Brief History of United States Paper Money


Paper money of all varieties has been used in the United States for well over 250 years. In the 1700’s, the colonies used what was known as “Colonial Currency” and “Continental Currency”. These notes were issued at regular intervals, per order of the Continental Congress, the governing body of Colonial USA prior to the ratification of the Constitution. Any surviving notes from this time period, especially in uncirculated condition, command a high premium, especially if they have been autographed by a subsequent signer of the Declaration of Independence, the Constitution, or Articles of Confederation.

It’s important to note that there was no one common form of money used in the United States during and immediately after the birth of the nation. Instead, states granted charters to private banks, which in turn printed and circulated their own money. This initial financial system, however, was wrought with difficulties: banks issued money per the amount deposited by their customers, and if they could not remain solvent, the currency essentially became worthless. Consequently, there was a high rate of bank failures early on in our nation’s history.

As the years progressed and need for sustainable financing grew, the government slowly stepped in and began to operate the beginnings of a federal currency system. This need was particularly apparent during the early to mid 1800s, when major national events such as the War of 1812 demanded that the government raise money. As a result, Treasury Notes were issued which earned interest at a regular rate. As economic times improved, the government quickly reclaimed these securities, to avoid amassing an exorbitant amount of debt.

The “real” birth of United States paper money as we know it today occurred during the beginnings of the Civil War. The government was in dire need of money, and decided to issue and circulate Demand Notes according to the Act of July 17, 1861. Released in denominations of $5, $10, and $20 dollars, these notes were the nation’s first experience with using “fiat currency”, since they could not be redeemed for Silver or Gold coinage (nor were the notes backed by any Silver or Gold deposits). Thus, citizens of the United States were forced to accept the value of these notes on faith, trusting that the government would remain financially sound. Another important fact to consider is the physical size of these early Demand Notes, which became standard for all USA currency printed into the early 1900’s. Currency collectors deem notes from this period as “large size currency”.

The development of Demand Notes was immediately followed by the issuance of Legal Tender Notes, also known as United States Notes, beginning on March 10th, 1862. The Congress authorized the printing of this currency under the Legal Tender Act of 1862 and the subsequent Legal Tender Act of 1863. The first issue was comprised of two obligations, and offered the public currency ranging in denomination from $5 to $1000 dollars. The nation’s first $1 dollar note appeared during the second issue of Legal Tender Notes, just over five months after the first issue. A total of three more issues followed, ending with the series of 1901 $10 dollar notes. No other denominations were offered as Legal Tender Notes during the fifth and final issue.

Concurrent to the initial releases of Legal Tender Notes were the issue of Compound Interest Treasury Notes, after the Acts of March 3, 1863 and June 30, 1864, were passed by Congress. These notes were “essentially Legal Tender Notes” (Friedberg 35) that bore interest at select intervals, lasting no longer than 3 years, at which point they were redeemed. Denominations from $10 to $1,000 were printed. A similar push for government financing occurred with the printing Interest Bearing Notes, which earned interest over 1, 2, and 3 year spans, as a result of the Acts of July 17, 1861, June 30, 1864, and March 3, 1865. These notes were printed in denominations ranging from $10 to $5,000. Once each note’s respective interest bearing time period concluded, the bearer could redeem them for face value plus interest earned.

The Civil War also gave rise to the creation of Fractional Currency. Tough economic times for banks meant specie payments had to be suspended, which essentially boosted the value of any outstanding coinage. The public tended to hoard what little metal coins were available, causing difficulties for merchants who could no longer give customers small change. So, the first release of Fractional Currency, known as “Postage Stamp Currency”, was authorized by the Act of July 17, 1862, upon recommendation from General Spinner, who was serving as Treasurer at the time (Friedberg 149). There were four more subsequent issues of Fractional Currency in 1863, 1864, 1869, and 1874. In sum total, Fractional Currency offered the public the use of denominations ranging from 3 to 50 cents. Then, according to Acts passed on January 14, 1875 and April 17, 1876, the government sought redemption of all outstanding Fractional Currency, in exchange for silver coin (Friedberg 149).

It was only after the Civil War ended that Congress authorized the first 5 issues of Silver Certificates, that allowed the bearers to exchange these notes for actual silver at a given government banking locations in major cities. The first issue took place during 1878 and 1880 (Friedberg 50), with denominations of $10 to $1,000 dollars. The second issue occurred on 1886, 1891, and 1908, with denominations of $1 to $1,000 dollars. The third issue was authorized in 1896 and only offered $1, $2, and $5 dollar notes. The same was true of the Fourth Issue of 1899. The fifth and final issue was authorized in 1923, with just $1 and $5 notes.

Meanwhile, Gold Certificates had began to be both printed and circulated, if only among banks during their initial years. “Although there were nine emissions of gold certificates, only four of the issues were circulated to any extent, namely the fourth, seventh, eighth, and ninth issues” (Friedberg 139). The first 3 issues circulated between 1865 and 1875, while the fifth and sixth issues were released between 1888 and 1900, consisting only of $5,000 and $10,000 notes. Obviously, these ultra-high denomination bills were not meant for the general public, but instead for banks using them to settle cash transfers and other exchanges. The fourth issue of 1882 was the first set of notes the general public used, with denominations of $20 to $10,000 dollars. One of the most famous notes of all USA currency, the $20 “Technicolor Note”, was printed during the seventh issue for the years of 1905, 1906, and 1907. It was loved for the golden hues found on the note’s obverse with the red treasury seal. “The eighth issue consisted only of $1,000 notes of the series of 1907” (Friedberg 139). The ninth and final issue of gold certificates are the most common, and are still highly sought after by collectors. Denominations of $10 to $1,000 were printed for the series of 1922, with the exception of the $50 note which bore the series of 1913.

Additionally, the government began circulating Treasury or Coin Notes as per the Legal Tender Act of July 14, 1890 (Friedberg 67). These notes were similar to Silver Certificates in that they could be redeemed for an equal value of coins, the exception being that the redeeming bank could pay the bearer in Silver or Gold. Denominations of $1-$1,000 were printed.

The ensuing years after the Civil War also offered the public the use of National Bank Notes, issued between 1863 and 1929 by “thousands of banks throughout our country and our territories” during 3 Charter Periods (Friedberg 75). The sheer volume of different issuing banks created a vast set of notes for future collectors to choose from, with denominations of $1, $2, $5, $10, $20, $50, $100 plus $500 and $1000 for the first Charter Period. Each bank’s respective notes were identified by a unique charter number printed on either the obverse or reverse of each note. In later issues, notes were further classified by a geographical letter that indicated the region from which the note originated. Unlike Silver Certificates or Treasury/Coin Notes, however, National Bank Notes were not backed by metal but instead by United States Bonds, with the exception of the Second Charter Period when banks could support their currency by “other securities” (Friedberg 76).

Just after the turn of the century, the Federal Reserve System was born, and with it, Federal Reserve Bank Notes. “The first issue was authorized by the Federal Reserve Act of December 23, 1913, and consisted only of $5, $10, and $20 dollar notes” (Friedberg 119). These new notes were somewhat the same as National Bank Notes, except for the fact that the obligation to pay the bearer rested with the respective Federal Reserve Bank and not the United States Government. “The second issue of Federal Reserve Bank Notes were authorized by the Act of April 23, 1918 and all notes of this issue are series of 1918” (Friedberg 119). Unlike the first issue, there were more denominations offered: $1, $2, $5, $10, $20, and $50. These notes are very popular with collectors to this day, even though only a small number of notes survived due to the redemption efforts of the Treasury.

The Federal Reserve Act of 1913 also resulted in the printing of the nation’s first Federal Reserve Notes. Unlike Federal Reserve Bank Notes, these notes were backed by the government itself, and were technically secured by bonds. The initial series of 1914 notes were widely circulated amongst the public, and for all intents and purposes were the immediate ancestors of today’s Federal Reserve Notes, with denominations of $1 to $100 available.

Finally, in 1928, the government officially reduced the size of currency to its present form, known as “small size currency” in the collecting community. United States Notes of 1928 were the first notes with the new changes, followed by the issuance of Federal Reserve Notes in 1934. National Bank Notes of this period were also reduced in size. Also beginning in 1928 was the use of a much higher range of denominations compared to any one type of currency previously issued: $1, $2, $5, $10, $20, $50, $100, $500, $1,000, $5,000, and $10,000 notes. Generally speaking, the high denomination notes were not commonly used with the general public, but instead to settle cash transfer balances between major banks. This didn’t mean, however, that people were forbidden from requesting and saving these high denomination notes for their own use or as keepsakes. In fact, just over 100 $5,000 notes and over 200 $10,000 notes still exist today, even though they were last printed in 1945 and officially recalled – along with $500 and $1,000 notes – in 1969 per executive order of President Richard Nixon. $500 and $1000 notes from this era are relatively common, although time has bore out some extremely unique rarities that rival the value of some of the most sought after large size currency notes.

That brings us to the present, where United States Currency continues to evolve. Although the size of USA notes has remained the same since 1928, new anti-counterfeiting measures, including color shifting ink, security threads, watermarks, and even holograms are now a part our day-to-day use of currency. Additionally, the Bureau of Engraving and Printing also introduced the use of multiple colors in all the latest issues of Federal Reserve Notes, as yet another security layer to foil would-be counterfeiters. For the most part, the general public has welcomed the colorized notes as a refreshing change, even though the basic designs and portraits of each note have been standard since 1928.
Only time will tell what the next step USA currency will take as it grows and evolves in the 21st Century.

Brendan Meehan, Private Collector,

Originally Written 2011

Source Cited:

Paper Money of the United States – 17th Edition – Arthur L. and Ira S. Friedberg: The Coin and Currency Institute, 2004.

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  1. Paper Money of the United States – Arthur L. and Ira S. Friedberg
    Considered the “Bible” of USA Paper Money Collecting, this book contains expansive information on curreny from Colonial times to the present, plus encased postage stamps. Images and data of all Large Size Notes, Small Size Notes, United States Notes (Legal Tender Notes), Treasury or Coin Notes, Interest Bearing Notes, Refunding Certificates, National Bank Notes, Silver Certificates, Gold Certificates, and Fractional Currency are offered. You can’t be a serious collector without this book!
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