Legal Tender

What is 'Legal Tender'

Legal tender is any official medium of payment recognized by law that can be used to extinguish a public or private debt, or meet a financial obligation. The national currency is legal tender in practically every country. A creditor is obligated to accept legal tender toward repayment of a debt. Legal tender can only be issued by the national body that is authorized to do so, such as the U.S. Treasury in the United States and the Royal Canadian Mint in Canada.

BREAKING DOWN 'Legal Tender'

Widely accepted currencies such as the U.S. dollar and euro are accepted as legal tender in many nations, especially those where foreign currencies are in short supply. Countries with extensive business and cultural ties may also accept each other's currencies as legal tender in limited amounts. For example, some U.S. and Canadian merchants located close to the U.S.-Canada border accept both Canadian dollars and U.S. dollars as payment for goods and services.
 
The popularity of cross-border and online shopping is increasing demand for more forms of legal tender; however, given official objection to such alternatives, these may still be some years away. In May 2013, the governor of Arizona vetoed a bill that would have made gold and silver coins legal tender in the state, in addition to existing U.S. currency. Bitcoin, another popular payment alternative, is a virtual online currency that can be used for a growing number of transactions but is not considered legal tender.

RELATED TERMS
  1. Hedged Tender

    A strategy in a tender offer where an investor short sells a ...
  2. Proration

    A situation during a corporate action in which the available ...
  3. Competitive Tender

    An auction process through which large institutional investors ...
  4. Schedule TO-I

    This schedule is known as an "issuer tender offer statement." ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank ...
  6. Schedule 14D-9F

    This schedule may be used by a Canadian foreign private issuer ...
Related Articles
  1. Investing

    Explaining Tender Offers

    A tender offer is a broad public offer made by a person or company to purchase all or a portion of the shares of a publicly traded company.
  2. Investing

    How Does a Tender Work?

    Tender usually refers to the process in which governments invite suppliers to bid for the right to work on large projects.
  3. Markets

    3 Benefits of a Successful Tender Offer: Cliffs Natural (CLF)

    Learn about the potential benefits that the debt tender offer by Cliffs Natural Resources had for the company's balance sheet and income statement.
  4. Investing

    Mergers and Acquisitions: Doing The Deal

    Start with an Offer When the CEO and top managers of a company decide that they want to do a merger or acquisition, they start with a tender offer. The process typically begins with the acquiring ...
  5. Personal Finance

    5 Free Or Low-Cost Legal Services

    Legal fees have never been more expensive. Here are some ways for you to save on legal fees while still getting reliable advice.
  6. Trading

    Dollarization Explained

    Find out how fledgling economies can find some stability in their currency and attract foreign investment.
  7. Investing

    7 Facts You Didn't Know About The Greenback

    There's more to that $10 bill in your pocket than you think - read on for some interesting facts about U.S. currency.
  8. Trading

    5 Countries Where the USD Is Commonly Accepted

    In these five countries, the U.S. dollar is either the official currency or is used alongside native currencies for transactions.
  9. Financial Advisor

    The Basics of The Series 79 Exam

    Passing the Series 79 exam is usually necessary for anyone who wants to work in investment banking.
  10. Investing

    How 4 Companies Are Changing the Legal Industry

    An overview of four companies transforming the way consumers and businesses interact with lawyers.
RELATED FAQS
  1. Why would I want to accept a tender offer from a stock company?

    I received a tender offer from a company that bought into another company. They are going public with the new company soon. ... Read Answer >>
  2. What happens to the shares of stock purchased in a tender offer?

    Learn what a tender offer is, whether it is a good idea to accept a tender offer and what happens to the shares of stock ... Read Answer >>
  3. What usually happens to the price of a stock when a tender offer for shares of the ...

    Learn what happens to the price of a stock when a tender offer is made public. Some of the most contentious takeovers have ... Read Answer >>
  4. If a company offers a buyback of its shares, how do I decide whether to accept the ...

    Learn why it may often be in the best interest of a shareholder to accept a tender offer made at a premium to the market ... Read Answer >>
  5. If I reject the tender offer for acquisition of the stock that I own in a company ...

    Since the passing of the Sarbanes-Oxley Act, a significant number of public companies have chosen to go private. The reasons ... Read Answer >>
  6. Why does executive compensation facilitate when a company buys back its stock?

    Learn about how companies use stock buybacks in order to facilitate executive compensation and why the practice is very controversial. Read Answer >>
Hot Definitions
  1. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. With a poison pill, the target company attempts to make ...
  2. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  3. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  4. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  5. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  6. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
Trading Center