Why must old currency be taken out of circulation when a new currency is made and what happens to “old money”?

Why must old currency be taken out of circulation when a new currency is made and what happens to “old money”?

An Old currency is any money that was previously used or regarded as a legal tender by a country. Over the years, different countries have changed what used to be their legal tender, while some still make use of their old currency.

The reason why most countries change their currency is that it has lost its value in the international market. Using such currency will require a very high circulation of it from the central or national bank of such country.

Old doesn’t always mean the same

Being out of use is not the only thing that makes a currency old. A currency that is still in use can also become old when it is actually old and worn out. For example, a dollar bill that is printed even after 1996 can be regarded as old currency when it looks old and tattered. For those that don’t know, any dollar bill that was printed before 1996 even if it looks crisp and new should be pulled out of circulation because it a has become a discontinued currency, and therefore can be regarded as old.

People may wonder what happened to the old currency once a new one is being circulated or why must old currency be taken out of circulation when a new currency is made.

The truth is, from a layman perspective, you can imagine how much confusion it will cause if an old currency is not taken out of circulation when a new one is made; for instance, the dollar bills printed before 1996. Many people may not be aware of the fact that any dollar bill that is printed before 1996 is regarded as old currency, so when offered this type of money as payment for any service, the individual happily collects the money.

Then, if he/she attempts spending the same money after receiving it, probably at a mall, it may be rejected because the mall’s policy may be that they don’t collect old currency, which may result in some controversy. So the question is ‘is old currency still valid?’.

According to the Federal Reserve, any currency can be deemed to be unfit if:

  • It has holes that are in total more than 19 square millimetres, or
  • It is dirty and worn out, or lastly
  • It is a five, ten, or twenty dollar bill that was printed before 1996 (these were removed solely because of their age)

It can be seen that any dollar bill that is printed before 1996 is regarded as an unfit currency. In a bid to forestall confusions that may arise from what and what not renders a currency old and unfit, and what to do with such money, this article will give important details on what to do with old currency.

What to do with old coins and banknotes?

discontinued currency

It is imperative to mop up any currency that is no longer in use out of circulation once a new one introduced. So if you still have a significant amount of these obsolete or worn out currencies, what do you do with them?

To get an answer to this question, you need to get significant information on what to do with your old banknotes or what to do with old coins if coins are part of your old currency collection especially when you have them in large amounts.

Three agencies are responsible for dealing with issues relating to old currencies. They deal, with all currency-related issues, these agencies are:

  • The Bureau of Engraving and Printing,
  • the U.S Mint
  • and the Federal Reserve.

The agency in charge of printing new dollar bills is The Bureau of Engraving and Printing while the U.S Mint is in charge of making new coins. These two agencies also play a role in destroying old dollar bills or coins. The Federal Reserve distributes bills and coins to the nation through the Federal Reserve Bank. Once a currency is considered to be old, either the bank or an individual can turn in such old or unfit currency to any of these three agencies. These agencies know how best to treat such money.

People may wonder what happens next after the currency has been sent to any of these agencies or how is old currency destroyed. Once your old notes get to these agencies, it will not take a long process before your old currency kicks the bucket.

The money is usually shredded because they cannot be recycled. It may sound like a waste, but it is the best thing to do to avoid causing confusion and unnecessary conflicts that may arise if they are not taken out of circulation.

So, next time you come across any money that is unfit for spending, do your part by sending it either to the bank or to the agencies responsible for getting rid of discontinued or worn currency.

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