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The currency for Portugal is the Euro. In the ALGARVE region you can buy/exchange Euros very easily at Cambios (Bureaux de Change or Change Shops), Hotels and even shops. Many banks no longer offer foreign exchange however. The best rates and commissions are normally found at the bureaux in larger towns. Worst rates by far are at the airports and hotels. Avoid, unless there is absolutely no alternative. The best thing is to keep an eye out whilst out shopping and always check the commission rates. You will not find much variation in the rates of exchange, as the change shops tend now to be owned by the same company.
The Cambios (Bureaux de Change or Change Shops) are open seven days a week in the main tourist areas.
You may need your passport to exchange cash (increasingly rare) but you will need it for travellers cheques. It is now virtually impossible to find anywhere that will change Traveller's Cheques. Shops will not deal with them.
Be aware that the exchange rates obtained by changing currency are not good. There are always fees (hidden or otherwise) and Cambios do not exchange money at the most favorable commercial (bank) rates. The best bet is to use an ATM/Cashpoint to obtain Euros from your home bank account, or use a non-fee credit card where possible. To read more about fees associated with exchanging currency, using credit cards, etc. take a look at this extensive information posted on the Flyerguide wiki.
For British Visitors especially!
British visitors wishing to change cash should be aware that you will almost always get about 2% less in Portugal for British pounds than if you had changed your money before you left home. A few places have been known to refuse to change Scottish notes.
It is not a good idea to be carrying large amounts of cash around and even less of a good idea to bring thousands in cash if your accommodation does not have a safe.
You can use your British debit card or credit card to withdraw cash as required (see below) and of course in many restaurants and supermarkets. Be aware that the PINGO DOCE supermarket chain does not accept credit cards on purchases less than 20 Euros. Some small shops will not take cards for small purchases of less than €10. Most small bars will not accept cards at all.
Check what rate of exchange your bank or card issuer will give you. This is normally the 'commercial' rate and better than the tourist rate. Then ask what the 'foreign' transaction and currency conversion charges will be. There will nearly always be an overall loss (depending on the card and the bank) on the use of your cards especially if making small cash withdrawals or purchases, but very much more secure than relying on cash.
Where to withdraw cash
There are automated cashpoints (Multibanco) at most bank branches, at most of the larger supermarkets and in the main shopping areas of most towns. There are also machines at airports and major railway stations. They are not free for all transactions (see next paragraph). Look for the blue/green M signs. Euronet cash machines (yellow and blue) are now also widely available, often outside shops. So far as is known (July 2016) they do not charge for cash withdrawals.
Instructions are available in English and several other languages - you have to select the one you want. That menu will appear once you have inserted your card into the machine. At the end you also get the option of completing the transaction in GBP or EUROS. The ATM will charge you about £6 on 200 euros if you take the GBP option. Note that the maximum cash for each withdrawal is 200 Euros. You can repeat the withdrawal several times per day (for Portuguese cards it's 2x, for international cards it is many more) When you put your card in you will be prompted for your PIN. Do not be put off by the 6 asterisks indicating a 6 digit PIN is required - if your PIN is the more standard 4 numbers just put these in and hit the green CONTINUAR (continue) button. If you get a "service unavailable" message, it is most likely that the machine is out of cash - especially at weekends and Monday mornings. The machine will have an icon with a cross though it, but this isn't very obvious.
Visitors can also find Multibanco machines in every small town and even villages all around Portugal. VISA, Mastercard and American Express cards are widely accepted in hotels, shops and restaurants. Petrol (gas) stations usually take credit cards and cash. USA visitors especially beware that at night many petrol (gas) stations are automated and will only accept Chip and PIN credit cards.
Caution: After you insert your debit card, pin and amount desired, you might get a " service not available" message and no receipt or funds, unless you use BankAmerica cards. Also outside of Lisbon you may have a difficult time locating a place to exchange dollars for euros (again including inside a bank). Many places will not accept credit cards.
Bank opening hours
Banks do not open at weekends. Opening hours vary and are posted clearly outside. but usually banks will be open between 0830 and 1530. In smaller towns a bank may close for lunch. Most branches no longer offer a foreign exchange service.
If you can, book all of your hotels on-line from home, and pay for them in advance in your local currency (via a site like Expedia or hotels.com for example). That way you avoid fees from your credit card company or the those charged by obtaining cash from ATM machines.