$1, $2 among Canadian bills set to lose legal tender status in 2021

These paper bills will soon become defunct The Bank on Canada is reminding Canadians that $1 and $2 paper bills, amongst others, are set to lose their legal tender status in 2021.

TORONTO — Any Canadians who have old paper bills in their wallets have until the end of the year to use them in day-to-day transactions before merchants no longer have to accept them.

The Bank of Canada (BoC) issued a reminder on Thursday that hundreds of millions of $1, $2, $25, $500, and $1,000 bank notes will have their legal tender status removed as of Jan. 1, 2021.

However, the bank says the decision to remove legal tender status from these bills will have little impact on the majority of Canadians.

"Most Canadians will not be affected because the bank notes targeted by this announcement have not been produced in decades and are rarely used in transactions," the BoC said in a statement.

The BoC noted that stores can still accept these bills as payment if they so choose.

"Money is not just bank notes but takes many different forms: credit cards, debit cards, cheques, and contactless payments using mobile devices. You can pay with any of these forms of money, even though they are not considered 'legal tender'," the BoC said.

While these rare bills will be losing their status in the coming weeks, it does not mean that the banknotes are suddenly worthless.

Canadians with these outdated bank notes can take them to their financial institution or send them to the BoC to redeem for their face value. The bank added that people can also opt to keep their older banknotes as souvenirs.

However, there may be more money to be made by selling the rarer bills to collectors.

The $500 bill is one of the rarer bank notes, and with just over three dozen of the bills in existence, they are extremely hard to come by. The value of one bill can range from $20,000 to $60,000 depending on its condition, according to the website Canada Currency.

Other rare bank notes, such as the $25 bill, can also fetch thousands of dollars.

CANADA'S OLD BILLS

The $1 and the $2 notes stopped being issued in 1989 and 1996, respectively, and were replaced with the loonie and toonie. Five versions were produced of these bills before they were taken out of circulation.

The only $25 bills in circulation were issued as commemorative bank notes in 1935 to mark the 25th anniversary of King George V’s ascension to the throne. Both it and the $500 note were discontinued shortly after they were issued in 1935.

The BoC produced four versions of the $1,000 bill before withdrawing it in 2000.

The BoC's last count of affected bills in circulation, from the end of 2019, is as follows:

These numbers do not include banknotes issued by the Dominion of Canada, individual provinces or defunct or chartered banks.

The removal of legal tender status of these bills is in accordance with amendments to the Bank of Canada Act and the Currency Act approved by Parliament in 2018 to remove outdated bank note denominations from circulation.

The BoC says having the power to remove legal tender status from certain bills will help the bank do a better job of keeping the notes in circulation current.

"Newer bank notes have better security features that make them difficult to counterfeit, and they are in better condition overall. Keeping notes current means they work more efficiently for all of us," the BoC said in the statement.

The BoC notes that "many other countries" have been doing this for years with more than 20 central banks around the world having the power to remove legal tender status from their notes, including the Bank of England, the Sveriges Riksbank in Sweden, the Swiss National Bank and the Reserve Bank of New Zealand.

The federal government has indicated that it has no plans to take any other banknotes out of circulation at this time.