What's Different about living in Portugal? Money

People who are unfamiliar with Portugal often ask us what it's like to live here vs the US. As recent transplants now residing in Portugal, we'll share our experiences so far.

Money and how money works is an important aspect of life. Portugal is part of the EU, so the common currency is the Euro. Lately, and a big plus for us, the value of the euro has fallen against the dollar to a current parity of 1:1. That's a huge bonus for us, as we had planned on taking a hit when converting cash from US dollars to Euros. The 52-week high was around 1.18 dollars to 1 Euro so that was a big point in our planning to move abroad. For now, were converting cash faster to take advantage of the lower rate thus reducing our overall cost of living here. By chance, good timing, divine intervention, or whatever you call it we are very blessed in this respect.

For those unfamiliar with the euro currency there is a bit of getting used to here as well. Similar to the US the smaller denomination coins are becoming less useful. I do love the €1 and €2 coins though, they seem much more efficient than a $1 bill. I am a bit annoyed that the folding money is sized differently, starting with the €5 bill being the smallest, €10 the next size up, the €20, and €50 slightly increasing in size. I haven't held anything larger yet so I don't know if the size growth continues in larger bills. All bills are slightly taller than a $ bill but noticeably shorter in length

Credit and Debit cards are readily accepted in most establishments, just look for the symbols for "MultiBanco" or "Visa/Mastercard". Very few will accept American Express, Diners or other cards. You will find some that are "Cash Only", mostly smaller establishments and signs are usually clearly posted

Taxes on goods and services in Portugal - Businesses are required to include all taxes in the price posted for an item. If you see an item priced at €20 the price that you pay at checkout is €20. No longer do we have to factor in the "sales tax" added to an item because what you see is what you are charged. The length of the printed receipts are a bit annoying as they will itemize the breakdown of the different tax rates applied. The tax is called "VAT" in Portugal (Imposto Sobre o Valor Agregado, or IVA for short), and is levied in three chargeable bands:

• General rate: 23% on taxable goods and services

• Intermediate rate: 13% on food and drink goods and services

• Reduced rate: 6% on certain essential necessities including certain foods (e.g., meat, fruit, vegetables, cereal), books, newspapers, medicines, transport, and hotel accommodation

• Separate IVA rates apply in the islands of Madeira (22%/12%/5%) and the Azores (18%/9%/4%).

Banking Most Portuguese use their debit cards or cash for daily purchases. Rarely will you see credit cards used by residents except for travel and other purchases that may require them, even though credit cards and debit cards are widely accepted throughout the country. Banks are not hounding you to open a credit account but most banks have them. The Banking systems are very progressive and have virtually eliminated check writing by allowing you to provide a code to your Utility companies as an example so they may direct debit payment from your account (with your approval of course). You can also pay bills through some ATM's. Very few offer a traditional interest-bearing savings account, instead investment vehicles are used such as treasuries and bonds but often at significantly lower interest rates than in the US.

Credit There is not a system-wide Point based credit scoring system, the EU is very big on personal privacy and does not allow creditors to have direct access to your information. Creditors don't look at or care about your score outside of the EU. A system called CCR, a report that can only be requested by you is used by lenders to determine your credit viability. This report is generated by the Banco de Portugal, the central bank of the Portuguese Republic. It lists what you have outstanding in debt, what you have borrowed, and what you have backed (co-signed, called fiador). The report also provides detailed info on all your existing credit contracts, when they started and/or finished, and whether your payments are on time or late. This information is provided to the Banco de Portugal by the credit agency with which you have a contract. You can be put on the "Black list" by writing bad checks or not meeting financial obligations.

Mortgages usually require a 20-30% contribution by the buyer, often as a result of very conservative property valuations by the bank. This is especially precarious in a fast-rising market like what we're experiencing now. Mortgage loans generally are not given past the age of 70 so if you are 60 and buying a home, a 10-year mortgage is all you can get. 90% of Portuguese who have mortgages are using what we call "variable rates" for interest calculations. This has been a plus for the past few years as the "Euribor" that determines rates have been very low. With the economic challenges of today, the Euribor rates are increasing causing higher monthly payments and some pain for those with these types of loans.