While it may seem a simple question to some, what currency you should use while vacationing in Mexico is often asked and more often gotten wrong. Most people know that the national currency of Mexico is the Peso, but most assume that the American dollar works just as well, if not better. It is a common misconception that Mexican merchants and vendors see the dollar as more desirable and revered, but that is not necessarily true.
Most retailers and merchants in Mexico will politely accept American dollars, but they prefer Pesos. The exception would be in Northern Mexico and Baja where merchants happily accept dollars and there isn't much chance to offend. You just need to make sure in these cases that you get a fair exchange rate. It is also a better deal for the tourist to use Pesos because prices are almost always less expensive when using Pesos.
You can plan ahead and use a currency exchange service before you travel, although you may find that a currency exchange at the airport might give you the best exchange rate. A good bill amount to obtain might be 500 Pesos, which would come in handy for tipping the bellman or a waiter. You can use your debit or credit card for all your other transactions and you can take along traveler's checks for any emergency that comes along. All of your cards and travelers checks can be replaced if stolen so don't take an inordinate amount of cash with you.
If you run low on cash you can always replenish your pocketbook at the many ATM bank machines that are prevalent in resort areas. You can cash your traveler's checks at an exchange house or a bank, which will result in the face value of the check multiplied by that day's rate of exchange. If the place you go tries to charge a fee for doing this, go somewhere else, as it is not common practice to levy fees or commissions for cashing traveler's checks.
And don't forget that friends and family will appreciate and enjoy seeing coins and currency from distant lands when you get home. Be sure to keep some Pesos to give a show and tell when you return. If you have children you will especially appreciate how much they will enjoy showing off your "booty" to their friends. And putting some of the Pesos you get while on vacation into your scrapbook or photo album will be a great reminder of all the fun you had in Mexico.
Using the currency of Mexico will not only make your cash go farther, but it will also stimulate your mind as you take in all the colorful images printed on the Pesos and immerse yourself into the culture of Mexico. Go to a currency exchange service and get a lot of different small denominations. Learning what certain everyday items cost and how little you have to spend to have a good time will only serve to better your vacation experience. Have fun!