Complete Guide to Currency in Iceland: What Currency Does Iceland Use?

February 8, 2023

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Iceland Currency

So, first things first: what is Iceland’s currency?

Iceland uses the Icelandic króna, abbreviated as ISK. It’s a currency that’s only used within Iceland, so you’ll need to swap your cash or use a card for most purchases because euros and dollars aren’t accepted in the country. Most places in Iceland do accept cards, but it’s always good to have some króna on hand — especially when exploring more remote areas where card readers might be less reliable.

Icelandic Króna Denominations

Iceland’s currency comes in both coins and banknotes. So what money does Iceland use in denominations? Here’s how they’re divided:

Banknote Denominations:

500 króna
1.000 króna
2.000 króna
5.000 króna
10.000 króna

Coin Denominations:

1 króna
5 króna
10 króna
50 króna
100 króna

The History of Icelandic Króna

The currency in Iceland has an interesting history, shaped largely by the island’s political and economic shifts. With so much changing over the years, what currency is used in Iceland today? Iceland’s króna was first introduced in 1874, when Iceland was still part of the Danish kingdom. Back then, it was tied to the Danish krone.

Iceland officially became independent in 1944, and its currency followed. Since then, the Iceland króna has had its ups and downs, particularly during economic events like the 2008 financial crisis, which had a major impact on its value. But, despite some instability, the króna remains the nation’s official currency and a symbol of Iceland’s economic independence.

Together, the króna and the Icelandic language symbolize Iceland’s unique blend of tradition and modern economic resilience.

The Faces of Icelandic Currency

Like in other countries, Icelandic banknotes give us a glimpse into the country’s history and culture. Each note features prominent figures who have helped shape Iceland’s identity, along with symbols that reflect its heritage.

500 króna: Jón Sigurðsson, a leader in Iceland’s fight for independence.

1.000 króna: Brynjólfur Sveinsson, a 17th-century bishop known for his scholarly work.

2.000 króna: Jóhannes Sveinsson Kjarval, one of Iceland’s most beloved painters.

5.000 króna: Ragnheiður Jónsdóttir, an influential woman from Icelandic history.

10.000 króna: Jónas Hallgrímsson, a poet and naturalist who played an important role in shaping modern Icelandic literature.

Iceland is Expensive

Iceland has developed a reputation for giving many traveler’s sticker shock. The island is an expensive destination for tourists —those entering and for those living here.

According to Iceland Magazine, you can expect to see prices around 66 percent higher than in the European market.

For example, it’s not uncommon to find a premade sandwich running around $10 after you’ve converted the Iceland currency of Iceland to USD. In fact, if you decide to eat out, you can expect dinner for two to start at around $100.

Travelers from America might also be surprised to be subjected to value-added tax, or VAT. The U.S. has individual state sales taxes;, however, the average sales tax imposed is usually less than half of the average VAT. In Iceland, however, there is a 24 percent VAT on goods and percent VAT on food.

The prices in Iceland are also attributed to the economic strength of its currency, the high standard of living, and the sheer fact that most goods need to be imported. That saidHowever, the beauty of visiting Iceland is that, if you’re a foreigner, you can apply for a VAT refund, and if shopping isn’t your goal, you can definitely take advantage of the natural wonders surrounding you without having to spend a ton.

Credit Cards Are Accepted

It’s also good to keep in mind that credit and debit cards are widely accepted here, and Iceland is nearly a cashless society. It’s not uncommon for many Icelanders to go months without needing to handle cash. For the majority of vendors, credit cards have become the preferred form of payment.

Iceland’s credit cards use the chip-and-pin method, meaning for any purchase over 5.000 ISK, you’ll need to enter a 4-digit pin. If your card doesn’t have this feature, you’ll be asked to sign the credit card slip.

Because of the fees passed onto the merchants, many will not accept American Express and Diner’s Club cards.

Shopping is Tax-Free

As you spend your Icelandic money, make sure that you keep your receipts. Like we mentioned before, as a noncitizen of Iceland, you can apply for a VAT refund on any goods that cost more than 4.000 ISK (roughly $33) when you exit the country.

Once you’re at the airport, you have to present your passport, the receipt that shows the purchase was made within the last three months, and a tax-free form provided and stamped by the store.

Iceland also provides an opportunity to avoid VAT, which is through Tax-Free shopping at the arrivals terminal at Keflavík International Airport.

Tipping in Iceland

Tipping culture in Iceland is simple. Unlike some countries where tipping is expected in many situations, in Iceland, service charge is usually included in the price of meals, drinks, taxi rides, and even hotel stays. This means there’s no need to add an extra percentage on top of your bill, and most people simply pay the total amount without leaving anything extra.

Of course, that doesn’t mean you can’t leave a tip if you want to. But here’s the important thing to remember: even if you don’t tip, the service staff won’t feel slighted or offended. It’s not ingrained in the culture the way it might be in other parts of the world. Icelanders generally don’t expect tips, and most won’t even think about it if you choose not to leave one. So, enjoy your experience without worrying about adding that extra percentage to your bill.

Where to Exchange Your Foreign Currency

If you need to exchange currency for Icelandic króna, there are several options available throughout the country:

Keflavík International Airport: Currency exchange services are available at the airport upon arrival. They don’t offer the best exchange rates, so if you’re not in desperate need of cash, we recommend waiting until you get into town to do your Iceland currency exchange.
Landsbankinn: One of Iceland’s largest banks, it has branches across the country where you can easily exchange money. Find a Landsbankinn branch.
Arion Banki: Another major bank offering currency exchange services. Their branches are located in most major towns. Visit Arion Banki’s website.
Íslandsbanki: With branches in most major locations. Find an Íslandsbanki branch near you.
Downtown Reykjavik: You’ll also find currency exchange services in downtown Reykjavik, especially around the main shopping streets and tourist hubs.

ATMs: If you prefer to withdraw local currency directly, ATMs are widely available and often offer good exchange rates. Most accept foreign cards.

Money-Saving Tips

Iceland is not cheap, but visiting this amazing country doesn’t have to break the bank. Here are some ways to save money while still enjoying everything the Land of Fire and Ice has to offer:

Shop at Duty-Free: Keflavík Airport is one of the few airports with Duty-Free when you arrive. If you’re over 20 and want to have a drink or two during your trip, picking up alcohol here is a smart move since it’s much cheaper than buying it at local liquor stores, where prices can be steep.
Drink Tap Water: There’s no need to spend money on bottled water in Iceland. The tap water is crisp, clean, and free. Just bring a reusable bottle and fill up wherever you go — it’s one of the easiest (and most sustainable) ways to cut down on costs.
Explore the Outdoors: Iceland’s landscapes are the real treasure, and the best part? They’re free. Spend your time hiking, exploring waterfalls, or just soaking in the incredible views. Nature is the main attraction here, and it won’t cost you a thing.
Visit Local Pools: Geothermal pools are a huge part of Icelandic culture, and they’re usually very affordable. So, instead of spending a ton in the ultra-popular Blue Lagoon, consider relaxing in a natural hot spring without spending much.
Eat Smart: Dining out can get expensive fast. To save money, try picking up snacks or light meals at local bakeries or grocery stores. You’ll find plenty of fresh options that won’t stretch your budget, and it’s a great way to experience Icelandic food without the restaurant price tag.
Skip Exchange Fees: Iceland is incredibly card-friendly. Most places accept credit cards, so you can avoid exchanging large amounts of cash.
Stay Flexible with Accommodation: If you’re not set on fancy hotels, consider a campervan or guesthouses. They’re much more affordable and give you a more authentic experience — plus, you’ll be closer to nature.

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Explore Iceland with Rent.is

Ready to experience Iceland with complete freedom? Renting a campervan from Rent.is lets you discover the country’s breathtaking landscapes at your own pace, all while keeping your budget in check. We offer a range of Iceland camper rentals for every type of traveler. Each one is equipped to explore the rugged beauty of Iceland.

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If you’re planning to explore the city, there are many things to do in reykjavik. Like relax in a lagoon, walking tours and go whale watching, to name a few.

FAQs

Do I need to carry cash in Iceland?

Not necessarily. Iceland is very card-friendly, and most places accept credit and debit cards, even for small purchases. But, it’s always a good idea to have a little cash on hand for more remote areas where card readers may not be available.

Do they offer Apple Pay and Google Pay in Iceland?

Yes, both Apple Pay and Google Pay are accepted across Iceland, especially in urban areas like Reykjavik. Just make sure your device is set up for international payments.