Coins/Notes 

Canada has both paper money and coins.  There are currently six coins in circulation – the penny (1 cent), nickel (5 cents), dime (10 cents), quarter (25 cents), loonie (1 dollar) and toonie (2 dollars).  The toonie has 2 colours--a silver rim around a gold-coloured centre, while the slightly smaller loonie is all gold-coloured. Five bill denominations ($5, $10, $20, $50, $100) are all in different colours and the latest issues feature the Queen or former Prime Ministers on the face, and Canadian cultural and historical icons on the reverse. 

A word of warning regarding $50 and $100 notes. The larger stores will more likely handle these notes, as smaller establishments and theatres are sometimes fearful of counterfeits.  Many stores will not take the old $50 bill or old $100 bill, only the new $50 bill and new $100 bill, which have much better anti-counterfeiting measures (such as holographic stripes along the sides of the bill, and watermarks). So best to make sure you have a good selection of the smaller denominations if you are relying on cash.

Credit Cards 

Most merchants accept credit cards.  Visa and MasterCard are the most popular, followed by American Express.  Be aware that most cards charge a transaction fee for foreign currency transactions.  Sometimes, 3%.  You'll want to check with your credit card company on their fee.  It's a wise precaution to phone your bank and credit card company before you leave home and let them know you'll be traveling in a foreign country.   If you fail to warn them, they may notice unusual transactions on your cards and they may freeze your account.  

Travellers' Cheques

Travellers' cheques are less popular — and may be subject to a fee.   A good way for American Auto Association (AAA) members to avoid the commission and receive a favourable exchange rate is to purchase C$ travellers cheques from AAA before the trip.  Rates change over time, so check what is fair today before accepting their word for it.  Don't over-purchase as you will generally lose money if you exchange your Canadian dollar checks back for other currencies at the end of your trip.   Your AAA office might not always stock Canadian traveler's checks, so contact them in advance.

ATMs 

ATM (Automated Teller Machine) networks includes Plus/Visa and Cirrus/Master Card.  (Note: In 2008, several TripAdvisor members from the UK reported problems using their Visa and Mastercard ATM cards in Canada.) ATMs provide Canadian currency; your bank will do the conversion.  Canada's Scotiabank has ATMs located across the country and is a member of the Global ATM Alliance; the international ATM fee (often the equivalent of U.S.$3 - U.S.$5) will be waived for customers of other alliance members (including Bank of America, BNP Paribas, Barclays, Deutsche Bank, Westpac) when they withdraw cash using a Scotiabank ATM.

Banks or Credit Unions 

Although tempting and convenient to exchange funds at your hotel’s front desk, it’s always best to exchange currency at a bank or credit union. Some banks have the daily exchange rate posted at the entrance. You will receive a much favourable rate this way. Merchants may accept U.S. (but not other foreign) currency, the exchange rate is set by each merchant and is almost always very much in their favour.

Major Banks of Canada

Canada has a variety of financial institutions. However, there are five which dominate the domestic banking industry. Branches of the "Big 5" banks will often be found in many cities from coast to coast.  Many have switched to shorter names, but are sometimes referred to by their older names: RBC (Royal Bank of Canada), TD Canada Trust (Toronto-Dominion), Scotiabank (Bank of Nova Scotia), BMO (Bank of Montreal), and CIBC (Canadian Imperial Bank of Commerce).

Airport Exchange kiosks 

Currency exchanges at airports offer less attractive rates.  The rents they pay for the premium space is passed along to the customer.  Most other alternatives are more economical.

Regarding U.S. dollars

Canadian businesses taking U.S. currency do so as a courtesy, not as something that should be expected everywhere or taken for granted.  Expect to receive Canadian currency for your change if they do accept U.S. cash. Comments such as "What does that cost in real money", or "Not your dollars, real dollars", although usually endured politely by long-suffering retail clerks, are not generally from a valued/courteous guest, and should be avoided.