What Currency Is Used in the United States?

What currency is used in the United States?

If you’re planning a trip to the US, managing international payments, or working with American suppliers, it’s essential to understand the country’s currency. This guide is written for travellers, expats, e-commerce businesses, and global finance professionals. It explains what currency is used in the United States, how it works, where it’s accepted, and how to manage it effectively while avoiding common pitfalls.

The United States Dollar (USD): Official currency of the US

The official currency of the United States of America is the United States Dollar, abbreviated as USD and commonly symbolised as $. It is one of the most widely used and traded currencies in the world, and it serves not only as the national currency of the US but also as a global reserve currency used in international trade and finance.

Each dollar is divided into 100 cents, and the US dollar is accepted in all 50 states, as well as US territories such as Puerto Rico, Guam, and the US Virgin Islands.

Denominations in circulation:

• Coins: 1 cent (penny), 5 cents (nickel), 10 cents (dime), 25 cents (quarter), 50 cents (half dollar), and $1 coins (rarely used)

• Banknotes: $1, $5, $10, $20, $50, and $100

All US banknotes are issued by the Federal Reserve System and printed by the Bureau of Engraving and Printing. Notes are identical in size and colour regardless of denomination, with different portraits and security features to distinguish them.

Who uses the US dollar?

The US dollar is used by:

• All individuals and businesses in the United States

• US territories, where it is also the official currency

• Several other countries and regions where it is either used alongside local currencies (e.g. Panama, El Salvador, and Zimbabwe) or accepted informally for trade

Globally, USD is frequently used for pricing commodities (like oil and gold), international debt settlement, and foreign exchange reserves.

How the US dollar works

The US dollar is a free-floating currency, meaning its value is determined by market forces such as supply and demand in global foreign exchange markets. The Federal Reserve sets monetary policy, adjusts interest rates, and influences liquidity to maintain economic stability and price control.

Exchange rates between USD and other currencies fluctuate daily. For example, depending on global conditions:

• £1 might exchange for around $1.25 to $1.35 USD

• €1 might exchange for $1.05 to $1.10 USD

These rates are affected by interest rate changes, inflation, geopolitical events, and economic indicators such as GDP and employment figures.

Benefits and considerations of using the US dollar

Advantages:

• Globally recognised and accepted: The dollar is used in many countries and accepted widely for international transactions.

• Stable and secure: Backed by the world’s largest economy and a well-regulated financial system.

• Low conversion risk for trade, tourism, and investment in dollar-denominated assets.

Considerations:

• Exchange rate fees: Travellers and international businesses may pay additional fees or encounter poor rates when converting to or from USD.

• Counterfeit risk: Due to its widespread use, US dollars are frequently targeted by counterfeiters—especially higher denomination notes.

• Tip-dependent culture: In the US, service industries often rely on tipping, so carrying small denominations is useful.

Common misconceptions about the US dollar

Some people mistakenly believe that US notes differ in size or colour by denomination, as is common in many other countries. In fact, all US banknotes are the same size and largely the same colour, which can confuse those unfamiliar with the design.

Another myth is that older notes are no longer valid. In reality, all US currency issued since 1861 remains legal tender, regardless of age or design changes.

Tips for managing US dollars as a visitor or business

• Use ATMs for cash withdrawals—major US banks generally offer competitive exchange rates, though your home bank may charge international fees.

• Avoid currency exchange kiosks at airports, where rates tend to be less favourable.

• Use credit or debit cards for security and ease, but check for foreign transaction fees.

• Carry small denominations for tipping, taxis, and cash-only shops or food vendors.

• Pay in dollars if given the choice—some retailers may offer dynamic currency conversion, but the rates are often worse than your bank's.

FAQs

Can I use other currencies in the US?
No. Only US dollars are accepted for transactions in the United States.

Should I exchange money before travelling or in the US?
Withdrawing money from an ATM in the US using a travel-friendly debit card usually offers a better rate than exchanging cash before your trip.

Are contactless and digital payments accepted in the US?
Yes. Contactless cards, Apple Pay, Google Pay, and other mobile wallets are widely accepted, especially in urban areas.

Is tipping required in the US?
Tipping is standard in restaurants, taxis, and other service industries. A tip of 15–20% is customary.

Real-life example

A traveller from the UK visits New York with £400. Instead of exchanging it all at Heathrow, they use a fee-free debit card to withdraw $500 at a Chase Bank ATM. They pay by card in restaurants and shops but keep $100 in smaller bills for tipping, subway fares, and street food. By managing their currency wisely, they avoid high fees and make their budget go further.