Keeping Up On Currency

When you visit Mexico do you prefer to use Pesos or U.S. Dollars

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A common question a visitor to our beautiful Cabo San Lucas area asks is whether to pay for food, drinks, and merchandise in U.S. dollars or in Mexican pesos. It’s a bit more complicated than it seems, so let’s explore the pros and cons of each.

Remember, you’re in Mexico. The official currency is the Mexican peso.  Therefore in nearly most instances, you’ll be better off purchasing items and services in pesos. But the devil is in the details!

The official exchange rate changes daily but has been around 19 to 20 pesos to the dollar for the past year. That means one U.S. greenback buys 19 pesos at the official exchange rate. Next time you’re eating at one of our great restaurants or having a beverage in your favorite bar, look around for a sign which shows the exchange rate. 

Most establishments post an exchange rate of between 16 to 17 pesos per dollar. It’s required by Mexican law that menus and prices be posted in pesos (although this isn’t always followed). 

Many establishments list both dollars and pesos on their menu but don’t be fooled, the dollar amount shown will be at the lower exchange rate.  For example, if your tab comes to 1,500 pesos, and the posted exchange rate is 16 pesos, you will pay a bit under $91.00 USD  if you pay in dollars. But if you ‘buy’ pesos at the official exchange rate of 19, and use those pesos to pay your tab, those pesos would have cost you about $79.00 USD. That is a $12.00 ‘savings’ by paying in pesos. Multiply that by the number of times you’ll be going out, and it likely becomes significant savings.

What if you pay with plastic? It gets a bit more complicated! Be sure to check with your credit or debit card issuer. Some charge a 2 or 3 percent foreign transaction fee. Others don’t charge any fee. If you travel to Mexico often, it would be worthwhile to get a card without the fee. When you use your card, ask the establishment to run the charge through in pesos. This is very important, the card issuer will give an exchange rate very close to the official rate. In the above example, even with a 3 percent fee, your purchase would come to about $82.00 USD, still a savings of $9.00 USD. Some establishments that do accept credit/debit cards ask that you leave the propina (tip) in cash, so best to carry some actual currency with you.

That raises the question, where is the best place to get pesos? One of the easiest and least expensive is to use your bank (debit) card in an ATM.  It’s not as scary as it sounds. The ATMs at the banks, Walmart, or by the bank in the Mall are safe and low cost to use. Avoid the free-standing ATM's you see on the street, the fees are crazy high and security isn’t as robust. Again, check with your bank back home first. Some banks charge a foreign transaction fee for international ATMs while others do not. The typical fee at a Mexican bank ATM will be between 40 to 80 pesos per transaction, and the exchange rate will be very close to the official rate.  Most of the ATMs have instructions in both English and Spanish.  Remember, if they give you a choice, you want to pull the cash out in pesos not dollars.

If you have dollars with you that you want to exchange for pesos, check at your hotel/resort front desk. Many of them give a decent exchange rate, but not as good as the ATM. The currency exchange booth at the Cabo airport is expensive and usually has a very poor exchange rate. Likewise, the airport ATMs have high fees and low exchange rates. The exchange booth in front of the Tesoro Resort Hotel located on the Marina (behind Dock K) usually has a good exchange rate. They display a sign with the “buy” and “sell” rates for U.S. dollars and Euros if you are trading for pesos. Be sure to ask about any additional fees.

Another option is to buy pesos in the U.S. before coming to Mexico. Most U.S. banks have reasonable fees for currency exchange, but again, it varies significantly from bank to bank and the features you have with your account. If you’re an AAA member, AAA offers ‘free’ exchange, but at a slightly reduced exchange rate.

The answer to the question? It’s best to pay in pesos! If you plan to visit our area often, a recommendation is to obtain a credit/debit card with no transaction fees for purchases and ATM withdrawals.