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

Travel Tips

One of the most frequently asked questions by travelers heading to México is, “Which currency should I use in Mexico?” Often debated is whether pesos or US 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 views.

USING CASH

CONSIDER YOUR HOME CURRENCY

If your home currency is not US dollars, it makes better sense to only convert to pesos. While US dollars are readily accepted in most tourist areas in México, you will generally get a better deal by paying in pesos, as explained below.

PAYING FOR ITEMS AND SERVICES

Even though you occasionally hear that Mexicans prefer US dollars, this is not generally true. Any money is gladly accepted, and they will never tell you otherwise. However, they must convert those US 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 the local exchange rate. The downside is that it forces them to spend at places that may not have the best prices for things they need.

Using pesos when paying for items and services is almost always more advantageous. Consider a simple example of buying five beers at a restaurant.

Assume the price for each beer is 45 pesos. Therefore, 4 x 45 equals 180 pesos. The business will set an exchange rate if you wish to pay in US dollars and are accepted at the establishment. This exchange rate is usually a fair amount below the market exchange rate. Next, assume the restaurant sets its exchange rate at 16 pesos per US dollar. In this example, your four beers would cost you $11.25 US. Also, note that any change you receive will be in pesos. If you paid with a $20 bill, you would receive 140 pesos in change.

Consider exchanging your US dollars for pesos at a local bank or money exchange. Suppose the average market exchange rate is 21 pesos per dollar. In that case, you can assume you will receive around 20 pesos per dollar at a bank and slightly less at a local money exchange. In this instance, your $20 US would get you 400 pesos. Exchanging your dollars for pesos would net you 60 more pesos after paying for your beer than paying in US dollars (400 – 180 = 220 remaining) or enough for another beer and most of the tip! After several more and larger purchases, you would realize significant savings.

While most businesses and vendors will accept US dollars in or close to tourist areas, many outside 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 US $1 bills. Depending on the current exchange rate, a US $1 bill may only be worth 19 pesos or less after exchange.

USING CREDIT AND DEBIT CARDS

Mexico’s most commonly accepted credit cards are Visa, MasterCard, and American Express. When possible, using a credit or debit card is most often the best option for foreign travelers. Banks and card issuers usually give the best exchange rate closest to the market rate. You will have to weigh using a credit card vs. cash if the merchant charges a fee for a credit card or the bank charges a foreign transaction fee (typically 1-4%).

Notify your bank or card issuer that you will be traveling to prevent a freeze on your card for potential fraud while 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 websites 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.

The ATM may charge a usage 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. Contact your bank before traveling if you don’t have a 4-digit PIN.

While in Mexico, always choose to be charged in pesos instead of withdrawing in your home currency. Otherwise, the ATM has a license to mark up your exchange rate, known as ‘Dynamic Currency Conversion.’ 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 traveling in. Be aware of your surroundings. Do not withdraw or carry large amounts of cash. Only take what you need and keep the rest securely stored. Whenever possible, use ATMs in trusted locations such as banks, etc.

Always use an ATM at a local bank. Never use freestanding ATMs, as they are most vulnerable to fraud and tampering.

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 tiny camera hidden above the keypad. If anything looks suspect, find another ATM.

If you are interested in planning a trip to Mexico, contact us today to get started!