Dollars or Pesos: Which Currency and Payment Methods Should You Use in Mexico?

One of the most frequently asked questions by travelers heading to Mexico is, “Which currency should I use in Mexico?” Most often it is debated whether pesos or U.S. dollars are better for the traveler or most desired by Mexican businesses and staff. The answer can depend on a few factors and from which perspective you are looking. In general, pesos are a much more favorable option for the traveler. Let’s consider a few different options and perspectives.

Using Cash

Consider Your Home Currency

If your home currency is not U.S. dollars, it makes better sense to only convert to pesos. While U.S. dollars are often accepted in the Riviera Maya, you will generally get a better deal by paying in pesos as explained below.

Paying for Items and Services

Even though you may occasionally hear that Mexicans prefer U.S. dollars, this is not really true. Any money is gladly accepted, and they will never tell you otherwise. However, they must convert those U.S. dollars to pesos at a bank or money exchange where the value becomes even less. Sometimes they can spend it at a store that will give them close to market rate. The downside is that it forces them to spend at places that may not have the best prices for things they need.

When paying for items and services, it is almost always more advantageous to use pesos. Consider a simple example of buying five beers at a restaurant.

Assume the price for each beer is 30 pesos. Therefore, 4 x 30 equals 120 pesos. If you wish to pay in U.S. dollars, and they are accepted at the establishment, there will be an exchange rate set by the business. This exchange rate is usually a fair amount below the market exchange rate. Next, assume the restaurant sets its exchange rate at 14 pesos per U.S. dollar. In this example, your five beers would cost you US$8.57.  Also, note that any change you receive will be in pesos.  If you paid with a $10 bill, you would receive MX$34 (34 pesos) in change.

Now consider you exchanged your U.S. dollars for pesos at a local money exchange. If the market exchange rate is 19 peso per dollar, you can assume you will receive somewhere around or close to 18 pesos per dollar at the money exchange. In this instance, your US$10 would get you 180 pesos. As you can see, exchanging your dollar for pesos netted you 26 more pesos than paying in U.S. dollars (180 – 154 = 26) or nearly enough for another beer! After several more and larger purchases, you would realize significant savings.

While the vast majority of businesses and vendors will accept U.S. dollars in or close to tourist areas, many outside of these areas may not. Many travelers may remain within or close to these tourist areas, but it is a good idea to carry at least some pesos “just in case”. You never know when you may come across a situation when pesos are the only payment accepted.

Finally, consider tipping in 20-peso notes instead of the U.S. $1 bills. If you tip with a U.S. $1 bill, it is only going to be worth around 18 pesos at most or even as little as 12 pesos after exchange.

Using Credit and Debit Cards

The most commonly accepted credit cards in Mexico are Visa, MasterCard, and American Express. If your bank or card issuer does not charge a foreign transaction fee (typically 1-4%), using a credit or debit card, when possible, is most often the best option for foreign travelers. Banks and card issuers will usually give the best exchange rate and closest to the market rate.

Be sure to notify your bank or card issuer that you will be traveling out-of-country to prevent a freeze being placed on your card for potential fraud when you are using it in Mexico.

Using ATMs

ATMs are common in Mexico, especially in tourist areas. You can use global ATM locators for Visa, MasterCard, American Express, and Maestro to find your preferred ATMs in Mexico.  Some banks have locators on their website or via a phone app.

It’s best to use ATMs owned by large banks such as Banamex, Banco Santander (part-owned by Bank of America), Banorte, and HSBC. Smaller vendors may charge more for your transaction.

You may be charged an ATM fee, an international withdrawal fee, and a currency exchange fee at an ATM. Some ATMs might charge an exchange fee, and waive the withdrawal fee.

It is wise to note that most ATMs in Mexico only accept 4 digit PINs for debit and credit cards. If you don’t have a 4 digit pin number, contact your bank before traveling.

While in Mexico, always choose to be charged in pesos, as opposed to withdrawing in your home currency. Otherwise, the ATM has a license to mark up the exchange rate you’re getting. This is known as ‘Dynamic Currency Conversion’, and it usually means extra charges are placed on you, the customer.

It’s best to use a debit card at an ATM. That’s because your credit card will probably charge a cash advance fee when you withdraw money. Furthermore, you’ll immediately start accruing interest on the amount you withdraw. You may still pay ATM fees when you use your debit card, but at least you’ll avoid paying interest.

ATMs are often a target for thieves regardless of which country you are in. Be aware of your surroundings. Do not withdraw or carry large amounts of cash. Only carry what you need and keep the rest securely stored. Whenever possible, use ATMs in trusted locations such as banks, etc.

ATM skimmers are becoming prevalent throughout the world. Be diligent, and have a look around the ATM. Look for tampering, a loose credit card reader or keypad overlay, or sometimes a very small camera hidden above the keypad. If anything looks suspect, find another ATM.