A Traveller’s Guide to Icelandic Money

Bundles of 1000 ISK banknotes.

Since 1885, Iceland has had its own currency, called the Icelandic króna (ISK). It‘s had its ups and downs and is heavily debated at times, with some people rallying to swap it out for the Euro and others singing the praises of it. Nothing much has come from these wrangles, though, so for the foreseeable future, the Icelandic króna is here to stay. This is your guide to everything you need to know about it.

Are other currencies accepted in Iceland?

Other currencies than the Icelandic króna are not accepted in the country, so if you plan on paying in cash, you need to get some krónas. At the time of writing, currency exchange is not possible at Keflavík Airport, although the currency exchange service Change Group is preparing to open there soon. If you want to exchange your currency, you will have to do so in a bank outside the airport. Alternatively, you can opt to withdraw cash from an ATM. 

Icelandic banknotes and coins

There are five banknotes you might come across: 500, 1000, 2000, 5000, and 10,000. A 10,000 króna banknote [$73, €67] is quite a large sum in the context of day-to-day things. For example, you could buy almost 15 croissants in an artisan bakery for that amount. In combination with the fact that relatively few locals pay with cash, this means that some businesses might not have enough change in their cash registers if you pay with a 10,000 króna banknote. It is, therefore, best to carry a variety of banknotes in your wallet. The Icelandic coins are five as well: 1, 5, 10, 50, and 100. 

Paying with cards in Iceland

Carrying cash is not a necessity in Iceland. Not accepting card or contactless payments, no matter how small the purchase, is an anomaly amongst Icelandic businesses. The biggest exception to this is the Reykjavík city bus system, where you need to pay with cash, have prepurchased tickets from one of these vendors or use the Klappið app. Other than that, it‘s highly unlikely that you‘ll run into trouble if you have a MasterCard or Visa. As elsewhere in the world, American Express cards are not accepted everywhere, but they can usually be used in hotels, popular restaurants, and supermarkets.

 

Iceland 101: All the Basic Facts You Need to Know

Akureyri sign post.

Planning a trip to Iceland? Here are some interesting facts and essential information to read before you arrive.

How big is Iceland, and who lives there?

The surface area of Iceland is 103,001 square kilometres [39,769 square miles], and the total population is just under 400,000, with most people living in and around Reykjavík. For the longest time, most people living in Iceland were natives, but in the past two decades, the foreign-born population has grown immensely and is now about 18% of the total. The language spoken is Icelandic, but most people speak English relatively well. 

The Icelandic climate

The climate in Iceland is temperate, meaning that, for the most part, swings in temperature are not huge. In fact, the most reliable thing about the weather here is the cool temperatures. The lowest temperature in Reykjavík during winter is usually -10°C [14°F], and only on rare occasions does it go higher than 20°C [68°F] during summer. For other parts of the country, the average temperature is slightly lower.

In terms of other weather factors, Iceland has it all. If you’re lucky, you might even get the whole spectrum in the span of 24 hours. The weather patterns can be unpredictable, but you can expect to encounter strong winds and storms in fall and winter, along with any form of precipitation. From April and throughout August, storms are considerably less likely to occur, but rain is common. That’s not to say the sun never comes out or the wind never stops, but be prepared by bringing the right clothes!

The power of Icelandic water

Iceland is known for its exceptional quality of water, which you can drink from the tap everywhere you go. In most places, it’s even safe to drink straight from the country’s many springs and rivers. Bring your refillable bottle to avoid spending money on overly expensive bottled water. 

The vast amount of running water has also enabled us to generate significant amounts of electricity, powering the country with green energy all year round. There’s plenty of hot water going around as well, so much so that 90% of Icelandic houses are heated with geothermal energy. The energy is both cheap and renewable, which is why most Icelanders have their radiators on full blast when it’s cold.

The Icelandic currency

Iceland is one of the world’s smallest countries with its own currency: The Icelandic Króna, ISK. Businesses do not accept cash from other countries, but most accept card payments if you don’t want to carry cash. You could almost call that the Icelandic way, as many Icelanders pay solely with their cards, phones or smartwatches. 

Weather warnings and road conditions 

One of the most incredible things about Iceland is its marvellous nature, and we highly recommend exploring it. Whether it’s a trip to the Highland, a short hike, or a tour of one of our glaciers, be sure to bring all the essentials, such as good walking shoes, food, and fluids, as well as warm layers of clothing that you can take off or put on according to the situation. Circumstances, especially the weather, might not be what you’re used to. If travelling outside the capital area, check for weather warnings at the Icelandic Met Office, and the Icelandic Road and Coastal Administration (vegagerðin) for road conditions.

Medical assistance for tourists in Iceland

You can seek medical attention at the nearest health care centre (heilsugæsla). You can also call 1700, a 24/7 medical advice line, or use the Heilsuvera online chat, open 8am-10pm. In case of emergencies, the number to call is 112. Those with the European Health Insurance Card will be charged the same fee as persons insured in Iceland, but necessary documents must be presented. Others will be charged in full. 

In Focus: The Króna and the Euro

icelandic króna isk

The Icelandic króna was introduced as currency when Iceland gained its sovereignty from Denmark in 1918, with the first coins issued in 1922. At the time, one Icelandic króna was equal to one Danish krone. Today, the Icelandic króna has been devalued to such a degree that you’d need 2,000 of the original króna for […]

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Changes to Payment Processing Over the Weekend Led to Overcharges

digital payment iceland online banking

Updates to digital payment systems caused confusion over the weekend, when some consumers in Iceland were charged excessive amounts for some everyday purchases.

On Saturday, April 15, Íslandsbanki sent out a message to its customers in advance of the change, stating: “This weekend, there will be a global standard change implemented by payment processors that involves the removal of decimal points from Icelandic Króna currency. As a result, Mastercard will be removing decimal points from its transactions starting tomorrow, Saturday, April 15th at 7:05 PM.  Customers of our bank may be alerted to incorrect amounts when making purchases in Icelandic currency during that time, if payment processors do not update their settlements in a timely manner.”

Íslandsbanki warned customer to refrain from making certain purchases if they were uncertain of the charge. However, some Icelanders were unpleasantly surprised on their banking statements, as Morgunblaðið notes.

Among some of the charges include one Icelander who reportedly was charged 176,000 ISK [$1,290, €1,175] at Bæjarins Beztu, a popular hotdog stand, and an Icelander who was charged 642,600 ISK [$4,715, €4,293] for a grocery trip.

Regarding such charges, Íslandsbank stated: “If customers continue with their purchase and are charged the wrong amount, they should wait until the transaction has been settled and then contact the seller for a correction, or submit a refund request to Íslandsbanki.”

Online payment service Paypal likewise suspended ISK transactions between April 14 and 18.

Those experiencing problems with their banking are advised to contact their bank directly.

Can I use Euros in Iceland?

currency iceland

The short answer: no, you cannot use Euros in Iceland.

Iceland, to the surprise of some, is not in the European Union, nor does it use the Euro. In fact, Iceland is the second-smallest nation (after the Seychelles) to maintain its own currency and monetary policy, which is called the Icelandic króna, or ISK. It is, however, a part of the Schengen zone, which allows freedom of movement for citizens of partner nations.

Some of Iceland’s Nordic peers, do, however, have different arrangements. For instance, Denmark is part of the EU, but also retains its own currency, the Danish krone, which is pegged in value to the Euro. All of the Scandinavian nations have their own currencies, which are all variations on the local word for “crown,” just like there is a US, Canadian, and Australian dollar. These Scandinavian currencies are descended from the Scandinavian Monetary Union, a monetary union between Denmark, Norway, and Sweden in the 19th century. It stemmed out of a growing desire among some to unite these similar nations in a “pan-Scandinavian” movement. Little else came of this, but the monetary union was generally considered successful and helped to tie the region’s economies together under a standardized system.

But these days, the Icelandic króna is the only official currency, so plan accordingly.

If you are planning a trip to Iceland, know that digital transactions are largely the rule in most establishments. You certainly can pay in cash, but most places of business prefer electronic payment for convenience. Still, a well-prepared traveller should exchange some cash to have on hand, just in case. It is possible to change cash at the airport or at a bank in town. You can also use an ATM (in Icelandic: Hraðbanki) to withdraw local currency, but these generally come with fees.

However, some large stores, attractions, and restaurants that deal largely with tourists may accept Euros, USD, or other major currencies. Also, because of the high volume of connecting flights through Keflavík International Airport, all merchants at the airport accept Euro, USD, and some other major currencies. It is worth noting that this is not an official policy: it is a service that some businesses provide their customers with for convenience. That means that while it may be an option, do not make your plans around being able to pay in Euro, USD, or other currencies.

Króna Strengthens as Corona Wanes

Why is Iceland so expensive?

The Icelandic króna has risen in value against the Euro this summer and in fact has been strengthening against the Euro since the beginning of this year, RÚV reports. At the start of 2021, one euro cost ISK 157, while now it costs ISK 147.

According to Daníel Svavarsson, director of Landsbanki’s Economics Department, the foreign exchange market is extremely driven by expectations and the boom at the beginning of the year was largely based on what could be called vaccination optimism. In recent weeks, investments related to the large share offerings of Íslandsbanki and the airline PLAY have also made an impact.

“The biggest reason is the success of vaccinations and the fact that the pandemic has been steadily declining, which has increased optimism in the tourism industry,” says Daníel. “In recent weeks, the main forces have been linked to the flow of foreign investors into the stock market.”

Asked whether he expects the Central Bank to respond to the increased appreciation of the króna, Daníel says he does not foresee that the bank will fix the exchange rate to a certain value. “On the other hand, the Central Bank has been very active in the market in coming in and evening out fluctuations, whether strengthening or weakening.”

Daníel expects the króna to continue appreciating in the near future, though he warns it can always fluctuate in both directions in the short term. “Looking ahead to the next six months, I now rather expect it to be on the strengthening side. Given the current situation and the good performance of the tourism industry, where the resurrection has been faster than people dared to hope, I now rather expect it to continue to be relatively strong.”

A Króna for Your Thoughts

Central Bank of Iceland governor Ásgeir Jónsson

To some, he is the face of the financial bubble as the chief economist of Kaupþing, ahead of the 2008 financial crash. To others, he is the perfect man to shape the Icelandic economy, with his expertise in monetary policy. The new man at the helm of the Central Bank of Iceland is Governor Ásgeir Jónsson.

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Króna Continues to Weaken

currency iceland

The króna continues to weaken despite the intervention of the Central Bank of Iceland, RÚV reports. Following a significant drop in value yesterday, the Icelandic currency has weakened by 11% in the last two months.

The weakening of the currency will mean Icelandic consumers will pay more for imported products and online purchases from abroad. One example are Netflix subscriptions, which have gone up by ISK 137 ($1.15/€1) per month.

The weakening króna in combination with rising fuel prices in international markets have also affected gas prices, which were around ISK 210 ($1.77/€1.53) per litre at the beginning of the year and hover at ISK 230 ($1.94/€1.68) per litre today.

Króna Falls 6% in September

Why is Iceland so expensive?

The Icelandic króna has fallen 6% in respect to the Euro this month, 2% of that dip occurring over yesterday morning, RÚV reports. The Central Bank of Iceland intervened in the exchange market today to prevent further devaluation. It is the first time the bank has taken such an action since November of last year.

Jón Bjarki Bentsson, chief economist at Íslandsbanki bank, says uncertainty in the tourism industry and the future of Icelandic airline WOW Air are the main reasons behind the currency’s devaluation. WOW Airis currently searching for investors who would loan the company up to ISK 12 billion ($113m/€96m) over the next 18 months. Together with Icelandair, the company transports 80-85% of all travellers that visit Iceland, meaning its success or failure could hugely impact the tourism industry.

Jón says the risk of a large, permanent devaluation of the currency is much lower than it was, and that it is not likely the effect will be long-lasting. The Central Bank’s currency reserves are large and the bank’s actions yesterday show it is able to prevent further devaluation.

Minister of Finance Bjarni Benediktsson says the government has no reason to believe the króna will continue to fall. “What we’ve seen in the statistics in recent months is that we still have a good trade balance abroad and that shows a very strong position, a much stronger position than we’ve seen before and those are the most recent numbers we have,” he stated. “On the other hand we know that the country’s competitiveness has worsened and in the end that will impact the market, including people’s faith in the króna into the future,” Bjarni added.

Konráð S. Guðjónsson, economist at the Iceland Chamber of Commerce, says although authorities should be cautious, the Icelandic economy is in a very good position. “We have all learned well from what happened 10 years ago[…]households, companies, and the government, they all stand much better economically than we did then,” Konráð states. “The Icelandic economy’s overall debt position abroad is so, so, so much better. That alone helps enormously to keep the króna stable and really just shore up financial stability.”

Króna Enjoying Most Stable Exchange Rate in Years

The Icelandic króna has enjoyed its most stable exchange rate in four years this summer, Kjarninnreports. According to an analysis of the exchange market that Íslandsbanki bank published on Thursday, this welcome stability is thought to be due to several factors, not least of which is increased confidence in the Icelandic economy.

The analysis compiled the króna’s exchange rate on a quarterly basis over the last year, which has been relatively stable over the summer, even as capital controls have largely been lifted and the Central Bank is no longer on the exchange market. The report indicates that the exchange rate has not be characterized by trends in the last quarters, but rather that the króna has fluctuated in relation to the average exchange rate of foreign currencies within a range of 7% since August of last year.

Even so, Íslandsbanki did add that short-term fluctuations in the exchange rate have increased in July and that volatility was at its highest since September 2017. Still, the exchange rate was largely the same at the end of the month as it was at the beginning.

Íslandsbanki’s report gives three reasons for the króna’s unusual exchange rate stability. For one, there has been a good balance between the inflow and outflow of currency of late. Icelandic investors have been investing considerable sums abroad, while foreign investment in Iceland has also increased somewhat. Secondly, they point out that there are still controls imposed on the movement of currency, for instance, the Central Bank’s so-called capital flow management measures which impose heavy duties on foreign entities which may want to invest in króna bonds. And third, the stability can be attributed to an increased trust in Iceland’s national economy, which can be traced to a significantly improved standing abroad, lower household, corporate, and public debt, higher credit ratings, increased patience towards short-term fluctuations, and a reduced likeliness of capital flight.