Damaged or counterfeit money: What to do

For banknotes issued by the Bank of England, it's possible to exchange banknotes that are damaged or mutilated by sending them to their office.

There is no option to be reimbursed for counterfeit banknotes, however, so shoppers should learn how to check their currency while out shopping.

Old banknotes can usually be exchanged via banks or the Bank of England, although old coins are unlikely to be accepted or exchanged.

Credit: Caron Watson/Shutterstock.com

What to do with damaged banknotes?

Banknotes can be damaged due to everyday wear and tear or through accidents.

Despite the switch from paper banknotes to polymer, damage can still occur and it's possible we will need to replace our banknotes if they become too damaged to be used or if retailers refuse to accept them.

The Bank of England offers a replacement service for banknotes issued by them - so, Scottish, Northern Ireland, Channel Islands, Isle of Man and foreign bank notes must be returned to their own issuing authority instead.

A banknote will only usually be reimbursed at face value if we have at least half of the banknote. The only cases where less than half of a note will be replaced typically apply to businesses when there is clear auditable evidence that genuine notes have been destroyed - a fire at an ATM, for instance.

These are the things to know when sending damaged banknotes to the Bank of England:

• An application form must be sent with the banknotes
• As many details as possible need to be provided on the application form including serial numbers (for part notes) and a crime reference number (if applicable)
• Badly damaged notes should be handled as little as possible and packaged carefully
• Customers will need to supply their bank account details to have the money transferred directly into their account
• Claims of £700 or more will need to be backed by a form of personal ID and proof of address
• Business applicants will need to provide more information about the company

If customers believe the banknote is contaminated with a hazardous substance, this can still be submitted to the Bank of England for reimbursement but customers must call ahead on 0113 241 0075 to receive appropriate guidance.

Equally, there is no mechanism to deliver banknotes in person - they must be posted. As the Bank makes clear, this is at the applicant's own risk, so it might be worth sending the package via Special Delivery.

The Bank has also issued guidance on dye-stained banknotes that generally come out of a stolen cash box: if offered one, simply refuse it and prevent stolen cash making its way into circulation.

How many damaged banknotes are returned?

The Bank of England receives thousands of claims to replace banknotes due to damage each year.

They split their reporting down into five key categories:

• Torn or part notes
• Washed
• Fire or flood damage
• Chewed or eaten
• Contaminated

More reimbursement claims take place due to notes being torn or split as the following claims breakdown for the last four years demonstrates:

While there has been a steady reduction in the number of claims from a peak of 35,525 in 2006, the dip in 2020 and 2021 is likely due to cash being used less because of the coronavirus pandemic - less activity with banknotes equals less chance of damaging them.

We've also seen a long-term trend of cash becoming less popular, and the rise in popularity of mobile payments may be speeding this up.

Yet the Bank of England proactively replaces banknotes before they get to the point where we need to send them back.

For example, in 2018, they replaced 12 million polymer £10 banknotes and 11 million polymer £5 banknotes, accounting for 1.23% and 3.79% of the total number in circulation.

Counterfeit currency

The Bank of England is unable to reimburse customers for counterfeit banknotes, so they are not subject to the same processes mentioned above.

They advise anyone who thinks they have a counterfeit bank note to take it to a police station and provide information on how to check whether banknotes are fake or not.

The police will issue the holder with a receipt before sending the suspect notes to the Bank of England for analysis.

If the notes turn out to be genuine, the holder will be fully reimbursed - but if not, tough.

And under the Forgeries and Counterfeit Act 1981, anyone who thinks they might have a forged note who tries to pass it on is committing an offence - so the onus really is on us not to accept anything suspicious in the first place.

Retailers are also within their rights to confiscate fake notes in order to pass them on to the police - although if a customer is given a note they suspect of being fake, they are equally entitled to refuse to accept it and instead be paid with a different note.

It's also possible we might receive a counterfeit note from an ATM. Notes are supposed to be carefully checked before they're put into the machines, but anyone who suspects they've been issued with a dodgy note should report it immediately.

That means going into the bank or store where the cash machine is located and telling the staff. Having proof of the transaction will make getting a genuine note to replace the fraudulent one easier.

So, if the note looks unusual, don't put it away with the others. If the cash machine is inside a shop or bank, keep the dispensed notes in view and raise the issue straight away.

If that's not possible, there should be contact details for the owner of the ATM on the machine itself - so we should get in touch as soon as possible with as much detail about the transaction as we can.

If we can prove the fake note came from that machine, we should reasonably expect to be reimbursed.

Scale of counterfeit banknotes

The Bank of England say that the vast majority of counterfeit banknotes are discovered before they go back into circulation, meaning banks and retailers spot them the first time they are handed over.

They say that less than 1 in 40,000 banknotes were discovered to be fake in 2021, accounting for less than 0.0022% of all notes in circulation.

Data shows that the robustness of the polymer banknotes has contributed to a reduction in the number of counterfeit notes.

In 2012, the Bank of England discovered around 747,000 counterfeit notes while this had dropped to 103,000 in 2021. However, they point out that lower cash usage in 2021 also contributed to those figures.

What should you do with old banknotes and coins?

The 30 September 2022 marks the last day that old paper £20 and £50 bank notes can be used in retailers. We've previous seen deadlines pass for the £5 note in May 2017 and the £10 note in March 2018.

However, these can still be exchanged for new banknotes via several methods:

• At any UK bank (the bank will usually require you to be an account holder)
• Post Office branches may accept them as a deposit into any bank account held with them or as payment for goods and services
• Directly to the Bank of England

As with damaged banknotes, when sending old banknotes to the Bank of England customers are doing so at their own risk.

Once again, there's an application form to send off with the money (there are different forms for individuals and businesses) and ID will be required for exchanges of more than £700.

It's also possible to exchange banknotes at the Bank of England counter in Threadneedle Street, London. However, they advise that queues can be up to an hour and that sending them via post is the better option.

Exchanged money can be paid into a bank account within 10 working days, by cheque or via new banknotes (if the total exchange is worth less than £50 and customers are in the UK).

As for the old round £1 coins that went out of circulation in October 2017, it might be possible to exchange these at banks and the money will be paid into a customer's current account.

It's worth noting, though, that banks are under no obligation to do and it's at their discretion whether to take old coins.

Given that the coins have been out of circulation for five years now, it's unlikely that we'll find many lying around and banks may not be willing to take them after this long.

Some charities accept foreign coins for recycling, so if we want to get rid of them, this can be a good way of doing so (without getting paid for them, unfortunately).

The Alzheimer's Society is one example, but there are others around, so check with your preferred charity to see if they participate in these schemes.

Summary: Check your banknotes

Thanks to the Bank of England and arrangements from other banknote issuers, it's usually possible to exchange any damaged or contaminated banknotes we find in our possession.

Equally, if we have banknotes that are out of circulation, we can send them directly to the Bank of England for replacement.

The difficulty comes when we find ourselves in possession of a counterfeit note or old-style coins. There are no reimbursements for these, meaning that we will be out of pocket.

It's a reminder to stay vigilant and consider these three things when shopping with cash:

1. Does the banknote look real?
2. Is it damaged in any way?
3. Is it stained with dye that could be from a cash box?

If the answer to any of these questions is "yes", refuse the banknote and ask for another. If a retailer is uncooperative, remind them they can send the note for checking and, if it's damaged, it will be replaced.

This solution can be trickier when we're dealing with informal money exchanges between family and friends, but the advice is the same: try not to accept damaged or potentially dodgy banknotes if you can help it.