The official national currency in Laos is the Lao kip (LAK). Although only kip is legally negotiable in everyday transactions, in reality three currencies are used for commerce: kip, Thai baht (B) and US dollars (US$). In larger cities and towns, baht and US dollars are read­ily acceptable at most businesses, including hotels, restaurants and shops.

In smaller towns and villages, kip is usually preferred. The rule of thumb is that for every­day small purchases, prices are quoted in kip. More expensive goods and services (e.g. long distance boat hire) may be quoted in baht or dollars, while anything costing US$100 or more (e.g. tours, long-term car hire) is quoted in US dollars.

Despite experiencing relative stability in re­cent years, the kip cannot yet call itself a stable currency. As such, prices in this guidebook are given in the US dollar equivalent.

The Lao kip is not convertible to any cur­rency outside of the Lao PDR. Because of this, the only reliable sources of foreign exchange information are those inside the country.

ATMs

Travelers on their last kip have been giv­ing thanks that ATMs have made a tentative landing in Laos. But before you get overex­cited, the ATMs are only in Vientiane and dispense a maximum of 700,000 kip (about US$70) a time, with each withdrawal incur­ring a US$2 fee from BCEL. If, like most of us, you also have to pay extortionate charges to your home bank on each overseas withdrawal, that doesn't work out so well. So taking your plastic into the bank itself might still work out cheaper; see right.

At the time of research ATMs dispensed cash - in Lao kip - to Visa and MasterCard accounts only, despite stickers promising ac­cess to Cirrus and Plus accounts. This might change, but don't count on it. We met one traveler who had to go to Thailand to ac­cess his cash - an expensive diversion when you consider he needed to get a new visa to come back.

Banking

Foreign residents of Laos can open US dol­lar, baht or kip accounts at several banks in Vientiane, including branches of six Thai banks. Unfortunately, if you already have an account at a Thailand-based branch of a Thai bank, you won't be permitted to withdraw any money in Laos; you must open a new account. Alternatively, expatriates living in Vientiane use Thai banks across the river in Nong Khai because interest rates are higher and more banking services are available.

Black Market

There is no real black market in Laos and un­less there's an economic crash that's unlikely to change. Unlicensed moneychangers can be found in larger towns, and sometimes offer marginally better rates, but it's hardly worth seeking them out unless you're changing enough cash to fill a wheelbarrow (admittedly, that's not as hard as it sounds in Laos).

Cash

Laos relies heavily on the Thai baht and the US dollar for the domestic cash economy. An estimated one-third of all cash circulat­ing in Vientiane, in fact, bears the portrait of the Thai king, while another third celebrates US presidents.

However, the vast majority of transactions will be carried out in kip, so it's always worth having a wad in your pocket. Kip notes come in denominations of 500, 1000, 2000, 5000, 10,000, 20,000 and the recently printed 50,000 kip. Small vendors, especially in rural areas, will struggle to change the 20,000 kip and 50,000 kip notes - some we met had never even seen a 50,000 kip note. Also, both of these larger notes are red, so watch you don't go handing out 50,000 kip notes thinking they're 20,000 kip.

For larger transactions the dollar and the baht are favored. They also make carrying money less of a hassle; five 1000 baht notes -about US$135 worth - are quite a bit easier to carry than 135 10,000-kip notes. If you plan on making frequent transactions of over US$20, you can save luggage space by carry­ing most of your cash in baht and/or dollars, along with smaller amounts of kip.

Once you leave Laos no-one - except perhaps other travelers on their way into Laos - will want your kip, so spend it before you go.

Credit Cards

A growing number of hotels, up market res­taurants and gift shops in Vientiane and Luang Prabang accept Visa and MasterCard, and to a much lesser extent Amex and JCB. Outside of these three towns, credit cards are virtually useless.

Banque pour le Commerce Exterieur Lao (BCEL; thandakhdan kqan khda taang pdtheht Ido in Lao) branches in Vientiane, Luang Prabang, Vang Vieng, Savannakhet and Pakse offer cash advances/withdrawals on Visa credit/debit cards for a 3% transac­tion fee. Other banks may have slightly differ­ent charges, so if you're in Vientiane (where there are options) it might be worth shopping around. Advances/withdrawals can be made in Lao kip only - it's not possible to withdraw US dollars or Thai baht.

Exchanging Money

After years of volatility the kip has in recent times remained fairly stable at about 10,000 to the US dollar. Don't, however, count on this remaining the same.

Exchange rates are usually virtually the same whether you're changing at a bank or a moneychanger. Both are also likely to offer a marginally better rate for larger bills (US$50 and US$100) than smaller bills (US$20 and less). Banks also tend to offer better rates for travelers cheques, though the whole process of exchange is much more protracted. Banks in Vientiane and Luang Prabang can change UK pounds, Euros, Canadian, US and Aus­tralian dollars, Thai baht and Japanese yen. Elsewhere most provincial banks change only US dollars or baht, though you might get lucky.

The best overall exchange rates are those offered at the BCEL. Lao Development Bank has similar rates.

Licensed moneychangers maintain booths around Vientiane (including at Talat Sao) and at some border crossings. Their rates are simi­lar to the banks and they stay open longer.

It can sometimes be difficult to change travelers cheques because the bank won't have enough kip, especially in more remote provinces, so check that the bank can cover your cheques before you sign. Hence organizing your stash of cash before you leave a big town is highly recommended. If you plan on carrying US dollars or baht, stock up before you arrive in Laos. If you want to buy these currencies in Laos head to a market in a larger town or city, ask around for a money changer and don't expect great rates.

Exchange rates at upcountry banks tend to be slightly lower than what you'd get in Vientiane, despite the fact that the national bank mandates a single daily rate for all government banks. For the latest rates from BCEL, check www.bcellaos.com. For a list of exchange rates as we went to press see the inside front cover.

Tipping

Tipping is not customary in Laos except in upmarket restaurants where 10% of the bill is appreciated - but only if a service charge hasn't already been added.

Travelers Cheques

Travelers cheques can be cashed at most banks in Laos, but normally only in ex­change for kip. Cheques in US dollars are the most readily acceptable, and in fact outside Vientiane they might be the only cheques accepted. Very few merchants ac­cept travelers cheques.