Money in Cuba

All payments in the establishments operating in foreign exchange in Cuba must be made with convertible pesos.
Convertible pesos will remain at par with the US dollar at an exchange rate of one for one.

You may exchange Euros, Canadian dollars, Pounds Sterling or Swiss Francs for Convertible Pesos (CUC). The exchange rates for those currencies are set in accord with the exchange rates on the international market.
You may also exchange US dollars for convertible pesos, but a service charge of 11 percent will be levied, to protect Cuba's economic interests.
To be correct: There is a 8% exchange rate difference b/n USD and CUC. Banks charge approximately 3% for all transactions whether for exchanging cash or a cash 'advance ' using over the counter ot ATM withdrawal. Given that all currencies are linked to the fixed relationship between USD and CUC this 8 plus 3% applies to all Forex transactions.

Euros will still be used in the following tourist resorts: Varadero; the Jardines del Rey Archipelago; Holguín; Santa Lucía Beach, in Camagüey; Covarrubias Beach, in Las Tunas; and Cayo Largo del Sur.

Convertible Pesos Cuban Pesos CUP The rate of change of the Cuban Peso (CUP) with the USD or the Convertible Peso is of 1/26. A foreigner can use these CUP's for p.a. a public transportation, buying market food (vegetables and fruits), perhaps some juice or a pizza in the streets.

So To Be Clear ... Exchanging Money (Thanks to Terry)

Accepted Foreign Currency
Canadian Dollars (CAD), Swiss Francs (CHF), Mexican Pesos (MXN), Japanese Yen (JPY), British Pound Sterling (GBP) and the Euro (EUR) are all accepted. Exchange rate is based on 1 Cuban Convertible Peso being equal to 1 US Dollar.

American Dollars
$1.00 US Dollar = $0.90 Cuban Convertible Pesos plus 8% after April 9. Americans should do their own calculating, but I find it very doubtful that they could exchange their US Dollars into another major foreign currency, then exchange that currency into Cuban Convertible Pesos for much less than the 10% service charge that Cuba levies against their US Dollars. Who knows though, perhaps some Americans – especially ones living near the borders – can get great rates on Canadian Dollars or Mexican Pesos and beat the 10% surcharge. Best of luck.

Trivia
Always bring new bank notes, with no rips, tears or markings. Coins are useless, so all you Canadians please leave your Loonies and Toonies at home.

Very Important Note When Visiting the Bank or Money Exchange: Always take a calculator with you so you KNOW the amount of CUC that should be coming to you, and ALWAYS ask for the printed receipt. Ripping off tourists during money exchange transactions is a VERY common occurrence.

Airport Money Exchange
Most expensive exchanging at a bank or CADECA Money Exchange.

Street Money Exchange
Lots of Cubans working money exchange scams. It goes without saying that any traveler is an idiot to exchange money anywhere except at a proper institution, or between trusted friends. (And as noted above, even at the bank you have to be frigging careful.)

Hotel Money Exchange
Verry expensive, at least in Havana, but handy. I assume the all-inclusive resorts would be better. The CADECA on Obispo Street in Havana – as with the other offices I went too – were all open to 10:00pm, so it’s not a big deal to get money. Best rate you get at: Banco Financiero International.

Banco Metropolitano

Counterfeit Money
You are warned that counterfeit Convertible Pesos are quite common now, at least in Havana.

Credit Cards
Easy to get cash advances with any non-US issued credit card. Bring your passport for I.D. Cuban banks charge 11% commission!

ATMs
Not widely available, especially outside tourist areas. You can get ATM cash in Havana with your VISA creditcard

Traveler’s Cheques
Why should you? It costs a commission to cash them, they’re not always easy to cash outside of tourist areas, it’s very hit-and-miss if you can cash American based TCs like American Express, and if you lose them you can’t replace them while you’re in Cuba. They seem like a lot of trouble for very little convenience or security.

Last but not least ...
Getting rid of your Cuban Convertible Pesos: You can exchange your left-over Pesos at the airport when you leave, expensive, and many times they’re short of foreign currency. A better way to handle it is to budget wisely during the last few days of your trip so you don’t arrive at the airport loaded with useless CUP. Remember, you need 25 CUC per person for airport departure tax.