Update December 10, 2014: The exchange rate is currently higher than it has been for years….at about 14.5 to a dollar….and is expected to continue to climb. For all the reasons listed below, this is an EXCELLENT time to travel to Mexico, especially if US dollars is your primary currency. All the extra money you’ll spend on high airline prices you’ll get back and more, just spending your dollars here south of the border.
One of the questions we hear frequently at the hotel, on local forums and around Playa del Carmen is, “Should I use US dollars or pesos in Mexico?” Our answer to that question is a resounding “Pesos!” Here are some of the reasons why:
First off, it is better for you financially to use pesos. In the more than three years since we’ve been living in Playa del Carmen, and for all of the years we’ve been traveling here, only once do we remember the exchange rate of dollars to pesos falling below 10. And that was just a month or so ago and didn’t last more than a few weeks. The rest of that time the rate has always been somewhere between 10 and 11. In other words, for every US dollar you exchange, you’ll receive anywhere from 10 to 11 pesos.
Note: Shortly after posting this blog entry, the exchange rate started to climb and has been much higher than we ever remember it being. Yesterday, December 17, 2011, we saw an exchange rate of 13.20 pesos to 1 dollar! This means you will realize a savings of over 30% on everything you buy in Mexico at the moment. And that was at one of the cambios; the rate at the bank will be higher. This is yet another reason to buy and use pesos instead of US dollars.
Exchange rates can be confusing sometimes. But think of it like this: Prices for items here in Mexico are almost always listed in pesos and don’t fluctuate just because a specific currency rises or falls. If a margarita costs $50 pesos, that will generally be the price regardless of the exchange rate. So if you change $100 US for pesos when the exchange rate is 10.5 to 1, you’ll get $1,050 pesos in return. If you change $100 US when the exchange rate is 11 to 1, you’ll get $1100 pesos. That’s one or two extra margaritas for your money, depending on the exchange rate. It may not sound like much, but it adds up very quickly.
If you use US dollars to pay for items, most businesses will give you only a 10 to 1 exchange rate. Why? First off, it’s to their benefit financially, since they can later take your US dollars to the bank and trade them in for more than 10 to 1 and pocket the extra pesos. Secondly, it’s simply easier to figure out.
Another question people often ask is “Should I change my money ahead of time or just wait until I arrive?” The exchange rate you’ll get in an airport or in the US will invariably be less than you’d get in town, so we would advise to use your dollars until you arrive, and then change money once you get to town. The best rate you’ll find is at banks, but sometimes the long wait makes it more trouble than it’s worth. Using your ATM card at a bank will give you a similar good rate. Just remember to factor in ATM fees, both here and at home. Mexican ATM fees are generally less than in the US. Many are around 70 cents US per transaction or less. Besides banks, you can also change money in any of the cambios (exchange houses) as well as many small stores. Check around for a good rate, though, as rates vary. Rates will generally be posted on signs outside.
And one other question we hear quite frequently is “Should I tip using dollars or pesos?” The answer to this is that it’s totally up to you. Again, if the exchange rate is more than 10 to 1, which it generally is, then $1 US is worth slightly more than 10 pesos. So, the person receiving a dollar bill can exchange it for more than 10 pesos–a good deal for the person being tipped. Many people find it easier to carry around US $1 bills than Mexican 10 peso coins, obviously because coins are bulky and heavy. Remember that there are also $20 pesos notes that are great for tipping, as well, but they are harder to come by than US $1 bills.
One thing to remember is that you should never tip with foreign coins or torn bills of any kind. No place in Playa will exchange foreign coins–even banks–so foreign coins are worthless. Likewise, no one will accept damaged bills, whether Mexican or American. If you’re an American traveling in Mexico and you strike up a friendship with any locals, you might ask them if they have any American coins or torn US bills, and exchange them for them. You’d be doing them a big favor, since damaged bills and coins are easily used in the US.
Here’s a breakdown of the money you’ll likely see in Mexico. It’s easy to remember approximately how much each is worth–drop the final 0 on the peso & that’s its approximate worth in US dollars. (Note: this approximation is based on a 10 to 1 exchange rate – when the rate is 12 to 1, the cost in US dollars is actually 20% cheaper than the price here; when it’s 13 to 1, the cost in dollars is 30% cheaper. This is just a general rule of thumb to give you a crude idea of the cost of an item.)
20 pesos – about $2 US
50 pesos – about $5 US
100 pesos – about $10 US
200 pesos – about $20 US
500 pesos – about $50 US
1000 pesos (very rare) – about $100 US
10 pesos – the largest coin; about $1 US
5 pesos – about 50 cents US
2 pesos – just a little smaller than the 5 peso coin; about 20 cents US
1 peso – about 10 cents US
50 centavos – about a nickel
20 centavos & 10 centavos – virtually worthless & rarely used
One other thing to remember is that it’s difficult to find small change in Mexico. Shopkeepers expect you to pay with the smallest bill possible. It’s not uncommon to want to pay for something with a $200 pesos note (what you commonly receive in change from a bank) only to be told the business doesn’t have enough change. Even banks will rarely give you small bills or coins. Don’t ask us why–we still can’t figure it out!
One final note about the “tipo de cambio” or exchange rate. Many stores will post signs that say “Tipo de Cambio: 10” or “Tipo de Cambio: 10.5.” If you run across a store that quotes prices in US dollars, the lower the tipo de cambio, the better (just the opposite of when prices are quoted in pesos). Don’t get too confused on this issue, though, as it’s somewhat rare to see stores with prices quoted in dollars. However, if you do find yourself in an area where all the prices are posted in dollars, it is probably better to just use dollars, unless you are familiar enough with the current exchange rate to know that their tipo de cambio is fair. The reason for this is that any time you convert from one currency to the other in a store, the shopkeeper will figure out a way to make a little money on the exchange. Tricky, yes, but that’s the way it works.
But back to pesos. Not only does using pesos put more money in your pocket, but using the local currency of the country where you’re traveling enriches your travel experience. You’ll feel much more a part of the country if you “do as the Romans do,” and you’ll be treated less like a tourist the more you steep yourself in the country’s culture.
12/18/11 note: A couple of things have changed since we wrote this blog several years ago. One, the price of using an ATM has risen from about 7 pesos to closer to 25 pesos – more in line with what you’d pay at a US bank. Secondly, the large chain stores have been consistently having a really good exchange rate–often better than the banks. These stores include Walmart, Mega, Sam’s Club, Chedraui and Soriana. If you shop in any of these stores, feel free to use your dollars and not feel you’ll get ripped off. Because the exchange rates are so good, there are some restrictions so as to avoid people using the store as a bank. For example, you can’t buy a package of gum and pay with a huge bill. (Remember, all of your change will be in pesos, not dollars.) But if you’re out to do some shopping for your kitchen room or condo and pay with dollars that won’t result in lots of change, you’ll be in good shape.
5/22/14 note: Over the past few years, although the exchange rate still fluctuates daily, it has settled in at around 12.5 pesos to the dollar, give or take. This is great news for Americans especially, as the US dollar continues to stretch much further than before, making Mexico a great vacation for those on a budget.