Depending on how you’ve acquired any notes you may now have in your collection or accumulation of worldwide currency, probably you have already entered into the exciting and sometimes controversial realm of grading. Grading means assigning a condition of preservation to a note. Happily, banknote grading is, in my opinion, generally easier to master than coin grading and therefore not quite so subject to broad interpretation and controversy as is the grading of a coin. For one thing, a note is basically a two-dimensional object, while a coin is three-dimensional. The grades that banknote collectors use are essentially analogous to that of the coin collector, although the 70-point grading scale, where the state of UNCIRCULATED is broken up into eleven different substates (MS-60 to 70), is starting to rear its ugly head in the world of banknotes, though seemingly restricted for the moment to the more rare U. S. and world notes.
In any case, if you’re actively acquiring notes by buying or trading for them, you need to have a good working knowledge of grading so that you can make astute decisions when purchasing or swapping these items. Also, you’ll probably want to get an idea of what the items you already have may be worth. To some collectors, this monetary value is of little concern and they collect what they like (and what they are able to afford) without regard to the value the item might bring in the collector market. In fact these collectors may well derive the most pure pleasure from their holdings. Most paper money collectors, however, like to think that what they’re buying may at some future date appreciate in value. Whether this will be the case or not, as some issues do indeed go up in value while others do not or remain static, in order to determine a reasonable range of value for most notes, it is necessary to be able to identify what you have correctly and be able to determine its state of preservation accurately using standards widely accepted by the collecting community.
Let’s then look at the subject of grading, keeping in mind that the collector must develop his own standards based on his interpretation of the commonly-accepted system devised by the International Banknote Society, of which we will speak later. We’ll start with the lowest grades and work our way up the scale. Be aware that you should examine a note out of its holder under a strong light in order to be able to see the true condition of the bill. This is especially important for high-grade notes, as some light creases and flaws are very difficult to detect except under the best lighting conditions.
Note – a some point in the future we will try to get some high resolution scans of examples of notes in various grades.
POOR – a virtual ‘dog,’ generally a raggy, dirty, torn and sometimes taped-up poor-excuse of a banknote that has seen better days and is generally collectible only as a filler unless it is extremely rare.
FAIR – this is barely one step up, maybe not quite so raggy or dirty but perhaps missing a piece or more of the note along with other defects. This grade still exhibits extreme limpness generally.
GOOD – like the grade ‘GOOD’ for a coin, GOOD really isn’t so good although it is possible to have a semi-attractive note that still grades only GOOD due to the fact that it may have tears and small missing pieces as well as heavy creasing. Most GOOD notes have seen a lot of circulation and will show evidence of this such as many heavy folds, stains, edge tears perhaps extending into the design, pinholes, a center hole from excessive folding, etc.
VERY GOOD (VG) – this grade will have fewer or less severe defects than the grade of GOOD and a number of VG notes are in fact quite attractive, especially instances where a note has been folded and refolded numerous times on the same creases, wearing a small hole through center and maybe causing a tear to appear in the design. At this point I want to introduce the notion of split grades, that is, an instance where the note is clearly better than GOOD but not quite VG. In this case, we might call the grade G-VG or G+ or even aVG (about very good). Experience is the best teacher for this; after you’ve handled dozens of well-used notes, you may feel more comfortable about split grading. Maybe you’ll never feel comfortable because you might not even like the idea. We use split grades on occasion and believe most dealers and collectors do. I am less enthusiastic about the use of a 70-point grading scale such as is used for grading coins; more on this when we get there.
FINE – this grade exhibits still considerable circulation with a number of creases, folds, wrinkles, minor border tears (which cannot enter the design portion of the note), and maybe a few pin or staple holes. At this point, a note is appearing somewhat attractive at least. After handling enough different notes, you’ll come across some that appear to meet or exceed a certain grade except for some defect. Usually, this is handled by assigning that grade to the note but following it with a description of the defect. For example, you might have a note that is at least a FINE except for that somewhat obvious stain in which case you would describe it as FINE but stained or FINE but moderately stained or FINE but heavy corner stain, etc., whatever the case might be. Naturally the value of a note like this would normally be lower than a defect-free note of the same grade. Generally the higher grade a note is, the more ‘picky’ you should be about describing a defect that is not a normal characteristic of that grade. For example a VERY FINE note with a tiny tear or two might be listed as VF but border tear or could just be downgraded to F-VF or “net F-VF,” though the tear should still be described.
VERY FINE (VF) – Moving along, we start getting into the truly bright and more attractive notes in the VF grade and up. General characteristics of a VF note include: not more than a few vertical/and horizontal folds, a crisp paper, edges and corners can show slight wear but no tears are found in the border areas or anywhere else for that matter on the typical VF note. A slight amount of soil or smudging can be present but this should really be minimal in my opinion.
EXTREMELY FINE (EF) – This is an extremely attractive note, showing only minor evidence of handling. According to the grading standards of the International Bank Note Society, or IBNS, an EF note may exhibit ‘a maximum of three light folds or one strong crease.’ An EF note is bright and without signs of soil. To the casual observer, it should appear just about new. There will be only very minute wear on the corners or edges.
ABOUT UNCIRCULATED (au-UNC) – The next step up from extremely fine, this is a note which would grade uncirculated except for some very minor handling or use such as a so-called wallet fold where the note has a very light fold (not a creased fold). An AU note might have a slight bend or wrinkle from being counted. In any case, this remains a very bright, new-looking note. An AU-UNC designation is often applied to notes with an extremely inconspicuous counting wrinkle, or a note which might have a tiny corner nick, rippled surface of the paper (due to humidity or some other environmental condition), or a note having a so-called dimple at the top of the security strip. Another term used for such an AU-UNC note may be “borderline uncirculated.”
UNCIRCULATED (UNC) – New, as issued, with no defects with one possible exception. It is possible to have an UNC note that has staple holes, this due to the fact that some countries, including India and Pakistan, normally staple quantities of notes together prior to issue. In this case, a description of ‘UNC – usual staple holes’ is the rule. Otherwise, an uncirculated note is just that. More so in regards to U. S. paper currency but also occasionally used in describing UNC world notes are the adjectives ‘choice’ and ‘gem.’ I could see a particularly well-centered, attractive note perhaps earning one of these designations, however, I’m not convinced we need both terms. This mainly due to the concern that people would next move toward a silly multi-point UNC grading system like that of coins, particularly U. S. coins. In fact this has come to pass. Some very rare and not rae at all U. S. and world notes are being “slabbed” (put in special sealed holders) and commercially graded by numismatic grading companies using the 70-point scale. It has become a big business and most expensive notes today are slabbed sooner or later. Whether this is a good thing has been a matter of debate among collectors and some dealers as well. I would say third-party grading might be useful to determine authenticity of a valuable note and “perhaps useful” as a second opinion on grading.
Just my personal take on this, but it seems like a convenient way to squeeze a lot more dollars for a “superb gem UNC MS-66 note.” To newcomers to the numismatic community, “MS” refers to mint state (i. e. Uncirculated) and the “66” part indicates the relative “grade of uncirculation” with 60 being the lowest and 70 the ultimate or theoretically “perfect” note. About Uncirculated would range from 50 to 59, etc. This system has been in use for a number of years now in the coin business. The worst part is the difference in a coin’s value from a single key grading range (say MS-65 to MS-66) can be thousands of dollars for a “rare” item. This great difference in perceived value by some is why the whole grading system is controversial by nature because grading, is, in the final analysis, subjective (i. e. “beauty is in the eye of the beholder”). I believe a note will stand on its own; if it’s hard to find, attractive, and actively sought by collectors, it’s going to bring a better price. Many world notes are also common, but so attractive that they are always eagerly snapped up by enthusiastic collectors. But, I digress…
Another item to perhaps bear in mind, the grading system for U. S. notes is similar in many ways to that of world notes, but it has been my experience that the world system is generally more conservative, particularly for the upper grades. I have seen ads like “UNC – 1 fold.” What does that mean? Sounds like an EF or AU note to me (EF if creased, AU if just a light fold or “wallet bend”).
An additional point – notes, like coins, have sometimes been cleaned or had their appearance improved in some way. Some collectors have no problem with this, others feel, as with coins, that the items shouldn’t be altered in any way. For notes, alterations can include actually washing the note (literally “laundering money!”), trimming it, erasing graffiti, pressing the note, mending tears, etc. The buyer should be aware that a note can be washed and pressed to improve its grade and a note altered in this way should not command the price of a note naturally appearing in this grade. A word of advice on mending tears, if you are inclined to mend tears, please don’t use cellophane tape. Sooner or later it makes a mess of whatever its been taped to as it turns yellow and brittle. If you feel you need to tape a tear, use the permanent translucent tape that’s now widely available.
The best advise I can give you is to try and look at lots of notes, offered by a multitude of dealers/sellers and see how (or if) they grade their items. Some online sellers “cop out” of grading by saying to look at the scan or scans and come up with your own grade. This might be fine and dandy except it is very difficult to determine the grade of a note unless it is a very high resolution scan and also not possible to determine if the item being offered is genuine from a scan. In the long term, having one or more experienced and trusted dealers to work with to build your collection is invaluable. Scans are great to show you the general design of a note. Some scans on this site are of the actual note being sold when it is a one-of-a-kind (particularly circulated notes). But for many bills, a generic scan is all that is used due to time constraints. Since time is money, it’s just not profitable for a dealer to individually scan each of a group of notes that may be selling for less than a dollar to a few dollars each. There are so many hours in a day and a dealer needs to use them wisely in order to remain in business.
Hopefully this clarifies grading a little if you’re a beginner or at least serves to demonstrate my interpretation of it and what kind of grading criteria you should expect and demand from my company. Clients have been, I am happy to report, very pleased with the quality of service as the return rate for notes has been a tiny fraction of far less than one percent. Indeed, most returns are due to a collector having accidentally ordered an item which he/she already had in his/her collection. With grading under your belt, you can then start to determine a valuation range for your notes.