Before relocating to Mexico, I was convinced we could navigate living here just fine with our U.S. bank and brokerage accounts, based on the recommendations of other expats. My assumption that we could do without a local bank account was reinforced by some advice in Retirement Secrets of Mexico, a best-selling book by expat Russell Blake.
While I still recommend his book, I've changed my mind a few times on this topic.
Why Bother Getting a Bank Account in Mexico?
Roughly a year and a half of struggles convinced me that having a local bank account made sense.
The inconveniences included:
Inability to pay monthly utilities online because the providers don't accept foreign credit cards or payment via Wise. Instead, frequent trips to Oxxo are required.
Sporadic problems sending money via Paypal for our internet bill
Needing lots of cash on hand to pay local service providers like maids, electricians, handymen
Struggling to use a mobile app other expats swore worked with foreign credit cards
Paying high fees on mobile payment apps like Paypal (~ 3% per transaction) when they do work
Paying up-front fees each time we withdraw pesos at a local ATM (Fidelity and Schwab refund these fees for us, but many other U.S. banks don't)
Inability to quickly send money to people in Mexico
No place to deposit cash while in Mexico
While we own our property, another reason many foreign residents decide to open a local bank account is to have a convenient way to pay their rent. Since many renters need more than they can withdraw from an ATM in a single day ($9,000 pesos MXN is the daily ceiling at most banks), it means multiple trips to the bank to take care of this basic task.
Besides the hassle, carrying that much cash around to hand-deliver is also a safety risk in some parts of Mexico.
The Benefits of Having a Bank Account in Mexico:
This decision on whether to get a local account is a personal one and reasonable people can differ. That said, plenty of things become easier when you have a Mexican bank account...
Here are some of the biggest benefits:
Saving time by paying electric, water, and gas utilities online instead of at Oxxo
A way to pay bills while traveling outside of Mexico
Eliminates the need to hold lots of cash for local service providers (like a maid)
Avoids fees altogether when you withdraw pesos at your bank's ATM
Able to send money quickly to others in Mexico, e.g. paying your bill in a restaurant that doesn't accept cards, or conveniently paying a friend who spotted you cash
A place to transfer foreign funds when the Dollar/Peso exchange rate is favorable
It's easier to receive payments from locals when using cash is impractical or impossible, e.g. when you sell furniture, a car, or a piece of property
A way to buy tickets to local events that can't accept foreign credit cards
It's a stepping stone to building credit in Mexico
Opens a door to other investments like a high-yielding bank CD (some pay ~ 11% at the moment)
Is Your Money in a Mexican Bank Account Insured?
This question gets to the root of my longstanding resistance to opening a bank account in Mexico. The legal answer is yes, your funds are insured through the Bank Savings Protection Law passed in 1999.
The public agency in charge of administering the law is Protección al Ahorro Bancario (known as IPAB). Their mandate -- per the Mexican government's website -- is to rescue depositors up to the covered amount when a Mexican bank fails.
Deposits in ordinary savings and checking accounts, payroll accounts, and "term" deposits in basic investments such as bank CDs are covered by IPAB's insurance up to $3.1 million pesos. At the current exchange rate this equates to roughly $181,700 USD in covered funds per individual, per bank.
That's how Mexico's bank deposit insurance system works on paper. And though many foreigners have held bank accounts in Mexico for years without incident, the fact is that your money's "safety" is not guaranteed.
First, not every financial institution in Mexico that accepts depositors' money is covered by IPAB insurance. The insurance applies to traditional Mexican banking institutions. This list from September 2023 was the most up-to-date resource I could find on the institutions offering IPAB-covered products.
It's worth noting that Mexican regulators have deemed the top six banks operating domestically as "too big to fail." In other words, their failure would pose a systemic risk to Mexico's banking system, so in the event of some epic screw-up or external shock, they would be bailed out.
The "too big to fail" banks in Mexico are BBVA, Santander, CitiBanamex, Banorte, HSBC, and Scotiabank, with all but Banorte being foreign-owned.
While your deposits would still be covered at smaller, regional banks on the list, it could be a lot messier recovering your funds in the event of a failure.
Now if you don't care for big banks and choose to deposit your money with brokerage firms, fintech companies, crypto exchanges, or other non-traditional financial institutions (anywhere, not just in Mexico), those funds are generally NOT covered and at risk of major loss if something goes wrong.
Second, individual depositors with accounts at Mexican banks covered by IPAB insurance have lost the equivalent of millions in USD deposits through the nefarious activities of bank employees.
Say what?
Banco Monex Fraud Case
In the stunning case of Banco Monex from 2018, approximately $8 MM USD in client deposits across 158 accounts disappeared over several months.
Most of these accounts were owned by wealthy and overly-trusting American retirees living in San Miguel de Allende, who relied on a well-connected Monex bank employee to take care of their basic banking and investing needs.
The employee was allegedly stealing clients' money via unauthorized wires, withdrawals, and transfers to a network of individuals and shadow accounts, all while reassuring her clients that their accounts were in order.
When the scandal broke, Monex's initial response was not encouraging-- and IPAB did not get involved due to the commingling of depositor funds (courtesy of the rogue employee) between Monex's banking and brokerage businesses, with the latter not being insured.
Following protracted negotiations, many bank clients recovered a portion of their stolen money. However, they had to advocate for themselves -- filing their own claims and hiring their own lawyers to obtain justice. And plenty of them lost big money.
Bottom line: If you bank at an IPAB-covered institution with major weaknesses in its internal security protocols, you can still lose some or all of your money and the regulators won't help you.
Accendo Banco Failure
In the 2023 failure of Accendo Banco we saw that even public depositors (plus the National Lottery!) could become victims of bank fraud with no assurance of remedy by the feds.
In this case, a staggering $3 Billion pesos MXN disappeared from a bank managing public funds from various government entities, including the States of Mexico, Puebla, Veracruz, Baja California, and Oaxaca.
Several municipalities' public monies were also lost in this mess, including my city of Zapopan in the Guadalajara metro area, and Tijuana up north.
Accendo Banco was reportedly under-capitalized and under scrutiny by federal regulators, then descended into chaos with internal partners accusing each other of various kinds of fraud, including making illicit payments to shell companies, and so forth.
To date, no one has been charged, no public money has been returned to state or local governments, and the partners remain at large, "pursuing new investment opportunities" according to the publication EME | EQUIS.
How Depositors Recover Their Funds When a Mexican Bank Fails
When a Mexican bank fails and the loss involves covered bank products at covered institutions, a depositor does NOT need to file a claim to get reimbursed by IPAB. However, unlike bank failures in the U.S. where the FDIC makes insured depositors whole in hours or days, in Mexico, it can take months (or even years in the Monex case) to get your funds back.
According to the IMF, following two Mexican bank failures in the 2020-2021 time period, IPAB returned 95% of depositors' funds within 3 months. The international standard is 100% restitution within 7 days, so the Mexican system still has room for improvement-- but what progress from the years before 1999 when there was no safety for bank deposits whatsoever!
Given these realities, it's worth asking yourself... Can I afford to lose this money if something goes wrong at my bank?
Practical Tips to Keep Your Money Safe in Mexico
First, if you decide to bank in Mexico as a foreign resident, commit only what you can afford to lose, keeping the rest of your life savings in a country where depositor protections are stronger and bank failures are handled expeditiously by regulators.
Second, check your Mexican bank account statement every single month to ensure that you recognize all transactions and transfers. Take immediate action at the bank branch -- in person -- if anything looks suspicious to you.
Finally, have a Plan B in place if you were cut off from those funds for some time, to ensure that everyday needs can still be met.
One option could be to transfer funds with Wise to a trusted friend's account. Operating in 160 countries and handling transfers in 40 different currencies, Wise is a safe, fast, and low-cost resource for bank-to-bank transfers. They can tackle pretty much any type of transfer you want to do, including wires, ACH, and debit/credit card-based transactions.
Living in Mexico Without a Local Bank Account
If you decide that opening a bank account in Mexico isn't worth the risk or hassle, what is the alternative? Here are the critical resources I'd recommend U.S. expats put in place to save time and reduce fees when handling money in Mexico:
A U.S.-based savings or checking account (FDIC insured up to $250,000 USD) with an excellent mobile app and website, and international wires at low or no cost.
A basic brokerage account at Schwab or Fidelity, which automatically reimburse ATM fees from Mexico.
An account with Wise. This international money transfer service offers a quick, low-cost way to move funds from your U.S. bank to a recipient's Mexican bank account.
Paypal account. While I'm no fan of this company it's a frequent 'alternative payment' option on Mexican company websites and useful if you don't have a Mexican credit card or local bank account to pay out of.
Access to a reliable ATM and/or Oxxo store 24 hours a day to access pesos and pay bills in person.
To be sure there are solutions besides these, but with this setup, you can live in Mexico relatively easily without a local bank account.
For those who see the benefits of having a local account outweighing the risks, I'll be sharing details later this month on what it takes to open a bank account in Mexico as a foreign resident (not a tourist!) in Guadalajara.
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