CANADA'S OTHER CURRENCY

TORONTO—Canada's unofficial second currency may be headed for the shredder.

For more than half a century, thrifty Canadians have had an alternative to their legal tender. Canadian Tire Corp., an iconic retailer here that sells everything from car batteries to hockey sticks, hands out Canadian Tire money to loyal shoppers. (click below to read more)

Customers receive the brightly colored coupons, equivalent to a fraction of their shopping bill, at the checkout. They can redeem them next time through the door. Each bill features the face of fictional character Sandy McTire.

Over the years, the coupons—printed on counterfeit-resistant paper in denominations ranging from five Canadian cents (about five U.S. cents) to two dollars—have gained currency outside the store's doors. Collectors covet older bills and anticipate print runs of newer ones. One group auctions off rare Canadian Tire bills and publishes a newsletter devoted to the coupons.

Many small businesses across Canada accept the bills at face value, alongside Canadian dollars. Speculators buy and sell the paper.

About one billion bills are in circulation across Canada, worth an estimated 100 million Canadian dollars, the company estimates. Fresh bills are stored in high-security vaults before being sent to Canadian Tire's 750 retail and gasoline outlets.

But now, Canadian Tire is starting to phase out the program in a shift toward a plastic loyalty-card system. The company says it will continue to honor its paper currency, but thinks a card would help to better understand what customers are buying and fine-tune offers directly to them.

"We're taking the focus away from money, and moving towards a 21st-century model," said Rob Shields, senior vice president of marketing at Canadian Tire. "It's the evolution of currency."

That isn't sitting well with some Canadians.

Corin Raymond, a folk musician, has collected donations totaling nearly $3,600 in Canadian Tire money, which he plans to use to rent studio time to make a record, including a song he has written in praise of the coupons. James Paul, the studio owner, said he will use the money to help cover the cost of buying various odds and ends at Canadian Tire, including toilet paper, storage bins, kitchen appliances and LED light bulbs.

"This money is in our blood. It's part of our culture," said Mr. Raymond. "If I was going to send a box to Mars to explain what Canada is all about, I'd put in a 10-cent Canadian Tire money bill in it."

The new system promises to better reward customers—giving back up to 3% of a purchase's value in loyalty points, as opposed to 0.4% with the current system. The cards launched in Nova Scotia in early February and will be rolled out across Canada this year.

Canadian Tire said it has no immediate plans to stop printing Canadian Tire money entirely. But as more Canadians pay using their debit and credit cards, Mr. Shields said, the company's paper coupon circulation is dwindling, too.

"It's unfortunate, but it's just the way the economy has unfolded," he said.

Canadian Tire money was launched in 1958 when the company's co-founder and first president, A.J. Billes, needed a gimmick to attract customers to the company's newly established gas stations. His wife, Muriel, suggested a coupon-style money program.

A few years later, the company gave the bills a makeover, adding an illustration by a company employee of Sandy McTire, the chain's smiling and mustachioed fictitious figurehead.

As the program took off, Canadian Tire started printing its coupons on bank-note quality paper. They now have the crisp feel of real money, and each carries an embossed serial number. The company declines to say how much it costs to print its money.

Canadian Tire's cash isn't the only corporate currency floating around.

Disney Dollars are redeemable for goods or services at many facilities operated by Walt Disney Co. A small gas station chain across Ontario, Pioneer Energy LP, initially offered its customers "Pioneer Money" in 1962. It replaced its paper money promotion with a plastic rewards card in 2006.

But Canadian Tire money has worked its way into the Canadian psyche, with many small establishments across the country honoring the bills. Canadian Tire stores—anchoring strip malls from Montreal to Vancouver, and many smaller towns in between—are one of the country's most ubiquitous suburban landmarks.

Eli Gershkovitch, owner of the Rogue Wet Bar in Vancouver's trendy Gastown district, uses Canadian Tire money he accepts from customers to buy plumbing equipment. And many of his customers get a kick out of buying drinks with the coupons.

"Who'd ever think you could get a beer with Canadian Tire money?" he says. "It sure beats buying motor oil."

At The Works Gourmet Burger Bistro, a restaurant chain with 14 stores across Ontario, about $12 in Canadian Tire money buys a hamburger topped with pineapple, sweet and spicy sauce and brie cheese. The restaurant chain usually brings in about $400 worth of coupons each year, though many customers pay with real money.

"It's a pretty popular burger," said Alex O'Brien, owner of the restaurant chain.

Roger Fox, former president of the Canadian Tire Coupon Collectors Club, said his collection of rare Canadian Tire money is valued in the "tens of thousands" of real dollars. He anticipates a boom in demand if Canadian Tire eventually decides to drop the program, but sees Canadian Tire money living on.

"When that happens, they might get a big run at their stores," Mr. Fox said. "And after that, there'll be dribs and drabs forever."

Buyers and sellers trade the bills on Craigslist and other sites that host speculator communities.

Edmonton resident Keith Parsons scans the Internet for chances to buy up Canadian Tire money at a discount. He has become something of a market maker in the trade, recently closing 10 big deals for about $200 worth of the coupons, paying just 50 real cents on the dollar.

"People have contacted me from all over Canada," said Master Cpl. Parsons, an infantry soldier in the Canadian army. He has bought car tires, a barbecue oven, garden supplies and a power washer with the money.

Cheri Border, owner of Acme Fibres in Port Erie, Ontario, recently received a two-inch stack of coupons worth about $150 from a customer to pay for spinning fiber and yarn.

"There's a lot of nostalgia for it," she said. "It's something we've always had as kids. It's part of everyone's collective memory."