United States dollar

The United States dollar is the official currency of the United States. It is commonly represented by the dollar sign $ and by the international currency code USD.

The dollar is divided into 100 cents. Physical United States money includes coins issued through the United States Mint and paper currency issued as Federal Reserve notes.

Under federal law, United States coins and currency, including Federal Reserve notes and certain older circulating notes, are legal tender for debts, public charges, taxes, and dues.

Name and symbols

The word dollar has historical connections to European silver coins whose names developed from the German word thaler. Dollar-based currencies later became widely used in the Americas.

The symbol $ developed from symbols associated with the Spanish American peso. The U.S. Currency Education Program states that the United States officially adopted the dollar sign in 1785.

Common representations include:

• $1;
• US$1;
• USD 1;
• one dollar;
• 100 cents.

The prefix US or the code USD can distinguish the United States dollar from other currencies that also use the dollar name or symbol.

History

Before and during the early history of the United States, many kinds of money circulated, including colonial notes, foreign coins, commodity money, and privately issued banknotes.

Congress authorized the federal government to issue paper currency during the American Civil War. The Federal Reserve explains that the U.S. government began issuing paper currency in 1861 through demand Treasury notes.

The Federal Reserve System was established in 1913, and Federal Reserve notes were first issued in 1914. Federal Reserve notes eventually became the dominant form of United States paper currency in circulation.

The U.S. Currency Education Program maintains a historical timeline covering colonial currency, Continental currency, Demand Notes, United States Notes, National Bank Notes, Federal Reserve notes, security redesigns, and other developments.

Federal Reserve notes

Most United States paper money in circulation consists of Federal Reserve notes.

Federal Reserve notes are issued under the authority of the Federal Reserve Act. They are placed into circulation through the Federal Reserve Banks in response to public demand for cash.

The Bureau of Engraving and Printing produces Federal Reserve notes, while the Federal Reserve System distributes them through the banking system.

Notes that are worn, damaged, or otherwise unfit for continued circulation are removed and destroyed under established procedures.

Current note denominations

The Federal Reserve Board currently issues seven note denominations:

• $1;
• $2;
• $5;
• $10;
• $20;
• $50;
• $100.

Higher-denomination Federal Reserve notes were issued historically, but they are no longer printed for general circulation.

Older genuine United States notes do not need to be exchanged merely because redesigned notes enter circulation. The Federal Reserve states that all United States currency remains legal tender regardless of the date on which it was issued.

Coins

The dollar is divided into 100 cents. Common circulating United States coin denominations include:

• one cent;
• five cents;
• ten cents;
• twenty-five cents;
• fifty cents;
• one dollar.

The United States Mint manufactures coins for circulation, collectors, and other authorized programs.

Some denominations, such as the half dollar and dollar coin, circulate less frequently in everyday retail transactions than cents, nickels, dimes, and quarters.

Legal tender

Legal-tender status means that United States coins and currency are legally recognized for satisfying debts, public charges, taxes, and dues under federal law.

Legal tender does not necessarily require every private business to accept physical cash for every immediate transaction.

The Federal Reserve explains that no federal law generally requires a private business to accept currency or coins as payment for goods or services, although state or local laws may impose additional requirements.

A business can therefore establish payment policies, subject to applicable laws and existing contractual obligations.

Currency design

Federal Reserve notes contain portraits, symbols, serial numbers, seals, denomination indicators, and design elements connected to United States history and government.

Note identifiers can include:

• serial numbers;
• Federal Reserve indicators;
• series years;
• plate-position information;
• Treasury seals;
• signatures;
• denomination markings.

The series year does not necessarily identify the year in which an individual note was printed. It generally refers to the design series and certain signature changes.

The U.S. Currency Education Program provides guidance on the identifiers and symbols printed on Federal Reserve notes.

Security features

Modern Federal Reserve notes use multiple security features intended to discourage counterfeiting and help users authenticate genuine currency.

Depending on the denomination and design series, features can include:

• watermarks;
• embedded security threads;
• color-shifting ink;
• microprinting;
• raised printing;
• ultraviolet characteristics;
• detailed portraits and backgrounds;
• three-dimensional security ribbons.

Not every denomination has the same features. The $1 and $2 notes retain older design styles, while higher denominations have undergone more extensive redesigns.

Security features should be checked using official guidance rather than relying on a single visual characteristic.

Production and circulation

The Federal Reserve estimates the public's demand for notes and places orders with the Bureau of Engraving and Printing.

Federal Reserve Banks distribute currency to financial institutions. Banks and other depository institutions then provide it to businesses and individuals.

Currency returns to financial institutions through deposits. Notes are processed to determine whether they are genuine and fit for recirculation.

Fit notes may return to circulation. Unfit notes are removed and destroyed.

Lifespan of notes

The lifespan of a Federal Reserve note depends on how frequently it is handled and how it is used.

Lower denominations often pass through more transactions and may wear out faster. Higher denominations, particularly $100 notes, are more often held as stores of value and may circulate less frequently.

The Federal Reserve periodically updates its methods for estimating note life based on circulation and processing data.

International use

United States dollars circulate outside the United States as savings, transaction currency, bank reserves, and a unit for international pricing.

Some countries and territories use the United States dollar officially, while others allow it to circulate alongside a domestic currency.

Dollar-denominated deposits and financial instruments can also exist outside the United States without involving physical banknotes.

International use does not mean that every dollar-denominated account is held inside the Federal Reserve System.

The dollar in financial markets

The dollar is used in:

• foreign-exchange markets;
• international trade;
• government and corporate bonds;
• commodity pricing;
• bank deposits;
• cross-border contracts;
• investment funds;
• payment and settlement systems.

Exchange rates measure the dollar's value relative to other currencies. They can change because of interest rates, inflation expectations, economic growth, trade conditions, political risk, and market demand.

Inflation and purchasing power

The dollar's purchasing power changes over time.

Inflation reduces the amount of goods and services that a fixed number of dollars can purchase. Deflation increases purchasing power when general prices decline.

Nominal amounts are stated in current dollars. Real or inflation-adjusted amounts attempt to compare purchasing power across different periods.

The face value of a genuine note does not change because of inflation, but the goods and services obtainable with that note can change.

Cash and bank money

Physical currency is only one form of dollar-denominated money.

Most modern dollar transactions occur through:

• checking accounts;
• electronic transfers;
• debit cards;
• credit arrangements;
• automated clearing systems;
• wire transfers;
• mobile-payment systems.

A bank-account balance is a claim on a financial institution and is not the same physical instrument as a Federal Reserve note.

Both can be denominated in United States dollars.

Damaged and mutilated currency

Ordinarily damaged notes may be accepted or exchanged through financial institutions when enough of the note remains to establish its authenticity and value.

Severely damaged or mutilated currency can require examination by the Bureau of Engraving and Printing.

Users should not attempt to alter, reconstruct, or fraudulently present currency.

See also

• Nasdaq
• Equity (finance)
• Asset
• Net income
• International Securities Identification Number
• Ticker symbol
• Types of business entity