Last month, three Detroit business owners got together to create to create a local currency. The bills, called Detroit Cheers, will be accepted by more than a dozen Detroit businesses as a payment method — which is all that it takes to create a local currency. Local currencies have been popular during past economic crisis: during the Great Depression, thousands of towns and cities created local money in order to keep local economies going.

The Benefit of Local Bucks

For local businesses, using a currency like a Detroit Cheer is an easy way to keep money in the local community. It’s rare that a big chain store or restaurant will accept anything but nationally-backed currency — that’s an American dollar to you and me. The big benefit of a local currency is the fact that when locals don’t have the ability to earn money in amounts similar to national levels. It keeps prices at a level that locals can keep buying, keeping businesses going.

Detroit isn’t the only city experimenting with a local currency right now. Michael Shuman, the author of The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition, estimated that about 75 local currencies are in use around the country.

Should You Use Local Currency?

If you’ve got the option of using a local currency, it can be pretty useful at those businesses which have already agreed to accept it — but a major hassle everywhere else. In general, the idea behind a local currency — like bolstering the local economy — is a good one. But it’s important that you can easily trade between your local currency and the national one. If you can’t get your money converted to something you can spend, it isn’t worth the paper it’s printed on. Detroit Cheers has a temporary fix for that problem — if you bring your currency to one of the three founders of the Detroit currency, they’ll convert it — but if a currency is widely adopted, finding that one person able to convert money can be impractical.

Another crucial concern is how that local currency is backed. Detroit Cheers are backed by $3,000, which has been placed in escrow. If something happened to the currency, at least a few people should be able to convert their money back into national currency — but it’ll depend on how many Cheers are actually in circulation.

There’s nothing wrong with using local currency, as long as your comfortable with it, though. Local currencies are legal tender, as long as they aren’t made to look like the national currency. Some business may even offer a discount if you use a local currency, especially if they’re working to encourage adoption of the new currency. You can also get a good feeling: by dealing in the local currency, you’re doing your part to encourage business to stay in your local economy — which may just pay off with more jobs and money available in your area. It’s a real trickle down effect.

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