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(Updated September 30, 2016)
Travellers to Cuba often ask what currency to bring to Cuba for spending money or for exchange.
Usually the short answer is to bring your own home currency and exchange in Cuba for Convertible Pesos (CUC) in Cuba. There are a few exceptions, however. If the currency of your home country is not exchangeable in Cuba, then you need to change to a currency that is exchangeable. Thus, for example, if you are travelling from Australia, it is recommended to change your Australian dollars to another currency, for example, Euros, as Australian dollars are not exchangeable in Cuba. If you are coming from the USA, there can sometimes be a small percentage saved by changing American dollars to another currency before you leave for Cuba. Often, it is not worth the effort, as discussed below. And in all cases, you will lose money by changing from your own currency to American dollars, as there is a 10% penalty charged when American dollars are exchanged in Cuba.
First, a bit of background:
At one time, the American dollar was actually used in Cuba as being interchangeable with the Convertible Peso. That was during the period from 1994 to 2004. Any advice that says to take American dollars is at least ten years out of date. In 2004, the American dollar was taken out of circulation, and soon afterward a 10% penalty was imposed on exchange of American dollars. (Note that while there has been some discussion in Cuba of removing the 10% penalty, as of mid April 2016, it still applies.)
The Banco Central de Cuba lists exchange rates for the following currencies, which should (in theory, at least) be exchangeable in Cuba.
British Pound, GBP
Canadian Dollar, CAD
Swiss Franc, CHF
Japanese Yen, JPY
USA Dollar, USD
Mexican Peso, MXN
Danish Krone, DKK
Norway Krone, NOK
Sweden Krona, SEK
If you are travelling from Canada, the UK or European Union countries, simply take your home currency. There is normally no advantage to exchanging money to a second currency before going. Here is how it works:
(Note that the calculations below were based on exchange rates as of mid February, 2015. While currency rates have fluctuated since that time, and the actual numbers will be different now, the general conclusions are still the same. Also, as the CUC is pegged at 1 CUC = $1 US, the percentages of losses or gains discussed will be approximately the same.)
Every time you convert a currency, the bank charges a service charge (generally about 3%, sometimes higher). This is typically expressed as a spread between the buy and sell rates. For example, a Canadian, dismayed at the low value of the Canadian dollar against the US dollar, may feel that there is a benefit to taking US dollars, a stronger currency. But, let’s say that on a given day, the Bank of Canada rate shows a value of the Canadian dollar as $0.80 US. That means that to buy US dollars, the Canadian could only buy about $78 US for $100 CDN, taking into account the exchange rate and the service charge for exchanging. In Cuba, that same $100 CDN would similarly buy 78 CUC, as the CUC is pegged at 1.00 CUC = $1.00 US.
But then if the Canadian takes the amount of US dollars that he can buy with $100 CDN, before the 10% penalty, $100 US converts to about 96.80 CUC, as the Cuban bank’s service charge for exchange is 3.3%. But then an additional 10% is subtracted for the penalty. Bottom line, $100 US exchanged in Cuba will return only 87 CUC. But remember, he has taken the amount of US$ that he can buy with $100 CDN, which is only $78 US. By ratio, $78 US will buy 78 x 87 ÷ 100 = 67.86 CUC. A loss of more than 10 CUC compared to just taking Canadian dollars.
But, what if one is talking about an American, or a Canadian who has some American money left over from a previous trip to the USA? Which is better, take the American dollars, or change to Canadian dollars first? At best, an American may end up with as much as 95 CUC by exchanging to say, Canadian dollars (or Euros, Sterling, or whatever); at the worst case, it may be even less than the 87 CUC for exchanging American dollars directly to CUC. It all depends on what kind of exchange rate the American traveller will be able to get. Consider the following example:
If $100 US is converted to Canadian dollars, $100 US will buy about $121 CDN at the bank in Canada or likely a bit less in the USA, (as US banks generally charge slightly higher conversion fees than Canadian banks.) As coins can’t be exchanged in a foreign country, ignore the $1, and assume $120 CDN is taken to Cuba. That $120 will buy about 92.60 CUC at the bank in Cuba, where the $100 US that this person started with will only buy about 87CUC. So there can be some advantage for a Canadian to cash in his leftover American dollars for Canadian dollars before going to Cuba. It is not so straightforward for the American traveller, however. Often, Canadians will advise American travellers to exchange to Canadian dollars before going to Cuba, but this is not always good advice due to the higher exchange fees in the USA (and the possibility of additional transaction fees that may apply in addition to the currency exchange fees).
Furthermore, as Canadian dollars will not be much use to an American when he returns home, he would have to exchange any leftover Canadian dollars back to $US. There will automatically be a loss due the currency exchange fee his bank will charge. And, if the Canadian dollar is losing value against the American dollar, by the time the American traveller returns, his Canadian dollars may well be worth significantly less than they were when he bought them. The risk of losses may well mean that it is better for an American traveller just to take American dollars and count the 10% penalty on the currency as just part of the cost of travelling.
Although the above examples are worked out comparing $US and $CDN, similar logic applies when considering Euros or Sterling. The only difference would be that if one is considering changing from, for example, CDN to Euros, or vice versa, there is no concern about extra penalties as there is with the American dollar. But the act of exchanging currencies twice would incur extra costs simply due to the currency exchange fee (3% ± each time an exchange transaction is done, as mentioned above.)
One final note: Often American travellers ask about changing first to Mexican Pesos, then to CUC. In the past, the Mexican Peso had generally traded at a very unfavorable rate in Cuba, and while there was not a specific surcharge levied against it, the end result was much the same. Since exchanging US dollars to MXP, and then to CUC would yield even less than a direct exchange of US dollars to CUC, it was generally not recommended to do so. However, since late May, 2016 there has been some improvement to the conversion rate for Mexican Pesos, and even more improvement since mid-September. While there is still some risk in exchanging US dollars to Mexican Pesos, it may be worthwhile to take Mexican Pesos for anyone who already has some in their possession The situation seems to be somewhat fluid, and could revert back to how it was before.