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Money in Mexico: Tipping, Negotiating, Cash, and Credit Card Use

Tips for navigating the financial aspects of a trip to Mexico.

Get the best bang for your peso.

If you're ever planning on visiting Mexico for a tropical vacation, it's good to have an understanding of how money works in the Latin American country. There are a few things about the culture of spending and moving money that differ greatly from "western" living. Here are a few important points to know before your trip to Mexico.

Cash is King

In Mexico, credit cards are not used nearly as frequently as they are in the U.S. or other "developed" nations. This comes as a shock to many of us who have become acquainted to using a plastic card even for a $2 coffee purchase. In Mexico, you can expect to be met with resistance or at the very least a weird look if you try to use a credit card to buy a coffee in most places.

The Mexican culture very much revolves around cash. Many Mexicans do not own a credit card. Additionally, international service fees for using your credit card abroad make it a rather unwise proposition most of the time. This is not to say that you cannot or should not use a credit card in Mexico ever, but rather just to be prepared not to rely on one as much as you usually might. Most hotels will accept them, of course, but for smaller purchases, it is a much wiser idea to use cash.

About that cash thing...

Make this your number one money-related rule for your trip to Mexico: do not use U.S. dollars to buy anything. Merchants in Mexico make a killing each year by giving tourists a bad exchange rate when they purchase an item in dollars. Currently, 1 dollar is worth about 13 pesos. This number fluctuates between 12-14 at the present time. However, merchants in Mexico usually use the "simpler" (and far more profitable, for them) method of counting 1 dollar as being worth 10 pesos. So for example, suppose you want to buy a blanket that costs 300 pesos. If you want to make this purchase in dollars, the merchant will almost certainly quote you a price of $30. In doing so, they're making an extra profit of around $5-$6 just by giving you a bad exchange rate.

Getting pesos

Now that you know to always pay for everything in pesos, you need to know how to get pesos. There are generally two ways to go about doing this. The first way is to use your ATM card to make a withdraw. This is not a terrible method and probably your best option if you think you'll only need around $500 or less worth of pesos for your trip. Be aware that your bank will probably rip you off in a few different ways. First, the Mexican ATM will charge a fee (25 pesos is pretty typical, don't pay more than this). Secondly, your U.S. bank will charge a fee for using a foreign ATM. Additionally, they will charge you a currency conversion fee. Of course, they make money by offering you a bit worse of a rate than the "true" market rate on the exchange. So if you take 3,000 pesos out of an ATM, the "true" value on those pesos on a given day might be around $230, but your checking account will probably ultimately be deducted $240-$245 after all of the various fees and costs. Welcome to the world of changing currencies.

An important word about ATMs in Mexico: do not use shady-looking ATMs that are not directly connected to a bank. There is a big scam taking place in Mexico right now where people are installing number-readers on "street ATMs" and making purchases on your card after acquiring your number. Only use ATMs in Mexico that are inside of or directly connected to an actual bank.

The second way to acquire pesos in Mexico is to bring dollars into the country and exchange them at a currency exchange center. Due to the fees associated with using an ATM, this is probably a wiser choice if you are wanting to hold more than $500 worth of pesos on your trip. So if you plan on doing a lot of shopping and spending in Mexico, bring a bunch of dollars on your person into the country and exchange them when you arrive. An important note about currency exchange centers is to shop around for a good rate. Never exchange your money in the airport or in any other highly tourist-dense area. Go off the beaten path a little to find an exchange center that offers better value for your dollars. Your hotel may be able to assist in helping you find the best exchange center in the area.

Be smart...

In Mexico, or anytime you are traveling abroad, never carry more cash than you need. Leave your pesos safely behind at your hotel in the safe. There is no reason to be walking around with tens of thousands in pesos unless you're planning on spending them imminently. Leave your hotel with only the money that you need for that trip out.

Number one rule for Mexican culture is that...

...everything is negotiable! Us "westerners" are not used to this. In Mexico, the price is never the price. And the more of a "tourist" you appear to be, the higher of a price you will be quoted. In marketplaces the price you are quoted for an item will often be more than double the amount they will actually settle for. If they tell you a sombrero is 350 pesos, it can probably be had for 150. It's okay to have some fun negotiating with the merchants but remember that they're people just like you trying to make a living. Be respectful and fair. A good negotiating tactic is to tell them a price just slightly under what you are actually willing to pay and stay firm with that number. If they tell you the Mexican blanket is 500 pesos, tell them you can only pay 200 for it. Stay firm about this. They will try a few times to get you to raise your number but eventually give up when you won't budge. When they finally offer to let you have it for 250, you can accept their offer. Remember, your biggest strength in any negotiation is the ability to walk away. Often the price will magically drop significantly once you start to walk away. And if it doesn't, you can always come back later if you really want it.

Closing Tips

  • In Mexico, tipping just 10-12% at restaurants and bars is perfectly acceptable and the norm.
  • While tipping less is acceptable at restaurants, you need to tip more people. Get in a habit of throwing a couple of pesos to the guy who bags your groceries, the organizers and guides for your excursions, the kid who scoops your ice cream, and to the old blind lady on the street.
  • Negotiate the price of all taxi rides before getting in the vehicle.
  • Never give someone money for something without first seeing the item.
  • Be careful about buying "Cuban" cigars. They are often cheap Mexican or Dominican cigars with a foil from a "Havana" cigar swapped in. You end up paying $20 for a $2 cigar.
  • You are a walking dollar sign to merchants and nothing else. You owe them nothing, not even the common courtesy of responding to their questions when you walk by which are only meant to engage you in a sale. Sorry to say, they don't actually care where you're from.
  • The people giving you your vacation rental will almost certainly try to screw you out of getting your deposit back. Try to negotiate giving them as small of a deposit as possible and factor it in as a cost of your unit. If you get it back, you can be pleasantly surprised as they will probably spend it as soon as you give it to them.
  • When we say "everything is negotiable in Mexico", we do mean everything, including a run-in with the law. You are best off not doing anything you're not supposed to, but if you get caught being drunk in public or having sex on the beach, you can always bribe your way out of the situation.
  • If you get gas in Mexico, monitor the attendant closely to ensure they put the full amount you gave them into the tank.
  • Count your change after every transaction before leaving the point of sale.
  • Monitor the cost of every item as it is scanned to ensure the price matches with your expectations.
  • Never, never leave money or other items unattended, even for a second. Only a fool would attempt the "hide your money in your shoe" trick at the beach in Mexico!

 

 
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