The currency of Peru is the nuevo sol. As of 25 October 2011, US$1 is worth S/.2.71 and 1€ is S/.3.63 (S/. is the symbol for "nuevo sol"). Coins are available in five, two and one sol, and in 50, 20, 10, 5 and 1 centimo. 5 and 1 centimo coins are not normally accepted outside of big supermarkets or banks, so avoid them (or bring them home for a collection or to give to friends). Notes are available at 10, 20, 50, 100 and 200 soles denominations; 200 soles notes are uncommon and will not be accepted in the same places that will not accept a US$100 note or a 50 pound note.
Counterfeiting is common: take time to get familiar with the money and do not hesitate to reject any note or coin (especially the 5 sol coins) that look suspicious, just like any Peruvian would do. In other words, if you want to look like a savvy foreigner, take 10 seconds anytime you receive a paper note to look it over. All bills have a watermark and security stripe, and the large number on the extreme right denoting the denomination of the bill will change from purple to green when viewed at an angle. Don't take any note that is ripped; you won't be able to use it anywhere else but a bank.
If you are stuck with a counterfeit coin or note, if you try to use it at big stores they may want to confiscate it. Don't accept damaged / ripped bills, since you will have to take them to a bank in order to change them into new ones before you can spend them. Be especially careful when exchanging money with money-changers on the street (a common way for counterfeit money to enter the money supply) or at the border (notably the one with Ecuador).
Typically, small bills are very helpful to carry around. Change large bills into small ones as often as possible. If you only have 50 and 100 Soles notes on you, consider changing them at a bank. Local merchants and taxistas often claim to not have any change on them, forcing you to wait in public while they search for some (potentially dangerous) and sometimes with the hope that you'll grow impatient and let them keep the change.
Travelers checks or credit cards are usual. Although cash has a ca. 2% better change rate, you are strongly advised not to carry large amounts of cash on your journey. The Banco de Credito (BCP) gives good rates on traveler checks. Rates in change offices are often somewhat worse. It's always worth comparing them before changing your money. When changing your money in change offices, check their calculations. Most of them make calculations on the fly for the amount you want using an electronic calculator in plain view, even showing you the process step by step (unless they are brutally obvious, like changing tens or hundreds). If they don't show, keep the money in your pocket and find someone that does. Even in the bank, check your bills for authenticity.
ATMs are available in big cities, upmarket hotels, and touristic areas. With a Cirrus or Maestro sign on it, you can withdraw cash easily. Make sure nobody is trying to see your PIN code. The exchange rate is the same as credit cards but fees are much lower. Most banks do not charge a fee for getting cash from their ATM's, however some do. Stay away from BBVA Banco Continental - their ATM's charge very high fees and don't tell you until it's too late (the fee is printed on the receipt, but not on the screen or next to the ATM as it is in other countries).
In smaller towns, it can happen that there are nobody who will accept your credit card or traveler checks. For this case, you should have taken care that you have enough cash with you. Nice new Dollar bills (not too high,10 or 20 US$ bills are fine) can help, too, since they are easier to change than travelers checks. In Peru, it's not as common for US$ to be accepted in transactions as in other countries (such as Ecuador). Often in small towns, local shops will change money for you. If so, it will be clearly marked. Take only US$ bills in good condition since bills slightly torn or even old-looking will not be accepted.
As a low budget traveller, you can live on US$50 per day without problems. Basic hotels or hostels (hospedajes) can be easily found in all Peru. The cost per night is about US$8-15 for a shared room in a youth hostel.
There are a lot of very cheap restaurants (US$0.50-1.50), but maybe this is not the best place to save your money. In somewhat better restaurants you can get lunch and dinner menus for US$2 -3. Of course, in every city you can find restaurants where you can spend US$20 and more if you want.
Buses are not very expensive. The usual price for a 10 h bus ride in a normal bus (not "Royal Class" or something like that) is about US$6. However, you'd do well in paying the extra buck, the difference between a US$6 ticket and a US$12 is enormous. Again, avoid bus companies that allow travellers to get into the bus outside the official stations. They are normally badly managed and can be dangerous, due both to unsafe practices or to highway robberies, which are unfortunately not uncommon. This should be heeded especially by female travellers going on their own. Get information at the hotel, hostal or tourist information booth before catching a ride.
Trains (except the ones for Machu Picchu, which are relatively expensive) run for similar fees.
Don't forget to retain your exit fee of US$30.25 They do accept USD or Soles for the fee and be sure to pay the exit fee before you get in line for security checks or you'll get to wait again.
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