Banking in Mexico

Draft of an article I'll soon post to my web site. Comments are appreciated.

Banking in Mexico
The Mexican banking system is much different than most foreigners are used to. It is a function of many things including a tax system which doesn’t always make sense, a culture of distrust of banks, a culture where people aren’t used to the easy availability of credit as well as a culture where tardy payments have little effect on one’s daily life, among other things.

Next to soccer, the national pastime is waiting in line. This is evident if you walk into almost any bank on the 1st or the 15th of the month when it is payday as many people have their pay electronically deposited into their account so go into the local branches to retrieve their money as well as make payments for other services.

Choosing a bank may be the most important decision you make. Not all banks are equal but they generally share a lack of thinking outside the box, bureaucratic attitude and are generally not into problem solving. Choosing the right bank can mean the difference between avoiding hours to resolve a problem that may not be yours and being able to resolve the issue within minutes.

In the Lake Chapala area Bancomer seems to be the best for banking services as it has 3 locations, English speaking staff and offers a deposit account where you can bank like you are used to. You can have a fee free account by maintaining a minimum balance, usually $2,000 pesos or so and pay bills online or automatically monthly such as the cable, light or phone bills.

Also the most important part is that they give you a VIP gold card so you almost never have to wait in long lines. I’ve also seen them (Bancomer) resolve issues where other local banks lie, act like clowns and try to make you leave instead of addressing the issues. Also opening an account usually takes 15 minutes or less. Other banks will make you come back multiple times and waste hours to do the same thing, not worth it in my opinion.

Others have commented that in other areas there are banks with good service and Bancomer may not be the best, for this area Bancomer is second to none, except with regards to mortgages where they have always failed miserably and should be avoided at all costs unless you are desperate and have no other option and are content waiting months to get funded.

Opening a bank account isn’t hard but they will usually want to see your passport, immigration document and a utility bill in your name. If you don’t have a utility bill in your name then you can usually show a copy of your lease or in some instances provide a residency letter from the municipality. You will also want to be careful not to deposit too much cash. Any cash deposits over $15,000 pesos in any calendar month will be taxed (Impuesto Sobre Depósitos en Efectivo) at a rate of 3% on the amount over the $15,000 limit. Also many stores and banks do not accept US Dollars although they (banks) will if you have an account and usually accept up to $4,000US per month although they will convert the amount to pesos and if you exceed the $15,000 pesos limit on deposits you’ll be hit with the tax on cash deposits of 3% applied to the excess.

Personal credit is also relatively new in Mexico. Many people coming to Mexico are shocked at the high interest rates for consumer credit. APRs or interest rates on credit cards, even the “preferred” rates run 24% and can run as high as 60%. This is due to the relaxed attitude about paying bills on time coupled with the fact that collection costs are high and even if you take the person to court, judgments can be hard to collect from people working in a cash economy and at times it is hard to track people down.

Credit card fraud is also rampant so it is a good idea to pay cash for everything and only use a credit card in an emergency if a card is required or cash isn’t available. Currently Capital One in the US is the only card issuer where using their card outside the US doesn’t incur any foreign transaction fees and some cards give miles and rewards.
As far as money exchange goes, you can exchange cash at an exchange house and probably pay a premium, i.e. get a poor exchange rate. Another option is to have a Bank of America account in the US and with their ATM card you pay no foreign exchange fees if you withdraw from a Santander Serfin Bank ATM or Scotiabank ATM and the exchange rate has always been very good, usually one of the best.

Other people need to move larger amounts of money and for them they have some banking groups such as Monex where you can electronically transfer large sums from your US account to an account here in Mexico and not be hurt too much on the exchange rate. Yet another option is to be able to deposit a personal check, many have accounts with Banco Multiva and there with prior authorization personal checks can be deposited and the hold on them is less than other banks, thereby allowing you faster access to larger amounts of your funds.

Checks can be more hassle than they are worth in Mexico. Banks are extremely strict on the negotiation / cashing of checks and if you don’t follow the rules to a “T” you’ll find yourself with a worthless check or very angry payee. In order to explain how to properly write a check and avoid problems, let’s talk about the cashing of them as that is the end goal. To cash a check you must show official ID which in all banks is a passport or Mexican voting credential (IFE), HOWEVER, Bancomer allows you to cash checks with a Mexican driver license, HSBC does but only up to $9,000 pesos although they denied me cashing a check for over $9,000 pesos with my Mexican driver license and instead asked if I had a US driver license and with that license I didn’t have the $9,000 limit, go figure!

If you are making a large purchase and having a certified check drawn up, it is the most prudent practice to obtain a copy of the payee’s ID. You will want to do this for two reasons. First to make sure that the form of ID is acceptable to cash the check so there won’t be problems later and secondly so that the bank teller making the check can write the person’s name exactly as it appears on their ID. If you do not list the name exactly as it appears on their ID the bank will not cash the check. To the banks here if the ID says John Paul Jones and the check is written to John P. Jones or John Jones they will refuse to cash the check. One way to avoid this is to make the check to the bearer where presentation of ID to cash / negotiate the check will not be required. You would then make the check payable to “AL PORTADOR.” While this makes things easier please be aware that if the check is lost anybody finding it can cash it and unlike in the US, they make no record of who cashed it so you cannot go after the person who found or stole the check.

Spencer you may want to add that if you are a Canadian it is best to open a ScotiaBank account in Canada as you can access your account at the Mexican branches of Scotia and won't pay any ATM fees or Foreign Exchange fees if you use the Scotia ATM's. I have just recently done this myself.

Will put it on the updated version, thanks!

Intercasa wrote:Draft of an article I'll soon post to my web site. Comments are appreciated.

Banking in Mexico
The Mexican banking system is much different than most foreigners are used to. It is a function of many things including a tax system which doesn’t always make sense, a culture of distrust of banks, a culture where people aren’t used to the easy availability of credit as well as a culture where tardy payments have little effect on one’s daily life, among other things.

Next to soccer, the national pastime is waiting in line. This is evident if you walk into almost any bank on the 1st or the 15th of the month when it is payday as many people have their pay electronically deposited into their account so go into the local branches to retrieve their money as well as make payments for other services.

Choosing a bank may be the most important decision you make. Not all banks are equal but they generally share a lack of thinking outside the box, bureaucratic attitude and are generally not into problem solving. Choosing the right bank can mean the difference between avoiding hours to resolve a problem that may not be yours and being able to resolve the issue within minutes.

In the Lake Chapala area Bancomer seems to be the best for banking services as it has 3 locations, English speaking staff and offers a deposit account where you can bank like you are used to. You can have a fee free account by maintaining a minimum balance, usually $2,000 pesos or so and pay bills online or automatically monthly such as the cable, light or phone bills.

Also the most important part is that they give you a VIP gold card so you almost never have to wait in long lines. I’ve also seen them (Bancomer) resolve issues where other local banks lie, act like clowns and try to make you leave instead of addressing the issues. Also opening an account usually takes 15 minutes or less. Other banks will make you come back multiple times and waste hours to do the same thing, not worth it in my opinion.

Others have commented that in other areas there are banks with good service and Bancomer may not be the best, for this area Bancomer is second to none, except with regards to mortgages where they have always failed miserably and should be avoided at all costs unless you are desperate and have no other option and are content waiting months to get funded.

Opening a bank account isn’t hard but they will usually want to see your passport, immigration document and a utility bill in your name. If you don’t have a utility bill in your name then you can usually show a copy of your lease or in some instances provide a residency letter from the municipality. You will also want to be careful not to deposit too much cash. Any cash deposits over $15,000 pesos in any calendar month will be taxed (Impuesto Sobre Depósitos en Efectivo) at a rate of 3% on the amount over the $15,000 limit. Also many stores and banks do not accept US Dollars although they (banks) will if you have an account and usually accept up to $4,000US per month although they will convert the amount to pesos and if you exceed the $15,000 pesos limit on deposits you’ll be hit with the tax on cash deposits of 3% applied to the excess.

Personal credit is also relatively new in Mexico. Many people coming to Mexico are shocked at the high interest rates for consumer credit. APRs or interest rates on credit cards, even the “preferred” rates run 24% and can run as high as 60%. This is due to the relaxed attitude about paying bills on time coupled with the fact that collection costs are high and even if you take the person to court, judgments can be hard to collect from people working in a cash economy and at times it is hard to track people down.

Credit card fraud is also rampant so it is a good idea to pay cash for everything and only use a credit card in an emergency if a card is required or cash isn’t available. Currently Capital One in the US is the only card issuer where using their card outside the US doesn’t incur any foreign transaction fees and some cards give miles and rewards.
As far as money exchange goes, you can exchange cash at an exchange house and probably pay a premium, i.e. get a poor exchange rate. Another option is to have a Bank of America account in the US and with their ATM card you pay no foreign exchange fees if you withdraw from a Santander Serfin Bank ATM or Scotiabank ATM and the exchange rate has always been very good, usually one of the best.

Other people need to move larger amounts of money and for them they have some banking groups such as Monex where you can electronically transfer large sums from your US account to an account here in Mexico and not be hurt too much on the exchange rate. Yet another option is to be able to deposit a personal check, many have accounts with Banco Multiva and there with prior authorization personal checks can be deposited and the hold on them is less than other banks, thereby allowing you faster access to larger amounts of your funds.

Checks can be more hassle than they are worth in Mexico. Banks are extremely strict on the negotiation / cashing of checks and if you don’t follow the rules to a “T” you’ll find yourself with a worthless check or very angry payee. In order to explain how to properly write a check and avoid problems, let’s talk about the cashing of them as that is the end goal. To cash a check you must show official ID which in all banks is a passport or Mexican voting credential (IFE), HOWEVER, Bancomer allows you to cash checks with a Mexican driver license, HSBC does but only up to $9,000 pesos although they denied me cashing a check for over $9,000 pesos with my Mexican driver license and instead asked if I had a US driver license and with that license I didn’t have the $9,000 limit, go figure!

If you are making a large purchase and having a certified check drawn up, it is the most prudent practice to obtain a copy of the payee’s ID. You will want to do this for two reasons. First to make sure that the form of ID is acceptable to cash the check so there won’t be problems later and secondly so that the bank teller making the check can write the person’s name exactly as it appears on their ID. If you do not list the name exactly as it appears on their ID the bank will not cash the check. To the banks here if the ID says John Paul Jones and the check is written to John P. Jones or John Jones they will refuse to cash the check. One way to avoid this is to make the check to the bearer where presentation of ID to cash / negotiate the check will not be required. You would then make the check payable to “AL PORTADOR.” While this makes things easier please be aware that if the check is lost anybody finding it can cash it and unlike in the US, they make no record of who cashed it so you cannot go after the person who found or stole the check.

Great response. This should help many.

The talk about how the banks can be difficult to deal with made me smile thinking back to the time when the government ran the banks. Talk about hard to deal with!!! Those were days from hell. At least as bad as when the government ran the telephone company.

Also Spencer just to be absolutely clear the 3% deposit tax doesn't affect wire transfers over $15,000 pesos/mth from a Canadian/US account to a Mexican account. Just cash or check deposits. Correct?

Cash like dead presidents or notes with Mexican faces on them.

DOES NOT APPLY TO: Electronic transfers, wire transfers, checks, traveler's checks and non cash types of deposits.

Got it. Thanks Spencer. Muy apreciado.

Multiva gets my vote. I have always been treated as if I am their only client.