The following introduction and Grading Guide is the result of the work prepared under
the guidance of the Grading Committee of the International Bank Note Society (IBNS)
It has been adopted as the official grading standards of that society.
Many collectors and dealers around the world follow these standards
Grading is the most controversial component of paper money collecting today. Small differences in grade can mean significant differences in value. The process of grading is so subjective and dependent on external influences such as lighting, that even 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 as standardized and as widely used as possible. This standardization should reflect common usage as much as practicable.
One difficulty with grading is that even the actual grades themselves are not used everywhere by everyone. For example, in Europe the grade 'About Uncirculated' (AU) is not in general use, yet in North America it is widespread. The European term 'Good VF' may roughly correspond to what individuals in North America call 'Extremely Fine' (EF).
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 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 under such examination.
Some individuals also lightly feel along the surface of the note to detect creasing
Cleaning, Washing, Pressing of Banknotes
Cleaning, washing or pressing paper money is generally harmful and reduces both the grade and the value of the note. At the very least, a washed or pressed note may lose its original sheen and its surface may become lifeless and dull.
The defects a note had, such as folds and creases, may not necessarily be completely eliminated and their telltale marks can be detected under a good light. Carelessly washed notes may also have white streaks where the folds or creases were (or still are).
Processing of a note which started out as Extremely Fine will automatically reduce it at least one full grade.
Unnatural Defects
Glue, tape or pencil marks may sometimes be successfully removed. While such removal will leave a cleaned surface, it will improve the overall appearance of the note without concealing any of its defects. Under such circumstances, the grade of that note may also be improved.
The words "pinholes", "staple holes", "trimmed", "writing on face", "tape marks" etc. should always be added to the description of a note. It is realized that certain countries (example, India & Pakistan) routinely staple their notes together in groups before issue. In such cases, the description can include a comment such as "usual staple holes" or something similar.
After all, not everyone knows that certain notes cannot be found otherwise. The major point of this section is that one cannot lower the overall grade of a note with defects simply because of the defects. The price will reflect the lowered worth of the defective note, but the description must always include the specific defects
The Term Uncirculated
The word uncirculated is used in grading guide only as a qualitative measurement of the appearance of a note. It has nothing at all to do with whether or not an issuer has actually released the note to circulation.
Thus, the term About Uncirculated is justified and acceptable because so many notes that have never seen hand to hand use have been mishandled so that they are available at best in AU condition.
Either a note is uncirculated in condition or it is not; there can be no degrees of uncirculated. Highlights or defects in color, centering and the like may be included in a description but the fact that a note is or is not in uncirculated condition should not be a disputable point
Definitions of Terms UNC, XF, VF ecc.
From Standard Catalog of World Paper Money vol. III - 17th ed.
Courtesy Krause Publications Inc.

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