What is the history of banknotes?

Money has witnessed the history of human economic activities. It has a history of nearly 4000 years, even earlier than the origin of written characters. Banknote was invented in the 7th century as a way of simplifying large monetary transactions. The usage of banknotes later spread throughout Europe during the 13th century. Originally, the value of banknotes were backed by precious metals such as gold or silver. Banknotes were seen as a promise to pay someone in precious metal, but after the removal of precious metals from the monetary system, banknotes evolved into the most common form of currency. 

What are the most valuable banknotes?

In recent decades, banknotes have been valued higher than the printed numeral on the bill itself. There are more than two hundred kinds of banknotes in the world, which circulate in 193 independent countries and regions of the world. Banknotes have historical value because each edition records the history of a country, including political, economic and social development. The themes, figures, and other decorative details on banknotes often reflect the culture of the societies over unique periods of time.  

To be considered ‘antique,’ the banknotes usually are early issued from 1660 or have short circulation time and infrequent denomination notes. For instance, this American $1,000 banknote is the most valuable banknote and coveted piece of antique currency in the world, having been sold at an Orlando auction for $3.29 million dollars. Only two of these bills are said to remain in existence, with one being held at the Federal Reserve Bank of San Francisco. The note was printed in 1890 with a face value of $1000, and got its nickname from the green stripes that curve down the zeroes on the obverse side, making each numeral resemble a watermelon. The rarity, age, and unique design of this note makes it one of the most coveted worldwide.

Australia began printing banknotes in 1913, and it is said that just one single bill remains from the first printing. It was originally believed that none of these notes remained until a Scottish collection was found to contain a good condition one in 2005. The note is valued at $226,000 and is slated to be auctioned in Sydney, Australia.

What influences the value of a collectible banknote?

The appearance of paper money is one of the most important factors that determine its value. Rarity and circulation time of banknotes after issuance is also closely related to the collection value. Banknotes with short circulation time have more investment value than those with long circulation time. Other factors to consider, particularly with banknotes, are denomination and serial numbers.

Rarity - Some banknotes had very short print-runs or were even printed but never put into circulation – these will be rare, and therefore likely also valuable banknotes. 

Series number - Today, whenever a new banknote is printed there is often a rush to find particular serial numbers with cultural meaning or numeric appeal. Early copies of a print-run are valued more highly by some collectors. In many cases, the very first produced notes will be gifted to patrons or famous figures, such as a monarch, and so have a great deal of added value.

Denomination - When the currency system was reformed, new money was issued and old money was recovered. Most of the holders will exchange the old banknotes with large denominations into new ones in the bank. Therefore, most of the banknotes with large denominations are recovered completely and will not be preserved too much.

Therefore, the large denomination notes are rare in the collection market, and the collection value is higher.

How can I determine the condition of my banknote?

In order to ascertain the grade of a note, it is essential to examine it out of a holder and under good lighting. Move the note around so that the light bounces off the surface at different angles. Try holding it up obliquely so that the note is almost even with your eye as you look up at the light. Hard-to-see folds or slight creases will be revealed under such examination. Lightly feeling along the surface of the note can also be helpful in detecting creases and folds.

According to IBNS Grading Standards, the grading of banknotes has 9 categories: Uncirculated, About Uncirculated, Extremely Fine, Very Fine, Fine, Very Good, Good, Fair, Poor.

Uncirculated - The banknote has not been in circulation, and it is well preserved without any creases, wrinkles and fading. The paper body is clean, rigid and sharp. 

About Uncirculated - A virtually perfect note, with some minor handling. May show evidence of bank counting folds at a corner or one light fold through the center, but not both. An AU note cannot be creased, a crease being a hard fold which has usually “broken” the surface of a note. Paper is clean and bright with original sheen.  Corners are not rounded.

Extremely Fine - A very attractive note, with light handling. May have a maximum of three light folds or one strong crease. Paper is clean and bright with original sheen. Corners may show only the slightest evidence of rounding. There may also be the slightest sign of wear where a fold meets the edge.

Very Fine - An attractive note, but with more evidence of handling and wear. May have a number of folds both vertically and horizontally. Paper may have minimal dirt, or possible color smudging. Paper itself is still relatively crisp and not floppy. There are no tears into the border area, although the edges do show slight wear. Corners also show wear but not full rounding.

Fine - This kind of banknote has been in circulation for a long time, so there may be multiple folds and stains. Edges may show much handling with minor tears in the border area. Tears may not extend into the design. There will be no center hole because of folding. Colors are clear but not bright.

Very Good - A well used note, abused but still intact. Corners may have much wear and rounding, tiny nicks, tears may extend into the design, some discoloration may be present, staining may have occurred, and a small hole may be seen at center from excessive folding. Staple and pinholes are usually present, and the note itself is quite limp but NO pieces of the note can be missing. A note in VG condition may still have an overall not unattractive appearance.

Good - A well worn and heavily used note. Normal damage from prolonged circulation will include strong multiple folds and creases, stains, pinholes, and/or staple holes, dirt, discoloration, edge tears, center hole, rounded corners and an overall unattractive appearance. No large pieces of the note may be missing. Graffiti is commonly seen on notes in Good condition.

Fair - A totally limp, dirty and very well used note. Larger pieces may be half torn off or missing, beside the defects mentioned under the Good category. Tears will be larger, obscured portions of the note will be bigger.

Poor - Part of the note is missing, but the missing area is no more than 20% of the whole banknote.