Free money: How to make the exchange rate work for you

Day to day, it works out just fine to know that the exchange rate is roughly 20 pesos to 1 US dollar. We don’t need to know the exact exchange rate if we’re just buying some Al Pastor tacos or huevos rancheros.

But when we were buying our apartment, we realized that it was important to pay attention to the rate. If it went up from 20 to 21 pesos per dollar, we would effectively save about 5% on the sale price. That adds up to a lot of money. It’s a $12,500 difference on a $250,000 purchase, for example.

Find the company you want to use for wire transfers

I researched a few different companies for transferring money and settled on Wise. Their balance of fees and exchange rates worked out best for us. (Some companies don’t charge fees, but they offer a lower exchange rate, so it ends up costing more.) You can pick a few sites, enter the amount of money you want to transfer, and see what the cost will be.

Set an alert for the rate you want

At first, I was obsessively tracking the exchange rate by refreshing the web page probably 20 times per day. But eventually, I got smarter and set up an email alert for the rate you want. (You can enter your email address at the bottom of this page to get alerted when the exchange rate reaches a threshold you set.)

The exchange rate ranged from 19.44 to 20.68 in this month

I picked a rate of 20.5 pesos per dollar, which was an OK rate for the time period when we needed to move money. We only had a month to watch for a good rate, so we couldn’t hold out for something like the phenomenal 25-plus rates from March and April 2020. You can look at where the rate has been for the past month or six months and figure out what rate you want.

The exchange rate hadn’t reached 20.5, and our closing date for the apartment was approaching. So, I thought I would have to settle for a rate around 19.8. But some of the documentation we needed from the Mexican government to purchase the apartment wasn’t ready, so we had to postpone our trip. But I had a couple more weeks to watch the exchange rate and ended up with an exchange rate of 20.52. (By sheer luck, when we transferred money for the 20% down payment in March, we hit on a 21.17 exchange rate, which was among the best rates in the past year.)

Be patient, but not greedy

Of course, watching the exchange rate feels a little like gambling. I had decided ahead of time that I’d move money at 20.5. But once the rate got there, I questioned myself. What if the rate kept climbing, and I locked in at 20.5 when I could have gotten 21 or higher? Was I being patient, or greedy? In the end, locking in at 20.5 turned out to be the right choice. That was the best rate it reached in the month when we could move money.

Move your dollars to your transfer bank early

One thing almost made me miss out on the exchange rate I wanted. When you send money to Wise via wire transfer, they lock in your rate for what they consider enough time for your bank to send the money to them. There’s more time built in for weekends. In our case, they locked in our rate for 24 hours. But my bank (Ally) can take more than 24 hours to complete a wire transfer. You have to request a transfer before 3 pm on a weekday, they review the request later in the day, and then send the money by 6 pm the following business day. So, I spent the day obsessively watching the accounts to see if the transfer went through and checking the exchange rate to see if it was getting worse.

I figured out later that I could have saved myself some stress. You can hold money at Wise in multiple currencies. So, I could have transferred the money to Wise in dollars and just let it sit there. Then, when the rate was good, and I wanted to move money, I could transfer it right away. Once your money is in your Wise account, rolling it between accounts only takes seconds. And when we made the final payment on the apartment, transferring money from pesos in Wise to pesos in the seller’s account only took a couple of hours. That meant we could get the keys to the apartment that night, not a couple of days later.

Look into what your bank allows for international wire transfers

Here’s something to know about international wire transfers—not all banks treat them the same. We have some money with Citizen’s Bank, and they allow international transfers only in person. The closest branch to us is about 30 minutes away, so that’s not super-convenient. Ally doesn’t allow international transfers at all. But it works with Wise, because Wise uses a Wells Fargo account for US transfers, so you are effectively doing a domestic wire transfer.

We don’t need to follow the exchange rate as much now that we’ve finalized the purchase. But I still keep an eye on it. If the dollar is strong, we can move a few months’ worth of living expenses into pesos so that money will go further when we need it. It’s an easy way to earn an extra 5% or so with almost no effort.