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By Peter Mosiondz, Jr. for CoinWeek ….
 

The tree of numismatics has many branches. One of the most interesting is the field of paper money.

Just as with coins, grading is perhaps the single most important ingredient of value when it comes to collecting paper money. And just as with coins, we have descriptive terminology to denote the condition of paper currency in grades ranging from poor to uncirculated. We’ll cover grading a bit further on.

But first you must determine the general “look” of a banknote–its “eye appeal”, if you will. It has to look really nice in your eyes.

Does the note appear to be washed out or faded in color? Does it have any creases? Does it have any tears, pinholes or staple marks? Does the note display any evidence of having been repaired? Can any pressed-out creases be detected? Examine both the face and the back of the note. Are there any pencil or ink markings? Are one or more edges trimmed so as to remove a possible defect?

All of the above play contributing roles in ascertaining the true grade and resultant value of a banknote.

For example, an uncirculated banknote must not have any of the above-mentioned flaws, otherwise it will not maintain its full value in the uncirculated grade. Flaws will cause a banknote to lose some value; the more significant the flaw the greater the loss in value. Too many faults and it will become a note that no other collector will want to purchase.

Another example would be a pencil mark on the front (face side) of an uncirculated banknote. This pencil mark, or number, may very well be a “counting mark” to denote the number of banknotes contained in a bundle after counting is performed by a machine. The note may still, by definition, remain uncirculated but will, of necessity, sell at a discounted price to that of a similar note without the pencil marking. It won’t do any good to erase the marking – an eraser will only damage the paper and evidence of the mark will still remain.

The centering of a banknote also plays an important role in the desirability and value.

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A well-centered banknote is worth considerably more than one that is off-center. This plays into the demand factor as well. Collectors–dealers too, for that matter–prefer a well-centered note. And before the letters come in stating that I am over-emphasizing the “value” factor, be assured that I must present all of the facts before you go out and spend your hard-earned money. These facts concerning flaws and other pertinent details that contribute to the value (or lack thereof) of any numismatic collectible can only serve to protect you as a consumer. A bargain will always look like a bargain and will not be in any great demand by a knowledgeable collector.

The well-informed buyer is more astute and less likely to make a bad purchase, so careful inspection and evaluation of any coin or banknote is essential.

Keeping that in mind, and realizing that one or more defects impacts these factors, let’s take a look at how to grade a banknote. The basic grading guidelines that follow may be applied to the paper currency issued by any nation:

Gem Uncirculated: A flawless note that displays the same crispness, freshness and vibrant color as when it came off the printing press. This note must be perfectly centred, have full margins and be free of any marks or blemishes. A superb note that is perfect in all respects. If this were a coin it would be graded MS-70.

Choice Uncirculated: A near perfect note, although not quite as select as the gem note. It will be brighter and fresher than ordinarily encountered in uncirculated notes of that particular issue. It must be reasonably well-centred and free of any marks or blemishes.

Uncirculated: A note that displays no evidence of having been circulated at any time. It may have a very tiny pinhole or two, counting smudge or some other evidence of improper handling, most likely performed by bank personnel. The note may be off-centred but not obtrusively so. It must maintain some degree of the crispness that is associated with a note that has never been circulated.

About Uncirculated: Sometimes referred to as “Almost Uncirculated”. This is a note that, due to its bright look and crisp feel, may at first glance appear to be uncirculated. However, upon closer examination it will show signs of very light use. This could be in the form of a corner fold or a faint crease, usually a vertical center fold. Conversely, any crease that breaks the paper fibres will only serve to reduce the note’s overall grade.

Extremely Fine: A bright note that maintains a good degree of original crispness. It will show some evidence of circulation. This note may exhibit two or three minor creases or folds but may not contain any tears or discolouration.

Very Fine: A decently crisp and clean banknote that has obviously been in circulation but not for an overly extended period of time. The colors may not be as bright and bold as on a higher-graded note but they won’t appear faded or washed-out. This note may have several folds, creases or light smudges but the design in the crease must not be worn off.

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Fine: A note that shows much evidence of circulation and thus exhibits considerable wear. Although numerous creases and folds are apparent, some slight degree of firmness will be present. A note in this grade will not be severely stained or soiled. At the crease areas, some portion of the design may be worn off. For some rare notes of many years ago, a fine note may well be the best one readily obtainable.

Very Good: A note displaying considerable wear. It may be dark, soiled and limp in appearance. One or two small tears may be evident on the notes margins. Other defects such as writing, foreign substances or rubber-stamp impressions, to name but a few examples, may be evident as well.

Good, Fine and Poor: Notes in these grades are seldom considered by collectors unless they are truly rare notes that are customarily seen only in these low grades. In general, collectors do not want notes grading less than very fine. But you must judge for yourself as to what you will collect and how much you can afford to spend on your hobby. If well-worn notes give you pleasure, then by all means pursue them.

But be forewarned. Notes in lesser grades are very seldom in demand by other collectors and dealers unless they are supreme rarities. This will become evident when the collection is sold.

Pricing

The pricing of banknotes is naturally commensurate with the grade, eye appeal, desirability and scarcity of a particular piece. For a relatively modern note that many dealers seem to have ample inventories of in gem condition, it may be foolish to pay a large premium for a gem uncirculated note over the price of its choice uncirculated counterpart. The fact is that if there are plenty of gem notes in dealer inventory, then they can’t be that scarce. Oftentimes a choice note can be had for a considerable reduction in price over gem. But if absolute perfection is your goal, I would suggest a modest 10- to 20-percent premium over a choice note in this scenario.

Basic Terms

There are a few terms and descriptions that I would like to bring to your attention before closing our talk on paper money. Many more explanations can be found in the various paper money catalogs available from numismatic literature dealers.

  • Face: The front side of a banknote that contains the portrait. Sometimes incorrectly referred to as the obverse.
  • Back: The other, or underside, of the note. Sometimes incorrectly referred to as the reverse.
  • Vignette: The engraved portrait or scene depicted on the face of a bank note.
  • Counter: A word, numeral or letter that denotes the denomination of the banknote.
  • Plate Number: These are the very tiny numbers on both sides of a note that indicates what printing press performed the job. Notes encountered without plate numbers once had them on the margin but they were trimmed off once the notes passed inspection and were fit for general release.

Many banknotes are printed by the intaglio (or engraved) method. This involves the designer engraving steel plates with the design elements in a “mirror image”. The recessed lines will hold the inks used to print on the paper. The master plate is used to produce working plates and these working plates produce the notes. This is but a simplistic overview of the engraving process. Many books are available on the subject.

Happy collecting!

 

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