Are Counterfeit Pens Always Accurate? No According to the Federal Reserve

Counterfeit pens are commonly used by retailers, casinos, and banks to detect fake currency. These pens are probably more reliable for recently produced currency compared to notes from decades past. Occasionally, there WILL be false positives.

You’ve just found a series 1934D $10 Federal Reserve Note in your cash payment from a customer. The note is worn and not collectible, but naturally you wonder whether or not it is genuine. A quick review of the note’s design and production characteristics seem to indicate a genuine piece of currency. Off you go to the hardware store for a new sawhorse.  As a prolific wood chopper, you’d hate to make a jackass of yourself, fearing you’ll be sent to the mini-porthole where poker chips are hard to come by. 🙂

Turns out Ace isn’t the place to be. The skeptical cashier sees your 1934D $10 FRN and has concerns. Out comes the counterfeit pen. The cashier scribbles all over your note like an angry Kindergartner, and out come the wrong color marks. Ah ha! This is a bum note! He hands it back and you sheepishly give him another $10 note from recent years.

So were you trying to pull a fast one? Not necessarily. The counterfeit pen is NOT infallible.

Have a look at this 1950D $10 Cleveland Star Note, signatures of Granahan-Dillon. Real or fake?

1950D $10 Federal Reserve Star Note - Cleveland - Signatures of Granahan-Dillon - Real or Fake?
1950D $10 Federal Reserve Star Note – Cleveland – Signatures of Granahan-Dillon – Real or Fake?


* Important: A manual inspection with magnifying glass and/or a UV light source (if applicable) is the best way to detect counterfeit notes. Obviously an image on your screen is hard to judge.

A cashier informed a customer this note was fake because of the pen test. We don’t know what brand of pen was used, or what exact color should be produced. Sometimes there are variations based on the pen’s age and type.

For the moment, let’s assume this star note is counterfeit. We’ll also assume the counterfeiter is highly knowledgeable about paper money, so a thorough check is required in spite of the counterfeit pen’s sketchy scribbles.

  1. Yes – Series of 1950D $10 Notes were circulated.
  2. Yes – The signatures are correct – Granahan – Dillon signed this series.
  3. Yes – The older Treasury Seal in Latin is correct for this note.
  4. Yes – The Federal Reserve district of Cleveland circulated notes. All the right numbers and letters are in place.
  5. Yes – The star serial number is formatted correctly, beginning with the letter D and finishing with the *.
  6. Yes – The serial number itself is within the known range reported by Schwartz and Lindquist in Standard Guide to Small-Size Paper Money: 1928 to Date
  7. Yes – The note doesn’t appear to have any errors (legitimate or not) on its obverse.
  8. Not Sure – We can’t feel the paper and engraving work. Passing one’s finger over a lightly circulated piece of USA paper money should produce a “feeling” of raised ink and embossing.
  9. Not Sure – If the note is too circulated to feel the results of the intaglio printing process, is the impression perfectly flat like that of a lithographic press (fake note) or copy machine (fake)?
  10. Need a magnifying glass – Are fibers present in the paper? If so, are they real or merely pen marks or simulations?
  11. Need a magnifying glass – How detailed is the impression? Upon VERY close inspection, does the black ink appear to be printed in dots (a bad note)? Does the impression blur in places where it shouldn’t? Are all the lines and flourishes crisp and sharp, or are they hazy(questionable note)?
  12. No – There aren’t any bank stamps that might suggest it was counted and packed at some point. A legitimate bank stamp would suggest the note is real. The vast majority of notes, however, never get marked at the bank so this isn’t a deal breaker.

Why did the counterfeit pen give a bad test result?

The principle ingredient most counterfeit pen’s chemical makeup is Iodine. Companies also add proprietary chemicals of their own, naturally not public information for good reason.

Pens typically produce no color when they react with genuine United States currency paper. Genuine paper is not bound with starch like normal copy paper or newsprint. Currency is in fact more fabric than actual wood. This allows it to circulate longer before retirement.

One mitigating factor might be the way in which 1950D $10 notes were produced. The Treasury was transitioning from the wet intaglio 18 subject sheet to dry intaglio 32 subject sheet. This could have produced the unwanted side effect of failing counterfeit pen tests attempted decades later. The particular note above could be 100% real depending on the pen’s accuracy on older currency issues.

We think the note is real based on appearances. In reality, a manual inspection is required to be sure. Today’s counterfeit pens might not be reliable for notes produced 40-50 years ago. In fact, the Federal Reserve admits pens are not 100% reliable.

You be the judge and let us know in your comments!

Can My Currency or Coin Collection Be Part of My Roth IRA?

Contrary to common beliefs, an IRA (Individual Retirement Account) isn’t just a place to put cash. In reality, IRAs can be a mix of different financial investments, including stocks, bonds, and precious metals as bullion. Advanced investors can also buy options. Unfortunately, collectibles can’t be added to your IRA portfolio.

If you’re under 40 and getting your long term finances together, opening an IRA (tax deferred, taxes paid on withdrawals) or Roth IRA (contributions taxed up front, no taxes upon withdrawal) probably makes sense. IRAs are a great vehicle for retirement investments because they allow individuals to buy and sell a wide variety of financial assets, with the eventual goal of cashing out when you’re finished working for good. The taxation of IRAs isn’t nearly as burdensome as traditional investment portfolios, because the idea to is to save now for 20-30 years down the road.

Roth IRAs are popular because under current tax law, you don’t have to pay any taxes on your withdrawals once you’ve retired. You pay taxes upfront before contributing to your account. Remember, IRAs aren’t just a cash savings account: they are a special mix of investment accounts and bank accounts that allow you to invest your money in a wide variety of products to increase your savings. With a good return on investment, you could potentially retire much earlier than planned, and that’s no so bad. 🙂

Most Roth IRA accounts available at the retail level allow a $5,000 per year contribution. Any money above and beyond $5,000 is subject to a nominal tax. Once the money is in the account, it’s there until retirement, or else you withdraw it with penalties. If you’re sage about investing, you can turn that $5,000 a year into a $1,000,000 with good stock, bond, options, futures, real estate, index funds, mutual funds, and exchange traded funds purchases.

Can my paper money collection or coin collection become part of my Roth IRA?

No. Unfortunately there are some limitations on what qualifies as a valid IRA investment. On the macro level, millions of people contributing up to $5,000 a year into an account they can’t touch until retirement means a ton of money is going to be invested across the market. This is good for business, government, and the individual holding the account if the investments are worthwhile.

Some might feel an IRA is nothing more than a way to fund financial markets and bolster asset prices for greedy companies that get to collect profits on their business activities now, not later. It’s a cynical point of view but there’s some truth to it: If your $15,000 IRA account goes up in value because your stock with company ABCD appreciates, the individuals running the company get to collect right away. You can certainly sell ABCD stock and make a profit, but that money is still stuck in your IRA until retirement, so it goes elsewhere in the market.

The fact that collectibles can’t be included in an IRA portfolio might strike some numismatists as odd: coins and paper money can be great investments, so why not save them for retirement?

The obvious rebuttal to this question is that the collectibles market is mostly unregulated and transaction data – even at public auctions – is private knowledge. It would be burdensome to ask Heritage Auctions or Lyn Knight Auctions to report to the government each time a collectible traded hands for the purposes of an IRA account. They already have to report profits they make after each auction as a business, so corroborating transactions between private individuals for IRA investments would create a tangled web of legal and accounting work no one wants to do.

Stocks, bonds, options, precious metals as bullion,  cds, and other items are already highly regulated and carefully monitored by the government. In fact, on the IRS IRA page, collectibles are considered “personal property”. The IRS does state some collectibles can be included, but you must pay additional 10% tax on monies used to fund a purchase. That kind of kills the joy of investing in paper money for retirement under the IRA program, although you can certainly save a collection for retirement money and pay regular income taxes when you sell it.

Looking to make a new purchase for your collection? Have a look at our inventory. We’ve just completed 100 crawls of inventory from some of the finest paper money dealers in the country. Big or small, there’s a note for you here at!