Cashless in Iceland: The Shift Toward Digital Payments and What It Means for Visitors

The shift away from cash

Iceland was one of the countries that led the way when it came to moving away from cash. Even twenty years ago or more, the proportion of cash circulating was very low and Icelanders were already very tech savvy. The pandemic focused minds on the transfer of germs using cash; tapping a card was contactless and thus perceived to be safer. With the rise of smartphones, many of us have banking apps on our devices and can keep track of the money in our account on the go.

So do you need to have cash with you at all?

In short, probably not. Today, it’s relatively rare in Iceland to find you have to offer cash to pay for something and there’s no other way of paying. Some businesses have gone completely cashless, while others will accept cash and cards. A handful of roadside stalls and artisan providers might only be able to take króna, but even in markets the stallholders will accept card payments. Using a credit card offers you consumer protection in case of fraud, making this method of payment advantageous for travellers.

Carry an emergency stash of your own currency

If you really don’t feel comfortable with the idea of being totally cash-free, then you have a couple of choices. Firstly, you can carry a small amount of cash in your own currency for emergencies. Dollars, euros and pounds can usually be exchanged quite easily in Reykjavik in a bank and so this gives you peace of mind if you worry about a card being declined. But if you don’t end up needing it, you won’t have incurred commission fees unnecessarily.

Visit the airport ATM or change kiosk

The other thing you can do is to change up some cash at your local bank before you leave for Iceland. However, most of us lead busy lives and it’s not always convenient to get to a bank particularly in the run up to a trip when you have a million and one things to do. Instead, visit the ATM or Change Group service desk (the same place you’ll do your VAT claim at the end of your trip) at Keflavik Airport once you arrive and withdraw some Icelandic króna for use when you need it.

What about tipping?

In some countries, such as the USA, service sector workers rely on tips to boost their income as their basic pay is exceptionally low. In Iceland, wages are at a fairer level and so people don’t need tips to boost their pay, though they are welcomed. However the situation means that it’s unusual to leave a tip, for example in an Icelandic restaurant, and you shouldn’t feel bad for not rounding up the bill. Even if you wish to do so it is normally possible to leave a tip using the card you’re paying with rather than shoving some notes into a countertop jar. Ask your server if it’s important to you, but don’t worry about causing offence if you don’t tip.

Why might you use contactless payment in Iceland?

Tapping your card rather than entering the PIN number each time is great if you are in a hurry or simply have a poor memory. However, the financial regulatory authorities place certain restrictions on the amount that can be spent in order for fraudsters not to take advantage of the process.

Current contactless limits in Iceland

In Iceland, the maximum amount you can currently pay in a single contactless transaction is 7500ISK, which equates to about $53 or £42 at current exchange rates. You can spend up to 15000ISK in total before a message on the terminal will indicate that the transaction has failed and that you need to enter your PIN instead. Once you’ve done so you can go back to tapping until your next 15000ISK limit has been reached.

Technology has advanced even further in recent years

Credit and debit cards stored in mobile payment systems such as Google Wallet, Apple Pay and Samsung Pay make it even easier to pay for goods and services. Simply tap with your phone and you’re all done. Secure and convenient, these digital wallets enable users to pay by card without their card details being revealed, which is why so many travellers now like to use this as their preferred form of payment.

The thorny issue of foreign exchange fees

You will soon notice one thing if you keep a close eye on your finances while you’re travelling. That is if you use your regular credit or debit card to pay for things while you’re in Iceland there’s a good chance that you’ll be charged a fee for transactions that are in a foreign currency. It’s similar to when you make a withdrawal from an ATM in a foreign country and it can come with a charge. These fees can add up to a substantial amount, so think about whether there’s a way you can avoid them.

The rise of Revolut et al

One option if you are keen to avoid foreign currency transaction fees is to open an account with a provider that doesn’t slap them on purchases – or at least keeps them as low as possible. Revolut is an example of this, for instance. You load money into your Revolut account and then use the card that comes with it. Alternatively, load the card into your Apple Pay or Google Wallet app and use that instead if you find it more convenient. Where MasterCard or Visa are accepted, so too will Revolut.

Should you use a pre-paid card?

Another option for cashless payments is to load value onto a pre-paid card and use that to make purchases. It’s a popular choice with families as the amount can be kept to a minimum, enabling young children to use it as if they had received their pocket money in cash. Adults can have one too, of course, though the exchange rates and conversion fees can be less advantageous to the holder making your purchases more expensive in real terms.

Mix and match

One of the best ways to deal with buying goods and services in Iceland is to have at least a couple of alternative methods. You might choose to make the majority of your purchases using your regular credit card or mobile payment system, for example, so that you can keep track of your spending easily. Carrying a small amount of cash as a backup gives you a failsafe mechanism of paying should your card be declined, and you can always change leftover króna back to your own currency at the airport – or keep it safe for the next time you come to Iceland.