Why is the US 2 dollar bill not commonly used in circulation?

Answer 1

The US is unusual in its low use of the $2 bill. Equivalent bills - and now coins - are in common use in Canada, the UK, Australia, the EU, and other countries. The situation in the US, though, is tangled up in a story of social morés and mythology.

When the federal government first starting printing paper money during the Civil War, $2 bills were nothing unusual. They were printed just like other bills, and met a need for change-making as a convenient denomination in between $1 and $5. However by the late 19th century, the bills found a special niche at racetracks where $2 was the standard bet. Worse yet they were also the currency of choice at brothels as the going rate for, uh, "services" in those pre-inflation days. Many people stopped using $2 bills because they were afraid someone might think they'd been frequenting one or both of those unsavory venues.

In some more-superstitious parts of the country that distaste eventually morphed into a belief that the bills themselves were somehow tainted by their association with vice. Simply touching one was thought to expose a person to contamination. The myth was further compounded by the slang term "deuce" (referring to the denomination) which was taken by many as a reference to the devil. Together those beliefs culminated in the practice of "draining evil" out of $2 bills by tearing off one corner and hanging them up like a washcloth!

The Treasury itself contributed to reduced use by its 1928 decision to print all $2 bills as a form of currency called United States Notes. US Notes, now obsolete, were issued directly by the government rather than through the Federal Reserve Bank and had red seals and serial numbers rather than the familiar green ink. Even people who knew there was no such thing as a "curse" on the denomination still tended to hoard $2 bills because of their unusual appearance.

Circulation dropped to the point that printing was temporarily suspended in the 1960s. The Treasury resumed production in time for the 1976 Bicentennial; this time the bills were standard green-seal Federal Reserve Notes and featured redesigned the reverse side that depicted the signing of the Declaration of Independence. It was hoped that the new design would make the bills circulate more widely but instead, they too were hoarded as curiosities despite being available in huge quantities. During the 1950s and 1960s people had become accustomed to using multiple $1 bills in commerce and cash registers were being made without a $2 slot, so lack of use became a circular problem. It got to the point where younger cashiers didn't even recognize the denomination, leading to a number of infamous cases where people trying to spend $2 bills were accused of counterfeiting.

Despite all of these obstacles the denomination still continues to circulate at a low level. In fact demand has picked up somewhat during the first part of the 2010 decade. As of this writing the Treasury has printed more $2 bills on a more-regular schedule that it has in about the previous 15 years. The "why" isn't completely clear; it's thought some of the increase in demand is due to inflation and some due to the bills' use by various groups as a way of pointing out their purchasing clout, but no definite reason has been identified.