Grading is the most controversial component of banknote collecting today. Small differences in grade can mean significant differences in value. The process of grading is so subjective and dependant on external influences such as lighting, that even a very experienced individual may well grade the same note differently on separate occasions.
To facilitate communication between sellers and buyers, it is essential that grading terms and their meanings be standardized and as widely used as possible. This standardization should reflect common usage as much as practicable.
The grades and definitions as set forth below cannot reconcile all the various systems and grading terminology variants. Rather, the attempt is made here to try and diminish the controversy with some common sense grades and definitions that aim to give more precise meaning to the grading language of paper money.
How to look at a banknote
In order to ascertain the grade of a note, it is essential to examine it out of a holder and under a good light. Move the note around so that the light bounces off 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 show up under such examination. Some individuals also lightly feel along the surface of the note to detect creasing.
Grading
- UNC (Uncirculated) - A perfectly preserved note with crisp clean paper and sharp square corners.
- AU (About Uncirculated) - An almost perfect note with only very minor handling. May have a bank counting fold at a corner or one light fold through the center. A note in this condition cannot be creased, a crease being a hard fold which has "broken" the surface of the note. Paper is clean and corners are not rounded.
- XF (Extremely Fine) - A very attractive note with only light handling. May have a maximum of three light folds or one strong crease. Paper is clean and corners may show only the slightest evidence of rounding. There may also be the slightest sign of wear where a fold meets the edge.
- VF (Very Fine) - An attractive note, but with more evidence of handling and wear. May have several folds both vertically and horizontally. Paper may have minimal dirt but is still relatively crisp and not floppy. There are no tears into the border area, but may show slight wear. Corners also show wear but not full rounding.
- F (Fine) - A note which shows considerable circulation, but is still on the desirable side. Has many folds, creases and wrinkling. Paper is not excessively dirty but may have some softness. Edges may also show much handling, with minor tears into the border area but not extending into the design. There will be no center hole because of excessive folding. A staple hole or two may also be present.
- VG (Very Good) - A well used and abused note, but still intact with no pieces missing. Corners may have much wear and rounding with tiny nicks and tears that may extend into the design. Paper may have some discoloration or staining and a small hole may also be seen at center from excessive folding. Staple and pinholes are usually present, and the note itself is quite limp. Overall, a note in this condition is not necessarily unattractive.
- G (Good) - A well used and heavily circulated 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 from excessive folding and rounded corners. No large pieces of the note may be missing and graffiti may be present. Overall, an unattractive appearance.
- P (Poor) - A note with severe damage because of wear, staining, pieces missing, graffiti and larger holes. May have tape holding pieces of the note together and trimming may have taken place to remove rough edges. A note in this condition is only desirable as a filler or when no other note of this particular issue is available.