As you probably already gathered, credit cards can/may get expensive. Pesos seem to run about 10 to about 10.50 per dollar. (As of July 30) and banks can run you alot. However, as suggested, take small bills, I usually go to a bank and take out small bills, ones, fives and tens. Makes life alot easier. Most people in Mexico won't take change although in Cabo I found a few people who didn't care.
We utilize the money exchange huts that you can find just about anywhere in town. They will usually give you a little higher than an atm. But for those of you who are Bank of America users - their affiliate in Mexico is the bank called Santander Serfin. Santander's label is red with white lettering. (Don't confuse it with the one with a Swiss flag though or you may get a big surprise!) Anyway, Santander won't charge you a fee. My daughter was in our bank opening up a student checking account just before we left and they told her to stick to this bank and she won't get any charge for using the atm's since they have some kind of understanding. Or if she I understand correctly, the fee is keep to a bare minimum for us B of A users. Anyway, we ended up with a few $20 pesos ($2 Am dollars) so I just put them in a little souvenir change purses and gave them to some people back home s/a dog walker, mail carrier/picker upper, etc as a thank you for watching out for us. So don't fret, may come in handy. Have fun.