Residents of the United States considering holiday or other travel to the island of Bermuda may wonder if U.S. dollars are accepted in Bermuda. The answer is an unequivocal "yes." While the U.S. dollar is not the official currency of Bermuda — Bermuda does have its own official currency, the Bermuda dollar — the U.S. dollar is equally accepted within the country and, in fact, may be more widely used overall. This is largely due to the significant presence of multinational companies, which use the U.S. dollar as their preferred currency.
The U.S. dollar is freely accepted by hotels, restaurants, retail shops and other merchants on the island and can also be used for private transactions among Bermudian citizens. In fact, Bermuda citizens, corporations and organizations can even choose to set up bank accounts on the island denominated in U.S. dollars.
One travel tip for visitors to Bermuda who arrive with U.S. dollars and wish to avoid having to pay any currency exchange fees is that most businesses in Bermuda give you change for purchases in U.S. dollars if asked, as they typically have plenty of U.S. dollars on hand.
General Reasons for the Acceptance of the U.S. Dollar in Bermuda
Part of the reason for the acceptance of the U.S. dollar in Bermuda derives from the same reasons for the U.S. dollar being accepted as currency in so many countries across the globe. There are three main levels of U.S. dollar acceptance around the world, and Bermuda falls into the second category of "semi-dollarization," in which a country uses both the U.S. dollar and its own currency as legal tender within the country. The higher category of U.S. dollar acceptance is official U.S. dollarization, the case that exists in countries such as Panama and Ecuador, where there is no native currency and the U.S. dollar is the only officially accepted currency. A lower level of U.S. dollarization — unofficial dollarization — is common in a large number of countries around the world where the U.S. dollar is not designated as legal tender in the country and is therefore not generally accepted at places of business but is commonly accepted in private transactions by the country's citizens.
The general wide acceptance of the U.S. dollar stems from the fact that it has been recognized as the world's primary reserve currency since the end of World War II. The U.S. dollar, which has thus far in history never been devalued, nor has it had its currency invalidated, is considered the most stable currency in the world. In addition, because the U.S. dollar is so widely used in international trade, a large amount of U.S. currency tends to end up in the possession of companies and individuals in foreign countries.
Specific Reasons for the Acceptance of the U.S. Dollar in Bermuda
In addition to the general reasons the U.S. dollar is widely accepted on either an official or unofficial basis in so many countries, there are also some very specific reasons for its free acceptance in Bermuda. One reason is the very limited acceptance of Bermuda's own currency. The Bermuda dollar is only accepted within the borders of the tiny island country and has no general acceptance, either official or unofficial, anywhere else in the world. Another supporting factor for U.S. dollar acceptance is the fact that the United States, just a bit over 500 miles away, is the closest major country to Bermuda. That makes the United States a primary trade partner and source of tourism business and also the country where many corporations based in Bermuda conduct the bulk of their business. The United States accounts for approximately 75% of Bermuda's total imports, visitors and commerce. In short, because of the deep and close monetary connection to the United States, using U.S. dollars interchangeably with Bermuda dollars to a large extent simply makes monetary transactions for the country's citizens and businesses easier.
The acceptance of the U.S. dollar as an interchangeable currency in Bermuda goes back to 1970 when Bermuda dollar notes were first issued. Prior to then, Bermuda currency was tied to the British pound by the country's Currency Act of 1841, and Bermuda currency was issued in British pounds.