How Damaged Can a Bill Be and Still Have Value?

Currency notes can sustain various forms of damage. Not all damaged money loses its worth, and specific procedures exist for redeeming notes that are significantly compromised. This article will explain the various types of currency damage and the avenues available for exchange or redemption.

Types of Currency Damage

U.S. currency can experience damage ranging from minor wear to severe destruction. Minor damage includes small tears, light stains, common folds, or incidental writing that does not obscure identifying features. These imperfections typically do not affect the bill’s usability in daily commerce.

More significant damage can involve larger tears, missing pieces, severe discoloration, or damage from water, fire, or extreme wear. When a bill is damaged to the extent that less than one-half of the original note remains, it is classified as “mutilated currency.” Common causes of mutilation include fire, water, chemicals, explosives, animal or insect damage, or deterioration from being buried.

Acceptance of Minor Damage

Many bills with minor damage remain legal tender and are widely accepted for transactions or can be deposited at financial institutions. A bill with a small tear, a crease, or a slight stain is generally still considered valid currency. For a bill to be accepted, its authenticity must be clear, and a significant portion of it should remain intact.

Commercial banks often accept such notes, as they can then return them to the Federal Reserve System, which removes unfit currency from circulation. However, the acceptance of slightly damaged bills can sometimes be at the discretion of individual businesses or banks. Heavily soiled, defaced, or excessively worn notes that are still more than half intact are generally exchanged at a commercial financial institution.

Standards for Major Damage Exchange

Severely damaged or “mutilated” currency requires submission to the Bureau of Engraving and Printing (BEP) for redemption. The BEP, as part of the U.S. Treasury Department, offers this as a free public service.

To be eligible for full value redemption, a note must meet specific criteria. The primary rule is that clearly more than 50% of the original note must be present and identifiable as U.S. currency, along with sufficient remnants of any relevant security features. If 50% or less of the note is present, satisfactory evidence must be provided to the BEP that the missing portions have been completely destroyed. The currency must also retain identifiable features like serial numbers, the Treasury seal, or the portrait to allow for authenticity and denomination verification by an examiner. For currency damaged by fire, water, or chemicals, do not separate fragments; instead, carefully package the currency as found to prevent further deterioration.

Process for Major Damage Exchange

Submitting severely damaged currency to the BEP involves a specific procedure to ensure proper examination and potential redemption. Handle the currency as little as possible to avoid further damage. If the currency is brittle, it should be carefully packed in cotton and boxed as found. If the currency was damaged while in a container, such as a wallet or box, it should ideally be left within that container and sent as is to protect the fragments.

Do not attempt to tape, glue, or otherwise alter the currency to preserve it. Coins or other metal items mixed with the currency should be removed, as they can cause additional damage during shipment.

A completed BEP Form 5283, which can be filled out online, must accompany all submissions. This form requires details such as the estimated total amount, how the currency was damaged, and contact information.

The package, including the form and damaged currency, should be sent to the BEP’s Mutilated Currency Division. For security, it is recommended to use registered or insured mail. After submission, processing times can vary, ranging from approximately six months to three years, depending on the complexity of the case and the BEP’s workload. If redemption is approved, a check for the redeemed amount will be issued.