How to Value: Banknotes

Banknote valuations can be much, much higher than the number printed on the paper (or polymer): the top selling historic banknotes regularly attract 5-figure sums. Telling the difference between a collector’s item and a scrap of paper, however, is as hard with banknotes as with any collectible.

Having only become its own collecting niche in recent decades, many have little idea of which banknotes might be rare, what collectors look for, and how banknote condition can affect their value. How would you compare the value of your note to any other on the market? The variety of historic banknotes might seem bewildering, but there is method in the madness.

Banknote Condition

Banknotes were made to last – but not all of them have. By their nature, most banknotes have passed through many hands and picked up wear and tear along the way. Those that haven’t are classified as ‘uncirculated’ and are granted the highest tier in the grading system used to assess the condition of paper money.

Banknote condition follows the 70-point scale first derived for coins, known as the ‘Sheldon Scale’. Banknotes considered collectible are graded from 4-70, while those which are in such poor condition as to be of little interest are given the lowest ranks. Factors that can be taken into account include discolouring, tears, fading, folds in the paper and any other sort of damage. On top of this, Paper Money Guaranty – the most popular banknote grading service – issues the best quality notes with special accreditations such as Excellent Paper Quality and their ‘Star’ designation.

Not all banknotes have to be pristine to be valuable, however. There is a high demand for materials used in the printing process, such as underprints and proofs, which never reach circulation and may not even resemble the final note. In particular, specimen notes (often punched with SPECIMEN or similar), or those that never made it into general circulation because of errors are more highly valued because of their rarity.

Banknote Rarity

Rarity is generally the defining factor in banknote valuation, but how can you tell the rarity of a note? One answer is age.

Certain types of notes, such as United States notes, were issued as legal tender for a very long time: for 109 years, in the case of US notes, between 1862 and 1971. This means there are many examples of that type of note, but also that the earliest examples remained in use for a very long time (and are still useable today) and so were more likely to be damaged or lost.

Probably a better indicator of rarity than age is how widely a note was circulated, although this might not be apparent on first look. 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. Similarly, different denominations of banknote, usually high-value examples, might also have been printed in smaller numbers. The same might go for a smaller country; smaller island-nations tend to have fewer notes printed than the US or China! Ultimately, however, the highest prices are achieved through competition between collectors and niche notes may also attract less of it.

Finally, serial numbers need to be considered. Today, whenever a new banknote is printed there is often a rush to find particular serial numbers with cultural meaning or numeric appeal. The same is true of historic banknotes, 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.

The Historic Banknote Market

Today, banknotes are the subjects of high profile, high value sales in their own right, but this is a relatively recent phenomenon. Until recent decades, coinage dominated this area of collecting as the more established practice, and as such the banknote market still sometimes reflects the price of coins.

So how can you tell when is a good time to buy or sell? Like coins, a barometer for the strength of the market are the various international paper money shows and fairs which attract the most serious collectors and dealers. There is, however, a growing disparity in values between banknotes which are considered rare and those which are for a more general, amateur market.

Easy to transport and universal to almost every country, banknotes are now an international field of collecting and as such values are tied to the global economy too. As with many collecting areas, the 2008 global recession hit banknote prices, but values have seen a steady recovery since then; in this small but steadily growing field of collecting, you can be confident of an expert valuation today.