Last update:
1-Aug-01

Spending your dollars

It doesn't take a lot of effort to spend money in the US, but there are a few warnings for the first timer. Probably the most important is that, apart from one or two specific purchases (such as petrol), the price you see is not the price that you pay!

Sales tax, which will be a combination of local and state taxes, will be applied once you go to pay for the goods. The tax varies from state to state, and area to area within each state, but is generally between 5% and 8%, and you need to remember it when you're buying something marked $4.99 and you have a $5 bill ready - you'll probably need at least another 25cents!

See the Guide To Sales Tax in the Encyclopedia for more information.

A few stores also charge a little extra, up to 3%, if you're paying by credit card. That's usually more common in very cheap discount stores, where the margins are so small that by the time they take off the card company's commission, they may be making a loss. If in doubt, ask - few stores warn you that they'll do this.

Traveller's Cheques are accepted as cash just about everywhere, although some places will not accept large denominations for small amounts. So it's always best to ask "can you take a $50 traveller's cheque?" before you sign it.

You must sign a traveller's cheque in front of the cashier, and you may be required to produce some form of picture ID - it's normal, don't get upset about it, just have your passport to hand. After all, the store isn't saying anything about you, they're just protecting their interests in general.

On the subject of traveller's cheques, always keep the receipt with the cheque serial numbers on it completely separate from the cheques. It's a good idea to leave a copy with a friend back home. Basically, if your cheques are lost or stolen, and you can tell the company exactly which cheques have been used and which ones haven't, you're likely to get replacements very quickly - so keep a record of which ones you use!

And remember that American banknotes look the same, especially to someone visiting the US for the first time. Check carefully before you hand notes over - most cashiers are honest enough to point out if you overpay, but some will be pleased to take a $50 bill that you thought was $5!

The dangers of unequal exchange rates!
If you buy something using a credit card, and have to take it back for a refund, be aware of the difference in buying/selling exchange rates. If you sell dollars, it will usually be at a rate up to $0.07 higher than if you were buying them.

It works like this ... in 1998 I bought a jacket for $50. It appeared on my credit card as a debit of £31.25 (an exchange rate of $1.60).

For a number of reasons, I returned the jacket and got a credit of $50 with no problem. Except that when it appeared on my statement, I was charged at the "selling" rate, and the pound/dollar rate had also slipped a bit. The actual rate was $1.69, and the amount credited was £29.58 ... I had made a loss of £1.67.

This has nothing to do with the retailer or the credit card company, and you just have to accept that this is what happens. So, if you do need to take something back, try and arrange to buy something else or get a credit note. You might even be lucky enough to persuade the store to give you the refund in cash, but I've not yet found a store that would do this.

However, if a retailer debits your card incorrectly by accident, and then re-credits it immediately, you need to be aware that the same equation may well apply.

This happened to me a few years ago in a hotel in Orlando. I paid the $110 bill, but they accidentally debitted $1100. The check-in clerk immediately cancelled the transaction, and debited the correct amount, insisting that the $1100 was cancelled before it had been processed ... but it hadn't. When I returned home, the $1100 charge appeared at an exchange rate of $1.58, and £696.20 was debited ... but the credit appeared four days later, at an exchange rate of $1.70 (there'd been a big change in the value of the pound, plus the difference in buy/sell rates) and the refund was worth £647.06. The difference was nearly £50!

In this case, I tried to get the £50 refunded by the hotel, but they wouldn't accept it. In the end I had to contact the credit card company, and they agreed to fund the difference.