar and Mexican peso and I take advantage of significant changes in the rate that will allow me to receive more pesos for the same amount of dollars.
Just to be clear, I’m not talking about just going to the ATM in Mexico and getting pesos out with my U.S. bank card. Although that’s okay, it won’t really save you a lot of money in the long run.
What I’m talking about is maintaining bank accounts in both the U.S. and Mexico and only transferring money between them when the exchange rate is to your advantage. The bigger the advantage, the larger the transfer.
It’s basically like waiting for a big sale before going shopping, but instead of food or clothes, you’re buying money.
Exchange rates are constantly influx; however, dramatic changes over a short period of time are typically preceded by some significant news event or situation. The latest such event is the Coronavirus.
In the course of a couple of weeks, fear and uncertainty over the spreading virus has caused investors to invest more in stronger currencies such as the U.S. dollar, Japanese Yen and Swiss Franc, and less in currencies like the Mexican peso. This had the effect of increasing the value of the U.S. dollar while simultaneously devaluing the Mexican peso.
Take a look at this:
Back on February 18th, the exchange rate was 18.55 MXN / 1 USD. On February 28th, it was up to 19.73 MXN / 1 USD. That’s a big change in only ten days.
So what does that mean in real money? Well, it really depends on how much you want to transfer. At the exchange rates shown, if you had transferred $5,000 USD it would look something like this:
That’s an additional $5,900 pesos (or about $300 USD) in your pocket just because you waited for a good exchange rate before moving your money.
Choosing the Transfer Method
Monitoring the exchange rate is only one part of maximizing your money. The next step is choosing the correct transfer method to ensure you’re getting the most money possible.
There are exceptions, but in most cases this is the worst option available. International wire transfers are a huge revenue source for large banks and they make their money through high fees and/or poor exchange rates.
Even if your bank says that international wire transfers are free, I guarantee that you’re losing money on the exchange rate. It pays to compare your bank’s rates and fees to those offered by third-party services.
These are companies who will handle the bank to bank transfer for you. For most people, this is the best option and will result in more of your hard-earned money ending up in your pocket on the Mexico side.
We’ve used several different services over the last five years, but the best one that we have found is Transferwise. They offer the actual bank to bank exchange rate and their fees are very low. In every side-by-side comparison that we performed, Transferwise gave us the most pesos at the end.
Let’s Wrap This Up
No one can predict with absolute certainty where the dollar will end up peaking against the Mexican peso. That’s why my advice for anyone looking to transfer dollars into pesos, is to watch the exchange rate carefully and follow the financial news. With a little luck and some perseverance, you’ll be able to get the most bang for your buck.
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