Direct answer
Both — use card at hotels, restaurants, supermarkets (always say "pesos" not USD); carry 1,500–2,500 MXN cash for taxis, taquerías, tips, market vendors, and the occasional broken POS terminal. Charles Schwab or Fidelity ATM cards reimburse fees.
Cards work widely at hotels and bigger restaurants — carry pesos cash for street vendors, small taquerías, tips, and backup when terminals fail.
Full details
Mexico is a cash-and-card economy depending on where you are in town, and the wrong choice costs you 5–10% per transaction in surcharges, bad exchange rates, or unnecessary fees.
Use a card (always in pesos, not USD): - Hotels, hostels, vacation rentals - Sit-down restaurants on 5th Avenue, Quinta Alegría, Centro Maya, Paseo del Carmen - Supermarkets (Chedraui, La Comer, Walmart, Soriana, OXXO) - Gas stations (chip-and-pin works fine) - Pharmacies (Farmacia Guadalajara, Yza, Similares) - Tour operators with offices
Critical rule: when paying with a card, the terminal will ask "USD or MXN?" — always pick MXN (pesos). Picking USD triggers "Dynamic Currency Conversion" which adds 4–7% to your bill via the merchant's exchange rate. Your bank's exchange rate is always better.
Use cash (pesos, not USD): - Taxis (the official airport taxi takes cards, street taxis don't) - Beach clubs (cover charge often cash, food + drinks usually card) - Local taquerías, fonditas, market stalls in Centro - Tips (10–15% at restaurants if not already included as "servicio") - Small bodegas / corner stores - The Cozumel ferry (cash gets a small discount) - Massage / nail places off 5th
Best way to get pesos: - Best: Charles Schwab debit, Fidelity Cash Management, or any "no foreign ATM fee" card. They reimburse ATM fees worldwide and give you the bank exchange rate. - Good: Your home bank's debit card at a major Mexican bank's ATM (BBVA, Santander, Banamex). Fee usually $3–6 per withdrawal, plus your home bank's foreign transaction fee (1–3%). - Avoid: Currency exchange counters at the airport ("Cambio" booths) — terrible rates. ATMs in convenience stores (often Euronet branded) — 5–8% surcharge plus poor exchange.
Carry-amount guideline: - 1,500 MXN (~$80 USD) for a casual day in Centro - 2,500 MXN for a beach club day or rented golf cart somewhere - Don't carry more than you can afford to lose; ATMs are everywhere
Bring at least 2 cards in case one gets eaten by an ATM or temporarily flagged for fraud. Notify your bank's fraud team that you're traveling to Mexico before you fly — modern fraud detection is usually fine but some smaller banks still freeze cards on first international charge.
Local context
ATM withdrawal fees + FX vary; airport exchanges are rarely the best.
Common mistake
Relying on USD everywhere — awkward pricing + weaker bargaining.
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