Slumdog Millionaire - Finances in Iran

We had only been in Tehran for a few months when one of my classmates, a Japanese guy, mentioned he had to take a quick trip to Dubai. I asked him why, and he responded, worried, "I’m running out of money, and my bank cards don’t work here."

I was stunned—he clearly hadn’t done his homework before coming to Iran. One of the most noticeable differences in everyday life here is that international bank cards simply don’t work, except in a few rare places where you’ll be hit with a hefty fee (around 20%). So, to keep it simple, it’s best to bring as many dollars or euros as possible before arriving. Since I don’t feel comfortable carrying a lot of cash around, I ended up at the embassy, where students can safely deposit anything they want—completely free of charge. While that was helpful, Iran’s variety of solutions to problems didn’t stop there. The best one for me was to send money to an Iranian student studying in Hungary, who would then transfer Iranian rials (IRR) to me. It’s a win-win situation because typically, Iranians send money abroad through the sarafi system (currency exchange), which is a well-established and completely legal method. Using this system, you can transfer money from a Hungarian bank account to someone in Iran—or the other way around—in less than 72 hours.

My Iranian Bank Card

Even though Iran has been cut off from the international financial system for decades—thanks to sanctions affecting everything from banking to SWIFT access—the country still operates with around 35 banks, both state-owned and private. I won’t get into the specifics of how they function, but in terms of everyday banking services, everything we’re used to at home is available here as well. In fact, services like instant money transfers between cards have been a standard practice in Iran for years. It's also far more common for people to pay online or with a card, and nearly every street vendor has a POS terminal. The main reason is convenience: with inflation soaring in recent years, paying with cash would require an overwhelming amount of banknotes, making card payments a much easier (and safer) option. For example, the picture below shows what you can expect to get in exchange for 200 euros at a currency exchange.

Just to avoid any confusion: the money is only in a black plastic bag by coincidence—it’s not stolen, it just didn’t fit in my small purse. :-)

Another reason bank cards are so widely used here is the size of the banknotes. The smallest note is 5,000 IRR (about 10 HUF), while the largest is 500,000 IRR. With the average salary being around 55,000,000 IRR (roughly 110,000 HUF), you’d need a mountain of cash for any major purchase. By the way, the data is from 2022.

And as you can imagine, all those zeros can be tricky. To make things easier, most prices are quoted in tomans, which was the pre-revolution currency and equals the rial minus one zero. So, 1 toman = 10 IRR. It can be pretty confusing at first, and shopkeepers often raise an eyebrow when you ask whether the price is in tomans or rials. It’s also a handy, indirect way to signal that you think the price is a bit high!

I hope you haven’t lost the thread yet and are ready for the next twist! ;-)

Another reason you can quickly become a "millionaire" in Iran is the existence of three different exchange rates. Having two rates isn’t unusual—many developing countries deal with that—but three? That’s a rarity. The official rate is 45,000 IRR, the market rate is at least four times higher (though it fluctuates), and the third rate, which is about double the official one, is reserved for students studying abroad. The official rate is key for those with import licenses for state-approved goods, allowing them to import at a stable and affordable price. But this system also opens the door to plenty of abuse, and with the currency’s volatility, market speculation is so rampant that some people base a significant portion of their income on it. The money earned this way can be invested in many different ways, from the Tehran stock exchange (yes, they’ve had one since 1967!) to buying used cars. And the used car market here? Totally surreal. Prices of imported cars don’t go down—in fact, they keep rising. This is because, since 2016, there have been restrictions on importing high-performance cars. As a result, a car that might cost 30,000 euros in Europe could go for nearly three times that in Iran.