Is it really so crazy to use a 200 peso bill to pay a 110 peso check?
November 8, 2011 6:43 AM   Subscribe

Why are there such problems getting change for purchases in some countries?

Anyone who has traveled much has experienced the frustrating situation where you have a relatively small bill straight from the ATM (usually with a value around $20) that you cannot actually use because no one will give you change for it. Even for a purchase that is totally reasonable relative to the value of the bill. I'm not talking about getting shortchanged or anything, but the idea that a seller will actually refuse a transaction because they can't make change. It's very foreign concept to me as an American, where only a poorly run garage sale will not have change.

Does anyone have theories on what causes this?
posted by smackfu to Travel & Transportation (28 answers total) 2 users marked this as a favorite
I agree that this happens. when you live there, you hoard change. "poo change" is a foreign concept to me.

Is it because the mint just hasn't made enough coins? Or that the metal is more valuable than the coin value it represents, so people use it for other purposes?

So, yeah. Once there's a shortage, people hoard it, and then this causes more shortages...
posted by titanium_geek at 6:47 AM on November 8, 2011

This appears to be the subject of academic research. Here's Federal Reserve Bank Working Paper No. 03-12: "Shortages of Small Change in Early Argentina":
In the literature on monetary history, it has now been well documented that a number of economies, during the early stages of their monetary development, experienced sporadic relative shortfalls of small denomination means of payment. These shortfalls created frictions in the consummation of everyday domestic transactions. Sometimes trade did not take place because the parties involved lacked the necessary small change needed to finalize the transaction. In other words, the relative supply of small denomination means of payment was insufficient to support a desired amount of commercial activity. This kind of episode has been called in the literature “a shortage of small change.” ...

Sargent and Velde (2002) review in great detail the evidence on shortages of small change in the monetary history of Europe (see Rolnick and Weber, 2003, for a good summary). Hanson (1979) provides an interesting review of the evidence for the British colonies in North America.
posted by Jahaza at 6:54 AM on November 8, 2011 [6 favorites]

Federal Reserve Bank of Richmond Working Paper
posted by Jahaza at 6:56 AM on November 8, 2011

This isn't as uncommon in the US as you might think. Go to any art fair or flea market in a small town and you'll run into the same thing. (Usually small-time sellers in larger cities have credit card machines, in my experience.) It happens whenever the person selling doesn't have a whole lot of extra money themselves to front for potential business transactions. Let's say everything I'm selling is under a dollar, and I only have enough to make change for, say, $20 bucks. If you come up and buy one item from me, and pay for it with a $20, and I give you all my change, then I'll have to turn down the next several customers that come by wanting to pay with $5s. It's one sure sale vs. several potential ones.

I'm not sure if that's the particular situation you're talking about encountering elsewhere, but I have definitely experienced it here. (Though, usually, the people working the booths call in change-making help from neighboring booth-people. Because this is America, and we rarely turn down sales.)
posted by phunniemee at 6:58 AM on November 8, 2011

Think of it as the reverse of the situation in the US, where coins don't circulate because nobody pays for things in coins: the vendor doesn't think he/she will be able to recirculate the bill easily, and it'll put a big dent into the float.

There are certain bottlenecks in most currency systems -- and the US actually has a lot more than most -- and the knack is in working out which particular set of coins or notes offers optimal "flow" both ways through the system.
posted by holgate at 6:59 AM on November 8, 2011 [1 favorite]

On reading your title, Heck yes it is unreasonable to ask for 90 pesos back- that's a heck of a lot of money to ask for in change! Money has different values in different cultures and economies. You can buy a lot for a few pesos, so 90 is really an astronomical figure. This is like your grand parents thinking that anything over 10$ is crazy expensive.

posted by titanium_geek at 7:10 AM on November 8, 2011 [1 favorite]

When I traveled in India in 1995 I noticed the same thing. It's like the shopkeepers were hoarding their small bills because they were scarce (not that I think they were). I then started hoarding my small bills so I had a supply to buy inexpensive things. It was a vicious cycle.
posted by ShooBoo at 7:13 AM on November 8, 2011

I would suspect, too, that, in cultures where bartering is a more common aspect of purchasing, not being able to make change is a point of leverage over the transaction.
posted by Thorzdad at 7:23 AM on November 8, 2011 [2 favorites]

I've had my notes refused at the local post office in the US. I had a $100 and the only way I could make my purchase was because a nice man in the line broke the note for me into $20's.

Sometimes smaller sellers only have a limited float and if they have a few people pay with large notes they run out of change. Not every place has enough workers (or workers they trust) that can just run to the bank for more change, or can afford to carry a large float.

One of my jobs used to be making sure the change float in the safe for a large hotel resort was going to be enough (we ran a float of about 10 grand over long weekends just for making change) because you get a bunch of big spenders i all paying with $100's and you can get caught short. I imagine a smaller place with only a couple of hundred total in change in the float get's 2 people trying to pay with $100's and Bam their entire change float is gone.
posted by wwax at 7:25 AM on November 8, 2011

I think the root of the problem is that the ATMs dispense bills that are too large - it's as if ATMs in the US dispensed only $100 bills. I think that would cause a lot of problems for smaller merchants, change-wise. As it is, many merchants will not accept $100 bills.

An easy solution to this would be for the ATMs in affected countries to dispense smaller bills - say, $5-equivalents instead of $20-equivalents.
posted by insectosaurus at 7:43 AM on November 8, 2011 [5 favorites]

I had major issues getting smaller denominations in Argentina.

I was told this was because of very, very widespread counterfeit notes. No one trusted them, so people wouldn't deal with them.

The only place I was able to change large notes was actually a McDonalds which had UV lights to check the bills.

And I ended up getting screwed with a counterfeit note by a taxi driver in my week there, too. I should have recognized the counterfeit he gave me, but I got confused/rushed and didn't pay enough attention. Live and learn!
posted by smitt at 7:56 AM on November 8, 2011

Response by poster: Yeah, Argentina was definitely one of the places I saw this. The ATMs will generally dispense 100 ARS notes (worth $23 today), which no one would take. I ended up getting 90 ARS out of the ATM repeatedly, because that would give me 50s and 20s, which were accepted. And I also used McDonald's to break notes.
posted by smackfu at 8:03 AM on November 8, 2011

I live in Mexico. I'm no economist, but I think the lack of change here comes from poverty combined with a nearly 100% cash economy.

The minimum wage where I live is 56.75 pesos per day. So 90 MXN in change is more than a day and a half of wages. A family living near the edge isn't going to keep all that money sitting around -- it goes to immediate needs, because they have no credit.

You go into a little shop and buy your bag of Cheetos, and the mom/shopkeeper gives the money to one of her kids to go out and buy fresh tortillas for tonight's dinner. None of the little shops or laundries that I go to even have a cash register. The money goes into the owner's pocket, with a handful of coins going into a change-making purse.

The same happens in small restaurants -- they constantly need to buy supplies, and they're going to use the cash paid by customers to buy them.

Major stores don't have this issue because they have more income and probably have credit with suppliers. When the ATM gives me a $500 bill (roughly $37 US) I put it aside until I know that I'm going to a major department store or big restaurant.
posted by ceiba at 8:09 AM on November 8, 2011 [2 favorites]

In Argentina, at least, there's been some suggestion that a black market of coin-hoarders is contributing to the problem. Generally I've heard blame assigned to the companies that run the bus lines, since the automatic fare machines don't take bills, so they are one of few places that will always be guaranteed a reliable source of small change. They (or their intermediaries) then attempt to sell barrels of of coins back to vendors at over market value.
posted by dr. boludo at 8:11 AM on November 8, 2011 [1 favorite]

In Armenia, don't expect to get change at the beginning of the day. At the end of the day sure.
And I always apologize for using a big bill at small shops.
posted by k8t at 8:18 AM on November 8, 2011

I've noticed that when I'm travelling in France, managing my supplies of coin change is a major, major frustration. ATMs hand out 20 and 50 euro notes (50 euros is pointless--anything that large, you're probably just going to use a credit card anyway). Regular shops really tend to resist taking even a 20 for a 15 euro purchase.

Meanwhile, as a US traveller, I need coin change for parking, autoroute tolls, etc. in case my US credit cards won't work and I have no other option. Or because I'm tired of the frowny looks from the primeur, the small bakery, the little cafe, and I really would like to offer them exact change if that's what they want.

My interpretation:

Banks over there are run differently than banks here. Here, anyone can walk into a branch bank and convert a $20 into ones, rolls of nickels or any crazy combo, no questions asked. Try that at BNP Paribas sometime.

Often no thought towards running a cash register or cashbox. Paid cash at a small hotel recently, that turned into a 20-minute scavenger hunt for change! Five 20 euro notes to pay an 86 euro bill, you'd think I was refinancing a house.

People may have turned more towards credit/debit cards anyway. I know I did when I could.

Few or no change machines, and I'm guessing no support system to keep them stocked. I'm sure they exist somewhere, I have yet to see or find one.

They tend not to have the bad US habit of pricing items in weird fractions, and then charging sales tax above that (which is good), but it also means there's less need to manage a cash drawer with rolls of small coins.

A few years ago, I might have thought the change to the euro might be part of the cause, but it's been many years now.

ATMs are a problem worldwide. At one time, Norwest Bank/Wells Fargo in the Twin Cities had ATMs that would hand out $5 in some cases, which was awesome, but they're back to just $20s now. (That 50-euro note from the ATM is just ridiculous, though.)

Overall: culture, inertia, ingrown habits, you name it. People who live there probably just deal with it and don't overthink it. I don't think there's a single root cause, although I think the relative formality, stodginess of banks probably gets in the way of access to cash in general. (I was going to say "resistance to change", but even I can't go that far with a pun.)
posted by gimonca at 8:50 AM on November 8, 2011 [2 favorites]

I've had the piece-of-candy-as-change experience in Indonesia, too. Difference in Indonesia was that I could walk into a bank branch and change a big bill into a fat roll of little ones (disclaimer: this was several years ago). You'd get candy in a bigger store like Sarinah or Robinson for an amount less that what they'd have a denomination for. People in smaller shops just adjusted their prices to the denominations people were likely to have, and that worked fairly well.
posted by gimonca at 8:55 AM on November 8, 2011 [1 favorite]

This really amazes me, the level of agreement in comments. Probably once a day I will make a purchase, and then spread my coins out on the counter and try to use up as many of them as I can to reach the total to be paid. I do it to reduce the weight in my pocket, and the traders are usually delighted. This is in Italy, where ATMs often dispense 50-Euro notes (I generally withdraw a large amount and then pay cash until it runs out, because my bank charges are a lot lower that way), although I have noticed there are more recently some which will dispense part of the amount €20s.

I can remember the time in the 1970s when every local bank here was printing "mini-cheques" for 50 or 100 lire (the former currency, before the switch to the Euro) - you'll often see 20 or so these framed as collector's pieces in country coffee shops. And candies were handed out for the really small change, even at highway toll booths. But that was in another country, and besides the lira is dead.
posted by aqsakal at 9:13 AM on November 8, 2011 [2 favorites]

It's happened to me enough times in the US where the shop gives you a dirty look for using a $20 for something less than $10. I've been turned away once or twice, with the explanation that they can't get change for x days (it was probably a Saturday morning or something)

The opposite occurs in Australia, where the machines give out $50 notes, I've never had a problem using one even in small shops (though I was prepared to be very apologetic). I got into the habit of asking for $80 from the machines to avoid the issue though.

In Chile the machines hand out 10,000 peso ($20) notes, which can be quite substantial when you need to pay for something small (snack from a street vendor at <500 pesos), I've never even bothered trying with those guys, I just assume I'll be rejected.
posted by defcom1 at 11:27 AM on November 8, 2011

In my experience in Brazil it's generally just a lack of a float. The float might just be a few reais to start the day (I compare this to a fast food job I had where my float was $200). The ATMs generally give out R$50s so I've learned to work within the system. I know where I can drop a R$50 and get change without trouble (generally large grocery stores and McDonalds). If I know I'm going to be needing a lot of small bills I may work for several days to get the change I need (or just send my hubby to the bank to get change). And lots of people do the candy-for-change thing; they usually just don't have the change on hand.
posted by wallaby at 11:34 AM on November 8, 2011

Yup. Experienced this in Bolivia. I don't even remember what I bought, but I remember my change very well: A toothbrush, three caramels and a band-aid.

I was in a very small town. The issue was a lack of enough small bills to be able to make change for people. The ability to make change involves having a supply of change in the first place. And since there are often more large bills coming in and smaller ones going out, it can be impossible to keep enough change on hand.

I quickly learned to hoard small bills because I'd need them.

In the U.S., this is most often experienced with quarters for laundry. You pay $5 for something that costs $1 and ask for your change in quarters, but they don't have enough on hand, so they give you back 4 dollar bills instead. It's like that, except they may not be able to keep enough of their currency's equivalent to 1 dollar bills on hand, so they give you stuff instead.
posted by 2oh1 at 12:26 PM on November 8, 2011

The answer to this question is really simple. $20 is a lot of money in Mexico/Agentina/India/wherever. Rich American tourists would do well to realise this. The problem is that ATMs in poorer countries aren't used by regular folk so they don't put out the smaller denominations normal people would actually use while tourists tend to get several days worth of spending money out at once.

gimonca: "Regular shops really tend to resist taking even a 20 for a 15 euro purchase."

I have no idea where in France you travel but I've never experienced anything close to that anywhere in the country at all.

gimonca: "Banks over there are run differently than banks here. Here, anyone can walk into a branch bank and convert a $20 into ones, rolls of nickels or any crazy combo, no questions asked. Try that at BNP Paribas sometime."

Have you? What happened?
posted by turkeyphant at 2:13 PM on November 8, 2011

Regular shops = small spots in the center of town (not big box places like Carrefour). Has happened to me several times. The transaction isn't called off, you're asked for exact change, then you shrug, then they relent and take the 20. This is in small cities and towns in the south and southwest.

My initial experience with banking there is that when you're not a regular customer, it's much more of a barrier to getting any bank services than it is here--the difference being that U.S. banks are happy to deal with practically anyone who walks in (but for a price, of course). The main point is that banks in general are the primary people with the stash of coins and small bills, and if they're not distributing them for whatever reason, that's at least one bottleneck.

And if you transfer the scene from the first world to the third world, I would imagine that there's a larger class of people in third world countries without banking access. Being intimidated from going in to a teller window in order to change a large bill could be a symptom of broader issues around not having the kind of access to basic services that many of us take for granted.
posted by gimonca at 2:40 PM on November 8, 2011

I noticed this in Mexico. Aparrently it was to do with the fact that everyone gets paid on the same day twice a month, so everyone was trying to spend larger notes at the same time.

The shopkeepers didn't want to give out the small change that they did have. It didn't make a lot of sense to me, and often felt like they were hoarding for the sake of hoarding - if they weren't going to give the change to me or any customer after me, why risk sales just to maintain a change stash?
posted by peppermintfreddo at 3:21 PM on November 8, 2011

See also this question.
posted by Morrigan at 5:19 PM on November 8, 2011 [1 favorite]

This definitely happens in Manila in the Philippines. The ATM's often dispense only 1000 pesos (about $23) or 100 pesos. I have learnt to use my thousand notes at big shops or starbucks that can give change and hoard the smaller notes. But definitely have faced the issue of having to pay a cheap taxi ride with a thousand peso note or buy some chewing gum etc.

Coming from Australia where, as mentioned, using a $50 note to pay for a coffee or somesuch isn't that unusual, this has taken some adjustment.
posted by Admira at 6:26 PM on November 8, 2011

I believe the question here is why, not where.
posted by Rash at 6:57 PM on November 8, 2011

Many countries are printing less of paper currency in a bid to move to electronic transactions and curb black/counterfeit money.

To print, say, a million dollars (I am taking the dollar only since it is a standard and easier to understand), it would require more effort to print smaller denominations (more paper, more checks to ensure they are 100% genuine) and tracking them in the economic system is more difficult. Apparently, it is easier to track serial numbers for larger denominations. Coins are also going out of fashion as they are expensive to mint and circulate.

Also, there is a daily limit on how much cash you can withdraw from an ATM per day. To increase availability of cash (and reduce the number of times the ATM is replenished), ATM machines store higher denominations, resulting in people getting higher denominations. With no coins and a shortage of smaller denominations, we end up in situations like the one the OP faced!
posted by theobserver at 8:42 PM on November 8, 2011

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