When Bank Notes Lose Their Power

We try to make sure we have a wallet full with money that isn’t blemished in any way, whether it is a tear or an ink mark. But what happens to bank notes that reach their expiration date both in a physical form and as a medium of trade? Here we’ll look at why and what happens to bank notes that are taken out of circulation as well as how old and blemished bank notes that are unusable are dealt with.

Money is transferred from the reserve bank where it is created, to banks and other depository institutions, which kicks off the exchange process. From banks to individuals to retailers to banks to retailers and individuals, bank notes inevitably become unfit for further use. We’re all taught not to haphazardly throw money away and to keep it safe in our wallets. However, at some point in time someone needs to throw it away.

Different value bank notes will have different life spans. The lower denomination bank notes tend to have a shorter life span because of their most frequent use. Very large valued bank notes could last for several years, with the lower denomination ones lasting anywhere from one to five years. The life span of a coin lasts on average about 25 years.

Bank notes will be withdrawn from circulation under certain conditions. Obviously its not an easy task detecting forged bank notes, but if you don’t like the look of a bank note i.e if a note looks soiled in any way, then it is better to take it straight to your bank to have it replaced. Torn bank notes should be given to your bank as soon as possible, where changing old bank notes should never be an issue. Thereafter, banks group all the notes together and send them to the reserve bank for approval. Here the notes are declared usable or non useable. All the bank notes that are still fit for circulation are sent back to the relevant institutions and continue as they left off. The notes that didn’t quite make the grade are then destroyed altogether.

Notes are declared completely unfit for circulation if half of the bank note is missing or if it has gone through so much that you can’t even decipher what value it holds. To check that they are not fake bank notes, the Reserve Bank sends them through a machine that determines their validity. If the bank notes are authentic but cannot be circulated due to their mutilation then the bank finely shreds them and they are disposed of.