Legal tender is any type of money that must, by law, be accepted in payment of a debt. The Legal Tender Act of 1933 gave unlimited legal-tender power to all United States currency in circulation.
Before 1933, gold coins and certificates had unlimited legal-tender power. Standard silver dollars had full legal-tender power, unless they were specifically declared unacceptable by contract. United States notes (greenbacks) were legal tender for all purposes except payment of customs duties and interest on the public debt. All other forms of paper money–whether issued by the United States Treasury, the Federal Reserve Banks, or private commercial banks–had legal-tender status for payment of taxes, but not for the settlement of private debts. Half dollars, quarters, and dimes were legal tender for amounts not more than $10. Nickels and cents were legal tender only for amounts not more than 25 cents.
Most other nations restrict the legal-tender power of coins in fractional denominations of the monetary unit. For example, the Canadian Currency Act makes coins of 10 cents or more legal tender for amounts not exceeding $10; 5-cent coins legal tender for amounts not exceeding $5; and 1-cent coins legal tender only for amounts of 25 cents or less.
