Money, Cards & Tipping in Iceland

Last updated: 2026-09-12 · TATS Man

The short version

Iceland is one of the easiest destinations for card-first travel. The local currency is the Icelandic króna (ISK), cards are accepted across almost every part of a normal visitor trip, contactless payments are common, and tipping is not expected.

I would still carry a physical card, a second payment method and a modest backup amount of cash. Not because Iceland is cash-heavy — it is not — but because a dead phone, blocked card or remote terminal problem is much easier to solve when you have redundancy.

Icelandic króna: what you will actually see

The currency is the króna, plural krónur, normally shown as ISK or kr. The Central Bank of Iceland currently lists five valid banknotes — 500, 1,000, 2,000, 5,000 and 10,000 kr — and five coin denominations — 1, 5, 10, 50 and 100 kr.

The 2,000 króna note is valid even though many travellers rarely encounter one.

Prices inside Iceland are normally charged in krónur. A booking website may display euros, pounds or US dollars for convenience, but that does not make foreign cash a normal day-to-day payment method. Visit Reykjavík says foreign currencies are rarely accepted.

Cards are the default for most visitor spending

Visit Reykjavík describes Iceland as largely cashless and says debit and credit cards are accepted almost everywhere. Hotels, restaurants, supermarkets, shops, taxis and tourism businesses are strongly card-oriented, while contactless payment is normal.

That does not mean every traveller should rely on one phone wallet. Before flying, I want:

• one main physical card;
• one backup card kept separately;
• the PIN for at least one of those cards;
• a phone wallet if I normally use one; and
• a modest cash reserve if it makes me more comfortable.

The physical-card point matters on road trips. Automated services and unattended terminals are exactly where discovering that you do not know your PIN becomes annoying.

How much cash do you need?

For many visitors: very little, and possibly none at all. Visit Reykjavík explicitly says cash is not essential.

I still like a small contingency amount for the same reason I carry a spare charging cable: resilience. A terminal can fail, a bank can flag a transaction, or you may simply prefer cash for a minor purchase. That is very different from travelling with a large pile of notes “because you might need them”.

If you want cash, withdraw Icelandic krónur after arrival rather than assuming businesses will happily take euros or dollars.

ATMs, bank fees and the real cost of withdrawing cash

Your cost at an ATM is the combination of whatever the local ATM/operator charges and whatever your own bank or card issuer adds. A card that is cheap for purchases can still be expensive for cash withdrawals because of withdrawal fees, exchange-rate margins or interest rules.

Before travelling, check:

• foreign purchase fees;
• foreign cash-withdrawal fees;
• whether cash withdrawals trigger immediate interest on a credit card;
• daily ATM limits; and
• whether your bank still wants travel notifications.

ATM access is naturally better in Reykjavík and larger towns than in remote areas. If you want emergency cash on a long road trip, obtain it before the route becomes remote rather than making the ATM itself part of the day's adventure.

Pay in ISK when a terminal offers a conversion choice

Card terminals and ATMs sometimes offer to convert the transaction into your home currency. That service may look reassuring because you immediately see a familiar number, but the conversion rate and fee structure can differ from the rate your card issuer would have used.

There is no one universal answer for every card, because your own provider's fees matter. The practical rule is to understand the conversion being offered before accepting it. If you have a card with competitive overseas rates, paying in the local currency — ISK — is often the cleaner comparison point.

For larger purchases, keep the receipt until the final card transaction has settled so you can match the amount against your banking app.

Tipping: optional, not a hidden percentage

Tipping is not expected in Iceland. Visit Reykjavík is explicit on this point.

You do not need to calculate 10, 15 or 20 per cent at restaurants, tip every time you buy a drink, or feel guilty if a card terminal shows an optional prompt. Pay the stated bill.

If a guide, driver or server gives exceptional service and you genuinely want to add something, you can. Treat it as a personal thank-you rather than a compulsory part of the wage or price.

Petrol stations: test your payment setup before the remote day

Self-drive travel is where payment resilience matters most. Fuel stops can be automated and service gaps can be long, so I make sure my main physical card and PIN work before the fuel gauge becomes urgent.

My road-trip rule is simple: refuel with margin, keep a backup card separate and never build the next 150 kilometres around the assumption that one specific payment terminal will solve everything.

For the wider driving decision, see my Renting a Car in Iceland guide.

Tax-free shopping: the 12,000 ISK threshold matters

Non-Iceland residents can claim a tax-free refund on qualifying goods when the official conditions are met. The current Ísland.is guidance says:

• a single purchase receipt must be at least 12,000 ISK;
• the original receipt must be attached to the tax-free form;
• the retailer completes/signs the form;
• the goods must be exported within three months; and
• the tax-free form must be export validated before departure.

At Keflavík, the official guidance says to deal with the export validation before checking in. If you are shopping with the refund in mind, do not pack the relevant goods deep in checked baggage before you understand the validation process.

This is a refund on eligible exported goods, not a general discount on restaurants, accommodation or services.

Carrying €10,000 or more in cash or equivalents

Most holidaymakers will never come close to this rule, but it is worth stating accurately. Icelandic customs says travellers carrying €10,000 or more, or the equivalent, in cash and certain bearer instruments when entering or leaving Iceland must declare it to customs.

The official cash-declaration form is TS-E29. If this applies to you, use current Icelandic customs guidance rather than relying on an airport forum post.

Refunds, deposits and card holds

Rental cars, hotels and some other services may use deposits or temporary card authorisations. These are not the same as a final charge, and the time taken for a released hold to disappear can depend on the merchant, payment network and your bank.

For a trip with a rental car and several hotels, I avoid running one card close to its limit. Keeping headroom helps if a legitimate pre-authorisation appears before an earlier one has cleared.

My payment setup for Iceland

Before departure I check six things:

1. My main card's overseas purchase fees.
2. My backup card's fees and PIN.
3. Whether either card has a low cash-withdrawal limit.
4. That I can access banking without relying on one SIM or one handset.
5. That I will normally pay in ISK, not blindly accept a terminal conversion.
6. Whether any large shopping purchase may qualify for the current tax-free process.

That is enough for most travellers. Iceland's payment system is not difficult; the goal is simply to remove single points of failure.

Official sources

For current card/cash/tipping guidance, see Visit Reykjavík. For valid currency denominations, see the Central Bank of Iceland. For tax-free shopping and cash-declaration rules, use the current Ísland.is tax-free shopping guidance and Icelandic Customs.

Cheers, Carpe Diem & paying in krónur without turning the terminal into a maths exam! 🍻⏳💳
TATS Man
your card-first Iceland planner