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South African Reserve Bank

Grading standards for world paper money 

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 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 as standardised and as widely used as possible. This standardisation should reflect common usage as much as practicable. One difficulty with grading is that even the actual grades themselves are not used everywhere and 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 would call 'EF'.
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.
The term uncirculated
The word Uncirculated is used in this grading only as a qualitative measurement of the appearance of the 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 colour, centring and the like may be included in a description but the fact that a note is or is not in uncirculated condition should note be a disputable point.
Grading guide - definitions of terms
Extremely fine
A very attractive note, with light handling. May have a maximum of three light folds or one strong crease. Paper is clean and bright with original sheen. Corners may show only the slightest evidence of rounding. There may also be the slightest sign of wear where a fold meets the edge.
Very fine
An attractive note, but with more evidence of handling and wear. May have a number of folds both vertically and horizontally.
A note, which shows considerable circulation, with many folds, creases and wrinkling. Paper is not excessively dirty but may have some softness. Edges may show more handling, with minor tears in the border area.
Very good
A well used note, abused but still intact. Corners may have much wear and rounding, tiny nicks, tears may extend into the design, some discoloration may be present, staining may have occurred, and a small hole may be seen at centre from excessive folding.
A well-worn and heavily used note. Normal damage from prolonged circulation will include strong multiple folds and creases, stains, pinholes and/or staple holes, dirt, discoloration, edge tears, centre hole, rounded corners and a overall unattractive appearance.
A totally limp, dirty and very well used note. Larger pieces may be half torn off or missing besides the defects mentioned under the Good category. Tears will be larger, obscured portions of the note will be bigger.
A 'rag' with severe damage because of wear, staining, pieces missing, graffiti, and large holes. May have tape-holding pieces of the note together. Trimming may have taken place to remove rough edges. A poor note is desirable only as a 'filler' or when such a note is the only one known of that particular issue.
Cancelled, washed, specimen and misprinted Banknotes (punch holes, or word cancelled on banknotes)
In the case of most of the early private banks only cancelled banknotes which were cut in half for security reasons during transport are available and as such a cancelled banknote which was in use maybe more desirable to a collector then a trial or unissued banknote. 
The fact that a banknote is cancelled is however and inherence feature of the banknote and must always be indicated in the description of the note as this has a direct bearing on the desirability and value.
Cleaned, Washed, Pressed Banknotes
Cleaning, washing or pressing paper money is generally harmful and reduces both the grade and the value of a note.
Forgeries produced to deceive collectors are consumers and do sometimes enter the market.  Forged notes are illegal. The Bank publishes and initiates, as necessary, public awareness campaigns in this regard.
Specimen Banknotes
These are sample notes, usually bearing special serial numbers such as 000 000 and overprinted or perforated with the word 'Specimen' in the language of the country of origin.
They are usually distributed to banks, treasuries and law enforcement agencies to familiarise them with newly issued currency.
Low Numbered Banknotes
These notes bear low numbers e.g. A 000 001 indicating they were amongst first printed of a specific issue. They are usually presented or sold to people involved in the design and approval of new issues.
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