Although many stores and vendors accept U.S. currency, tourists pay a steep penalty when using dollars. This “street rate” of exchange can be 30-40% less favorable than the bank rate, and budget-conscious tourists should convert dollars to pesos prior to spending cash in Mexico.
Options When Converting U.S. Dollars to Pesos
There are many options available to tourists when exchanging dollars for pesos. Traveler’s checks and/or cash can be converted at banks or casas de cambio (exchange houses), and ATM machines are increasingly common. However, rates of exchange differ significantly between options, and even among the same option (such as banks) within a given locale.
In addition, convenience and safety are issues that warrant consideration. Long lines, formidable procedures, and language can be overwhelming. Carrying unneeded cash risks unrecoverable loss, while replaceable traveler’s checks sometimes are impossible to cash.
Exchanging Dollars for Pesos at a Bank
Banks offer exchange rates closest to the floating rate. Instead of charging commissions, banks are compensated for exchanging funds through the spread between the purchase and sale price of currencies. For example, a bank might buy dollars at a rate of 13.62, meaning that they will give you 13.62 pesos for each dollar you exchange. At the same time, they might buy those pesos back at a rate of 13.37, meaning that you would have to give them an additional .50 pesos in order to buy each original dollar back.
Exchanging dollars for pesos at a bank can also be frustrating. Most banks discourage the exchange of dollars, either through restrictive procedures, limited time windows or simply non-acceptance, especially for traveler‘s checks. A lot of time can be spent in a bank line, only to find that an exchange is not possible.
Exchange Houses (Casas de Cambio)
Exchange houses are often more prevalent than banks, and are certainly more convenient. They post their exchange rates prominently, are often open when banks are not and handle transactions accurately and expeditiously. Their rates are not as favorable as the banks, but the added convenience may be worth the cost. While a local bank may quote an exchange of 13.89 pesos per dollar, a nearby exchange house might be quoting 12.50. In other words, exchanging $100 U.S. at the exchange house would net 139 fewer pesos than at the bank, a difference of 10%.
Different exchange houses and banks typically offer different rates. This has more to do with currency inventory than a desire to compete, and tourists are well-advised to shop for the best available rate. This difference might amount to .50 peso or more, meaning that a $500 exchange could generate 250 more pesos at one location than at another.
Using Bank ATMs to Obtain Pesos
Bank ATMs are commonly found in bank entry areas, usually open even when the bank is closed. ATMs can also be found in large supermarkets, like Soriana and at some PEMEX (gasoline) stations in larger cities.
Bank ATMs offer essentially the same exchange rate as the bank counter, but are far more convenient and accessible. Fees normally are charged for each transaction, sometimes both by the Mexican bank and the card’s issuing bank. Typical fees might be $5 U.S. for each transaction plus 1% of the total amount of cash obtained. For example, using an ATM card to obtain $300 U.S. in pesos could cost $5 plus $3 (1%), for a total of $8, or almost 2.7%.
Note that these charges apply regardless of size or type of transaction. In other words, if you obtain $20 U.S. in pesos, the charge could be $5.20 ($5 plus 20 cents), for a whopping 26% fee. Even worse, if you elect to check your account balance before withdrawing funds, you could also be charged $5 for the inquiry “transaction”.
How to Avoid ATM Charges: The Best Way to Exchange Dollars for Pesos
There is a way to take advantage of the convenience of ATMs and to avoid the fees. If one uses an ATM (either at a bank or elsewhere, like a supermarket) for a bank with which they have an account, the fees may be waived. For example, HSBC and Scotiabank are based outside of Mexico, and an ATM card from either bank provides free withdrawals in Mexico.
Banamex is owned by U.S. Citigroup, and Banco Santander is partly owned by Bank of America. Using ATM cards from these U.S. banks provides free transactions at the Mexican affiliated banks. Tourists should check with the personal banks to see if similar relationships have been established.
Using Autopista Toll Booths to Obtain Pesos
For tourist drivers, the fee booths on toll roads (cuotas or autopistas) can be another good source for pesos. Although most toll booths in mid and southern Mexico require payment in pesos, those from Mazatlan north will accept dollars, and return change in pesos. This is particularly useful to tourists entering Mexico from Arizona in a car. One can build a cache of pesos by paying tolls between Nogales and Mazatlan with twenty-dollar bills.
The toll booth exchange rates are posted and are quite favorable. Drivers, however, are advised to carry a calculator and to confirm the proper change before driving on. Multiply the posted exchange rate times the dollars you pay with, and subtract the toll in pesos to find the amount of change due in pesos. For example, if the toll is 35 pesos, the exchange rate 12.50 and you pay with a 20 dollar bill, 12.50 times 20 dollars equals 250 pesos, minus the toll of 35 equals the correct change due of 215 pesos. Mistakes do happen.
Use Different Options for Exchanging Dollars for Pesos, as Circumstances DictateWhile using an ATM card at a bank affiliated with your home bank is the easiest and least expensive way to obtain pesos, it isn’t always an available option. To be safe, be prepared to use other alternatives.