Cash Economy

One thing I've been meaning to write about is money differences between the USA and here. In San Francisco, we pretty much buy everything with a credit card, and then pay off the balance at the end of the month. In some ways, it's nice, in that you don't go to the ATM very often, and you can track and see how much you are spending for different things. It's also slightly horrifying to see what the total amount we spend is every month. Plus, the credit card companies get 2% of the proceeds, paid by the merchants.

Here, we pretty much use cash for everything. I don't think I've used a credit card at all since I've been here. We go to the bank machine maybe once every 5 or 6 days, and get the maximum 5000 pesos, or about $350 or so. Some of the restaurants take credit cards, but I haven't really been keen to use one. I think we even pay for school in cash.

There is a definite lack of credit here, and if you use credit, you're probably desperate. All home sales are cash, as mortgages are practically non-existent. If you do get a credit card, there is no limit to what the charges might be. Antonio told me he had a credit card that was charging him 42% yearly interest. He was able to renegotiate it down to 2% per month, which is still probably 30% per year when compounded. If you need a loan, you go to family or friends first, since the official money lenders seem to have no regulations.

I think the housing market here was fueled by the US housing bubble. Although you can't get a mortgage, a USA buyer could take out a second mortgage on a home in the USA to finance a purchase here. So there may still be a shakeout here for properties that Americans might buy, but probably not as extreme as we've seen in the USA. It's been interesting seeing what kinds of properties are for sale, and how much they are asking. There are places in town with $400,000+ lots, and million dollar plus homes. I see a lot of for-sale signs on houses here too.