Pesos vs dollars
Almost every tourist-facing business in Los Cabos will take US dollars. They set their own rate, and it is never in your favour. A $40 dinner quoted in dollars is routinely 5–8% more expensive than the same bill settled in pesos.
Change from a dollar payment usually comes back in pesos, converted at that same poor rate, so paying in dollars costs you twice.
Getting cash
Use ATMs attached to actual bank branches. Standalone machines in convenience stores, hotel lobbies and the airport carry higher fees and worse rates, and are also where card skimming is most common.
Withdraw larger amounts less often to reduce per-transaction fees, and keep small notes — 20, 50 and 100 peso bills — for tips, taxis and beach vendors, who rarely have change for a 500.
Cards
Cards work in restaurants, hotels, supermarkets and most tour operators. Cash is still needed for street taxis, water taxis at the marina, beach vendors, small food stalls and tips.
Tell your bank you are travelling. A card declined in Mexico on the second day is a common and entirely avoidable problem.