Updated: Apr 29, 2020
The currency used in New Zealand is the dollar, commonly written as NZ$ or often without NZ especially inside the country. As with other decimal currencies around the world, there are 100 cents in every dollar. The smallest available coin is now actually 10c, but as New Zealand has one of the most active electronic transaction systems in the world, cash is often not used at all. NZ decimalised its currency on 10 July 1967. At the time, the public were treated to some wonderful TV advertisements advising them of the change. Replacing the old with the new coins and notes on one day was a military-style operation. You can watch the archival footage of it here. Prior to this date, NZ had its own fraction-based currency developed from the old British pound, shillings and pence.
In 1935, New Zealand gained its own pound currency, distinct from the Australian & British, which had become legal tender in 1840. Prior to the introduction of the British currency there was no real currency as commerce was very limited and restricted mainly to a bartering system. The modern currency has lost the original $1 and $2 notes, replaced with coins in 1991, and the 1c and 2c (withdrawn in 1987) and 5c (withdrawn in 2005). 2005 saw the introduction of new, smaller coins that were both distinct from their Australian cousins & incorporated electromagnetic signatures to allow machines to 'read' them. As New Zealand is a British Commonwealth country, all the coins display Ian Rank-Broadley's portrait of Queen Elizabeth II on one side. The design on the reverse sides are individual & can be seen here on the Reserve Bank's website. In particular, the 20c coin stands out as it features a remarkable 1836 Maori carving, specifically of an 18th century Maori warrior leader called Pukaki, who was a Rangatira (Chief) of the Ngati Whakaue iwi of Te Arawa in the Rotorua district.
New Zealand has two sets of bank notes in circulation, the latest set gradually replacing the older since late 2015. Each set has $5, $10, $20, $50 & $100 notes. Images of them can be found on the Reserve Bank's website, here. The latest set incorporates additional Maori language features, such as Aotearoa, the Maori name for New Zealand and Te Pūtea Matua, the Reserve Bank of New Zealand's Maori name. The native flora and fauna featured on the notes are also written on Maori. The notes display prominent, respected New Zealanders, such as Sir Edmund Hillary ($5), the first man to conquer Everest; Kate Sheppard ($10), a prominent campaigner to give women the vote which was achieved as a world first in 1893; Sir Apirana Ngata ($50), the first Maori to graduate from a NZ university and an MP for 38 years he played a significant role in the revival of Maori people and culture; Lord Rutherford of Nelson ($100), internationally recognised as the 'father of the atom'.
New Zealand has had an EFTPOS (Electronic Funds Transfer at Point of Sale) system since 1989 (trialled from 1985) and more recently the rapid uptake of the contactless system (using RFID chips embedded in the cards) has cemented the use of this payment system for smaller transactions - no pin or signature required for transactions under $80. As a visitor, unless you are staying for an extended period, in which case it would be a good idea to explore the option of opening a local bank account, you will most likely be using cash for smaller transactions as each time you use your card your bank will undoubtedly charge you high fees and use an awful exchange rate! Every bank is different, so do take the time to get your bank to explain the possible charges in detail for each type of transaction. For example, if you withdraw cash using your bank or credit card, you will often get charged more than if you use it to purchase a retail item. On the other hand, carrying too much cash is never a good idea. New Zealand is an extraordinarily safe country to travel in, but if you lose cash for any reason, there is never any recompense.
So, use your cards for all medium to large transactions, but make sure you understand the charges. Use cash for all small transactions, but don't carry too much. If you are going to use public transport, for example the bus or rail network in Auckland, you should purchase a HOP card which you can do online or at selected supermarkets, transport hubs or retail outlets. It costs $10, but you then get substantial savings on the fares. Wellington has its own system which is a bit more complicated as there are more cards to choose from, but the principle is still the same. Pay a lower fare if you use the card. Which card will depend on what journeys you are making. Go to the Metlink site to investigate the card that will suit you best. Christchurch information can be found here.
One thing that most visitors to New Zealand find unusual is the non-tipping culture. Workers in the catering industries in NZ do not work for just tips, they are salaried, so unless you receive exceptional service for which a gratuity (10% is more than generous) is always welcome, do not worry to tip. Tipping is customary in hotels, so a couple of dollars for bags carried or room service is appreciated. Never tip taxi (or Uber which is a big growth industry in NZ) drivers & never feel pressured to tip anywhere; in New Zealand it is a bonus, not an expectation.