The Mexican peso is the standard currency used in Mexico. 20, 50, 100, 200, and 500 peso bills are most often used but you will occationly see a 1000 peso note. Peso coins are in denominations of $1 $2, $5, and $10 pesos, there is also limited edition $20 peso coin in circulation.
US dollars are excepted everywhere in the area but if you use dollars in restaurants, shops, etc., the exchange rate will not be the same as when you exchange at a bank or withdraw pesos at an ATM. At the best it will be rounded down to the nearest whole number, for example if the bank's exchange rate is 14.86 pesos to 1 dollar, some businesses will round down to 14, most likely it will be 13 or even 12 pesos to the dollar. Many businesses will post their exchange rate and/or prices in pesos and dollars.
There are 2 major banks on Isla, HSBC Mexico on Av. Rueda Medina across from the ferry dock and Banamex on Av. Juárez 1 block east (up) from Av. Rueda Medina (look for the 7/Eleven store on the corner) as well as the smaller Banco Azteca in the Elektra Electronics Store on Av. Guerrero near Av. Matamoros and the CI Bank on Av. Rueda Medina near Madero next to the OXXO store. The banks will exchange up to $300 USD per day but NOT Traveler's Checks which are rarely if ever used anymore, you might be asked to show your passport when exchanging foreign currency.
There are plenty of cash machines (ATMs) in the downtown area where you may withdraw money directly in Pesos (foreign withdrawal fees will be added). Always use the ATMs located inside the banks and most definitely NOT an ATM on the street or even in a store. The ATMs at Banamex are the best to use as their machines "swipe" the card (insert and remove - never leaving your hand) whereas other ATMs retain the card and have been know to "eat" it.
ATM fraud is a problem all over the world so take steps to protect yourself. Check the card scanner slot by giving it a wiggle. Often skimming devices are false panels that can be detected and will come lose. Use your body as a shield and extra security to protect your Card and PIN and ALWAYS cover your hand when entering your PIN.
Many travellers open a "Travel Account" and transfer the amount of money they need on a daily basis as well as setting a withdrawl and purchase limit. At the very least, change your pin number when you return from Isla. Be sure to advise your bank the dates you will in Mexico.
There is a growing number of travelers using online transfer services of XOOM.COM (US bank accounts only) The cash can be picked up at Banco Azteca in the Elektra Electronics Store on Av. Guerrero, the Telegraph office on Av. Guerrero or deposited directly into a Mexican bank account as well as many Cancun locations.
Credit cards are accepted at most hotels (best to check with them when you make your reservation), the large restaurants, golf cart rentadoras and some tour operators. That said, except for major purchases (like your hotel bill) use CASH. Credit card fraud is a problem that follows tourism everywhere and if you can get by without using your credit card - do it.
You should call your credit card company to alert them in advance of foreign travel. Give them your departure and return dates. Otherwise if you have a company with tight security, they may freeze your accounts for expected fraud when you try to use them in Mexico. If they are aware of your travel dates they are more likely to catch any fraud that occurs after you return very quickly. It’s a good idea to bring along several different cards, and keep at them in your hotel safel in the event that your wallet or purse is lost or stolen.
On Isla tipping in USD if fine (bills only, foreign coins have no value in Mexico), though pesos are usually more practical for the recipient (and will save them a trip to the bank), they are generally happy to receive a tip in either currency. Keep in mind that most of the people earn a very modest salary and rely on tips.
In restaurants and bars its customary to leave a tip equal to 15 to 20% of the total bill Some restaurants and bars automatically include the tip (“propina") on the bill, most often if you're part of a large group. Always check the bill to see if service is included or if there are errors. If a service charge is included, you may choose to tip extra for great service.
In hotels its usual to tip the housekepping staff on a daily basis and not on the last day of your stay as it may not be the same person who cleans your room every day. You should also tip luggage handelers (malateros) at the ferry docks and hotels. It is not nessacary to tip taxi drivers unless they help you with your bags or are helpful in other ways. It's also customary to tip tour guides, fishing and diving captains and crew, and remember to leave a tip in the musician/band's tip jar.
In grocery stores on Isla and in Cancun, there are teens and seniors who will bag your purchases. They often do not receive any payment other than the tips they are given, a couple pesos per bag is a good rule of thumb.
Remember that smile and a "gracias" is just as important as a tip!