Both work just fine. You can even use major credit cards.
Baja has been using dollars and pesos interchangeably ever since it received its first tourist a century and a half ago. Pretty much everyone accepts both, although out-of-the-way places, which keep very little money in the till, might make change in pesos. Even the symbol that both currencies use, $ (for solidus and shilling), is the same. To avoid confusion, the convention along the border is to use a distinctive suffix: “$25.00 m.n.” (moneda nacional) and “$2.00 dlls” (dollars).
The fun starts when you worry about the exchange rate. Every shop sets its own. Businesses that want dollars, such as supermarkets and Pemex stations, will offer a rate slightly better than the casas de cambio. Those that prefer pesos, usually the smaller operations, will offer a slightly lower rate. People who look to get the best price all around town will carry both currencies – but that certainly is not necessary.
Our two currencies have always been connected to each other. From 1785 to 1857, the Mexican peso was legal tender in the Confederation of States and in its successor, the United States of America. The dollar was legal tender in Baja California during the first half of the twentieth century for no other reason than its ready availability: in those days, Mexico City simply couldn’t ship enough pesos into the peninsula. From time to time federal administrations have attempted to control or to restrict this binationality but the people have always managed to get around such provisions. That’s why you’ll find so many casas de cambio on both sides of the border – half a century ago they were the way to get around an artificial exchange rate controlled by the Bank of Mexico.
Now that commercial banks are accepting foreign currencies only for deposit, the casas de cambio are more of a convenience than anything. They will change dollars into pesos and pesos into dollars; a few will also handle euros and British pounds. They do this by setting their tipo de cambio to bet on the foreign-exchange spread: if the inter-bank rate is, let’s say, 12.50 pesos to the dollar, then the casas de cambio will give perhaps 12.35 pesos to the dollar and will sell one dollar for perhaps 12.65 pesos. Bear in mind, whenever you exchange dollars (or euros or pounds), that you’ll need to spend your pesos in Mexico. Although U.S. currency still circulates freely in Baja California, almost no one in California these days will accept Mexican money.
If you’re out to buy pesos, look for the largest of the smaller number that you see. If you’re out to buy dollars, look for the smallest of the larger number. Typically the best rates of exchange have been found on San Ysidro Boulevard about a mile north of the border (near the 99-cent Store) and anywhere in downtown Tijuana except where tourists congregate.
You will want to avoid any moneychanger who charges “commission”, a fee that is levied on top of the exchange. A rate of exchange that looks to be too good to be true generally means a commission and will wind up being one of the worst deals in town. Consequently, commissions are illegal in Mexico and might soon be illegal in California as well. A couple of other tricks to be aware of in the signage on both sides of the border, are the transposition of a zero (12.045 versus 12.450) and the transposition of “buy” and “sell” amounts, both intended to make the peso look more attractive.
You can use your bank cards in Baja California just like you do at home to pay at the point of sale and to withdraw cash from your account.
When you use a card to buy goods and services, the transaction will most likely include a one-percent “foreign exchange” fee, which often makes for a better rate than casas de cambio offer. When you use a bank card to withdraw cash from an ATM, you will most likely be assessed a three-percent “foreign exchange” fee as well as whatever out-of-network ATM fees as might apply. Each bank we’ve talked to about this has given us a slightly different story about their foreign-exchange fees, so you had better check with your own bank to be sure. To avoid out-of-network fees, HSBC and Wells Fargo customers can use the ATMs at Mexican HSBC, CitiBank customers can use Banamex, and Bank of America customers can use Santander Serfin.
If your card is declined in a tourist trap (such as Animale on Revolución or most of Puerto Nuevo), check to see that your name appears on the declined voucher. In such places, the waiters are required to reimburse the house for the percentage taken by credit-card clearinghouses, so they’ll go to great lengths to have you pay in cash. Sometimes the card machine isn’t working; sometimes your card is declined for no reason. The waiter will apologize that your card won’t go through and show you a charge slip marked “RECHAZADO”, but his thumb will cover the name of the cardholder. Just another reason to avoid the tourist traps and get to know the real Baja.
Tourists occasionally complain about a more generalized “gringo tax”. They refer to something akin to the difference between tourist prices and mainlander prices found in Hawai‘i. This allegation is both true and false: a proper answer would require a team of sociologists to sort out all the subtleties. While we wait for that, here is a rule of thumb.
1) If you’re in a tourist area and the business you’re dealing with has no expectation of seeing you again, you’re not likely to get a good price. (Note: almost all of the tourists who visit Tijuana do so only once in their lives.)
2) If you’re in a tourist area and the business you’re dealing with wants you to be a repeat customer, you will be offered fair prices that will be uniform regardless of who you are. This is one of the goals of Ceturmex, although not all of its members currently abide by the policy.
3) Prices in non-tourist areas follow this same dynamic, except that it isn’t nearly as pronounced. Most often, when you encounter prices that differ between dollars and pesos in the real Baja, you’re encountering nothing more ominous than round-off error.
For example, the Mercado Campestre charges ten pesos or one dollar for entrance – not because they want to charge gringos a little more but because they don’t want to be bothered with making small change. A few years ago, when the peso was about nine to the dollar, one of the Ensenada wine festivals was charging ten dollars or one hundred pesos to get into the paella event: a local complained about the discrepancy to the guy who was selling him his ticket, and the guy (who happened to be the head of Monte Xanic) said “Okay, so pay in dollars.”
4) Some people who live north of the border believe that, merely on the strength of their Mexican ancestry, they don’t pay the gringo tax. They are seriously self-deluded. This is not a raza thing. With all other variables equal, loud, pushy people wind up paying more than do soft-spoken, respectful people.