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Fractional Currency: Paper Money Substitutes of the Civil War
By Krause Publications
November 16, 2010

The collector’s first encounter with U.S. Postage and Fractional Currency invariably provokes two questions: What is it? Why was it issued?

How was it used?

The first question is easily answered. Postage and Fractional Currency is genuine paper money of the United States issued during the 1862-1875 period in denominations of 3, 5, 10, 15, 25 and 50 cents.

Why paper money in denominations of less than the familiar dollar unit was required in commerce is less easily answered. The causes of this unusual issue of official “paper coins” at a time when people still demanded coins of high intrinsic value can only be found in the jumble of cause and effect that has been the catalyst of numismatic history from time immemorial.

It would be convenient to state, as has frequently been done, that within a few days of the outbreak of the Civil War all of the gold, silver and copper coins in circulation disappeared due to the desire of the timid to save something of universal value from the threatened wreck of the Union, and of the avaricious to hoard something which would possibly increase in value.

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Undoubtedly, fear and greed acted at once to trigger the hoarding instinct in some individuals, but on the whole, such an observation seems to be overdrawn. Contemporary newspaper accounts make little mention of a serious coin shortage until early in 1862.

It would appear that the initial hoarding of hard money was caused by little more than an ingrained distrust of paper money, an attitude more than justified by the nation’s experience with non-metallic currency up to that time. The Yankee worker, whose livelihood was completely bound to the money earned tending the lathes and forges of the industrialized North, simply felt more secure when his paper wages had been converted to gold and silver. Consequently, he gave a cool reception to “Greenbacks,” which could not be redeemed for either gold or silver and were suspiciously regarded as “faith paper.” The reception grew progressively colder as the flood of paper dollars increased.

This expressed preference for coins inevitably depreciated Greenbacks in terms of the gold standard. Gold coins commanded a premium of three percent over U.S. and state paper money in January, 1862, the month following the general suspension of specie payment by banks and the Federal Treasury; six percent in June, 1862; 15 percent in July, and 32 percent by the end of 1862. Thereafter the depreciation of Greenbacks accelerated, until at one point in 1864 it required $285 in paper to purchase $100 in gold. The distrust of the Government’s fiat paper was also maintained by the snowballing national debt, which reached its high-point of the war - $ 2.8 billion - in 1865.

A monetary situation whereby gold commanded a substantial premium over a like face value of paper dollars swiftly drove gold coins from commercial channels, effectively removing the United States from a gold standard. It also created a favorable condition for the exporting of silver coins, which disappeared from the marketplace, but at a less precipitous pace than gold.

In 1858 Canada had adopted a decimal system of coinage with a dollar unit similar to that of the United States. In lieu of a sufficient quantity of decimal coinage of British origin, Canada unofficially adopted the coinage of the United States and used it widely in domestic trade. The West Indies and many Latin American countries also imported large quantities of U.S. silver coinage for domestic use. Disappearance of gold from American trade channels and the willingness of foreign users of U.S. silver coins to pay for them with gold combined to produce a legal and highly profitable bullion trade which speculators and bankers found irresistible.

The discounting of Greenbacks in terms of gold enabled the exchange of paper money for silver coins, which were then exchanged for gold in Canada, the West Indies or Latin America. The gold was then returned to the United States, where it was used to purchase more Greenbacks at the metal’s high premium rate. A safer round-robin to riches can hardly be imagined. Even in times of national crisis, pragmatic profit taking will attract more adherents than an idealistic consideration for the national good. During the last week of June and the first week of July, 1862, more than $25 million in subsidiary coins vanished from circulation in the North. The shortage of silver coins, particularly in the eastern United States, would not be relieved until the summer of 1876.

Illogically, the Philadelphia Mint continued a small but steady production of silver coins during the 1861 Although they were of no use to the nation’s economy. Bullion dealers obtained them directly from the Mint and . sped them abroad. In 1863, nearly the entire production of silver coins was exported.

The withdrawal of subsidiary silver coins in the summer of 1862 all but paralyzed the institutions and practice of everyday commerce. The smallest denominations of official money available were discounted $5 Legal Tender Notes and the copper-nickel cents which had been fed into circulation in great quantities to retire demonetized Spanish silver coins and the large copper cents.

When first forced upon the public in 1857, the copper-nickel cent, which was intrinsically worth about 60 percent of face value, had been considered a nuisance; it was regularly discounted three percent and more in large transactions. But with the disappearance of silver coins, the ugly duckling became the belle of the ball. The erstwhile nuisance became the only alternative to walking, or going without a newspaper, or buying a pound of pomegranates and receiving change in kumquats and quince. Cents were bundled in bags of 25, 50 and 100 in a hopeless attempt to bridge the gap between the 1-cent piece and the $5 bill. By March 1863, the lowly cent commanded a premium of 20 percent, but few could be found.

The disappearance of nearly all official coinage from trade channels resulted in an outpouring of private emergency monies, some hoary with tradition, others as new and untried as the inspiration which gave them form. State bank notes of $1 and $2 denominations were cut into fractional parts. Other banks issued notes in denominations of $1.25, $1.50 and $1.75. Eastern cities issued their own fractional notes. Merchants, reviving a practice prevalent during the coin shortages of 1837 and 1857, made change in their own promissory notes or “shinplasters,” which were notes of small value, redeemable in merchandise at the issuer’s place of business. Unscrupulous merchants made change with their own notes even when they had sufficient specie on hand, knowing that the notes were not likely to be presented for redemption by other than their regular neighborhood customers. In like manner, private issues of the eminently collectible Civil War tokens began.

Most novel of the emergency monies called into use was the common postage stamp. The use of postage stamps as a low denomination medium of exchange was not a success, but it led directly to the issuing of the highly successful Postage and Fractional Currency series.

First issued by the Federal Government in 1847, by the time the Civil War began, the adhesive postage stamp had become a well-established part of the public routine. Inasmuch as they were of official origin, had a constant value throughout the country and were easily obtained, consideration of postage stamps as a medium of exchange for coin-deprived people was inevitable. In early July, 1862, Horace Greeley, publisher of the politically influential New York Tribune, suggested that stamps pasted on a half sheet of paper, with the other half folded over the stamps to afford them protection from wear, would make an excellent coin substitute. Other newspapers quickly endorsed the proposal, as did the coin-starved public.

Although there were surely those who attempted to do so, fragile, gummed stamps could not be carried loose in pocket or purse without soon becoming a crumpled, stuck-together, totally useless blob of colored paper.

Methods of affording the stamps a degree of protection were quickly devised. They were pasted on sheets of light vellum paper ñ with or without a protective flap ñ which also bore an advertising message and a large numeral indicating the total face value of the stamps. Stamps were also encased in small envelopes, on the outside of which was printed the value of the contents and an advertising message.

It soon became apparent that both methods of preparing stamps for the role of emergency money had as many drawbacks as advantages. Pasting the stamps on sheets of paper did not provide them sufficient protection from wear. Those enclosed in envelopes were better protected, but the method of protection provided an opportunity for petty larceny which wasn’t neglected. Few recipients had the time to check the contents of each envelope to determine if it contained the proper denominational total of stamps, or if the stamps were unused, or if rectangles of colored paper had been substituted for the stamps.

The method of stamp packaging which best satisfied the dual requirements of visibility and protection was patented on Aug. 12, 1862, by a New England inventor named John Gault, who encased a single postage stamp in a round brass frame (25 mm in diameter) with a clear mica front piece through which the stamp could be viewed. The reverse of this case bore the advertising message of the participating merchant who purchased a quantity of Gault’s “encased postage stamps” as a means of giving his customers the precise change required by their purchases.

Stamps encased by Gault were the 1-, 3-, 5-, 10-, 12-, 24-, 30-, and 90-cent denominations of the Series of 1861-1869. That series also contains a 2-cent and a 15-cent stamp, but the 2-cent stamp wasn’t issued until July 6, 1863, and the 15-cent value came along on June 17, 1866.

But for the eventual authorization of Postage and Fractional Currency, Gault’s encased postage stamps would probably have become the chief means of “spending” postage stamps, although they, too, had their disadvantages. The protective mica shield was easily cracked, and the encased stamps cost the distributing merchant the face value of the stamps, plus about two cents per holder. In view of the 20 percent premium existing on official coins, the additional two cents was of little consequence in the instance of the higher denomination stamps, but in the case of the popular one-cent stamp, it meant an expenditure of three cents for every one-cent encased postage stamp obtained from Gault for monetary use.

The timing of the initiation of Gault’s encased stamps also worked against their quantity distribution. At the time of their appearance in midsummer of 1862, the Postmaster General, Montgomery Blair, was still not reconciled to the idea of using postage stamps for money, and was doing his utmost to prevent quantity sales of stamps to anyone desiring them for coinage purposes.

All methods of using stamps for money that had been employed prior to July 17, 1862, suffered the ultimate disadvantage of being illegal, with the consequence that the holder of the stamps could neither redeem them at the post office nor exchange them for Treasury notes.

On that date, however, President Lincoln signed into law a measure proposed in self-defense by Treasury Secretary Salmon P. Chase, providing that “postage and other stamps of the United States” were to be received for all dues to the U.S. and were to be redeemable at any “designated depository” in sums less than $5. The law also prohibited the issue by “any private corporation, banking association, firm, or individual” of any note or token for a sum less than $5 ñ a provision that was widely ignored as the private sector continued its efforts to overcome a coin shortage in the face of which the Government seemed helpless.

The new law was not without its problems of practicality, either. The post office, already facing a stamp shortage before the gummed bits of paper had been declared legal tender, now had the almost impossible task of providing sufficient stamps for postal use as well as “coinage” use.

In addition, there was the problem of who would redeem nearly exhausted specimens of stamps which had been circulating for some time. Blair refused to take them in trade for new stamps and the Treasury would not exchange them for paper money because they hadn’t issued them in the first place.

Blair’s obstinacy ultimately melted before the heat of public pressure, and he agreed to redeem the masses of soiled and stuck-together stamps, but he continued to insist that the actual intent of the poorly-written law had been for the Treasury Department to print and distribute special stamps that would bear a general resemblance to postage stamps, but would be of a different design. A compromise was finally worked out whereby the Treasury Department would sell and redeem specially marked stamps which the post office would also accept for postage. Blair agreed to print the special stamps for the Treasury.

Before the stamps could be printed, a further decision was made to issue them in a larger, more convenient size, and to print them on a heavier, ungummed paper. Credit for the final form in which Postage Currency appeared is given to Gen. Francis Spinner, Treasurer of the United States. Spinner pasted unused postage stamps on small sheets of Treasury security paper of uniform size, signed his name to some of them and passed them out to his friends as samples of currency. Congress responded to Spinner’s suggestion by authorizing the printing of reproductions of postage stamps on Treasury paper in arrangements patterned after Spinner’s models. In this form, the “stamps” ceased to be stamps; they became, in effect, fractional Government promissory notes, a development not authorized by the initial enabling legislation of July 17, 1862. Nonetheless, the notes would be issued without legal authorization until passage of the Act of March 3, 1863, which provided for the issuing of fractional notes by the Federal Government.

Five issues of Postage and Fractional Currency in the total amount of $369 million were printed and released to circulation between Aug. 21, 1862, and Feb. 15, 1876, when a flood of silver from the Comstock Lode drove down silver bullion prices, reducing the intrinsic value of silver coins to a point below face, value, thereby insuring that they would remain in circulation. The silver price drop further augmented the supply of circulating silver by triggering a flow back to the United States ñ where they could be exchanged for their greater face value - of the hundreds of millions of silver coins which had been exported to Canada, the West Indies and Latin America since 1862.

Congressional Acts of Jan. 14, 1875, and April 17, 1876, provided for the redemption of Postage and Fractional Currency in silver coins, and all but about $1.8 million worth was returned to the Treasury for redemption. The outstanding notes remain legal tender and can purchase their face value equivalent in goods and services today.


August 2, 1862 - May 27,063
Denominations: 5¢, 10¢, 25¢, 50¢

The First Issue of U.S. Government stamp money is the only one of the five issues to be identified by name as Postage Currency. The initial printing of the First Issue was released through Army paymasters on Aug. 1, 1862, and was provided for general circulation a few weeks later.

Although it is a moot point, Postage Currency probably constitutes an illegal issue of fractional notes. Rather than being strictly “postage and other stamps of the United States,” and despite being “receivable for postage stamps at any U.S. post office,” Postage Currency took the form of reproductions of postage stamps printed on paper which carried the promise of the United States to exchange the currency for United States Notes, which gave Postage Currency the attributes of a promissory note, a development beyond the intent of the enabling Act of July 17, 1862.

The stamps reproduce on Postage Currency are the brown (sometimes buff) five-cent stamp of the Series of 1861, bearing the portrait of Thomas Jefferson, and the green ten-cent stamp of the same series, with George Washington’s portrait. The 25- and 50-cent denominations bear multiple reproductions of the appropriate stamp. Various colors of paper were used in printing the four notes of the First Issue, but the color does not influence the collector value of the individual note. Faces of the notes are printed in a color approximating the color of the genuine postage stamp, backs are all printed in black.

An interesting feature of the First Issue is the existence of notes with both perforated and straight edges. Apparently, the idea of perforated Postage Currency was a carry-over from the postage stamp printing process and was discarded when the demand for Postage Currency exceeded the capacity of the perforating machines.

Inasmuch as the Bureau of Engraving and Printing had not yet been established, contracts for printing of the First Issue were awarded to private bank note printing companies. The National Bank Note Company printed the face, the American Bank Note Company, the back. The ABNC monogram appears on the backs of some notes.

Total value of Postage Currency issued was more than $20 million.


October 10, 1863 - February 23, 1867
Denominations: 5¢, 10¢, 25¢, 50¢

The Second Issue of a fractional currency, authorized by Congress on March 3, 1863, all but discarded the concept of postage stamp money. Notes continued to be “receivable for all United States postage stamps,” but the identity of the notes was changed from Postage Currency to Fractional Currency, and the notes of the Second Issue did not bear a reproduction of a postage stamp, although the portrait of George Washington on all notes of this issue is the same as that appearing on the 24-cent stamp of the Series of 1861. The Second Issue was made necessary by the ease with which notes of the First Issue had been counterfeited.

All Second Issue notes have a slate-colored face with bronze oval surcharge centered on the portrait of Washington. Back of the 5-cent note is brown; the 10-cent, green; the 25-cent, violet, and the 50-cent note, red or reddish-orange. All backs have a large, bronze numerical outline overprinted.

Some specimen notes of this issue (and of the Third Issue) were printed on paper watermarked “C.S.A.” in block letters, for Confederate States of America. The paper, made in England for the printing of Confederate States paper money, was contraband seized from a captured blockade runner.

First Issue notes had been printed by the National Bank Note Company and the American Bank Note Company both of New York - which were one concern in all respects but name - at a cost which the Treasury Department thought excessive. The Act of July 11, 1863, instructed the Treasury Department to undertake the printing of its own currency.

Although the primary purpose of Second Issue notes was to retire and replace First Issue notes, they were issued in excess of the requirement, to a total value of $23 million.


December 5, 1864 - August 16, 1869
Denominations: 3¢, 5¢, 10¢, (15¢ essay), 25¢, 50¢

Authorized by the Act of June 30, 1864, the Third Issue of Fractional Currency was necessitated by an increased demand for the low denomination notes and by the continuing counterfeiting of earlier issues. Counterfeits of the Second Issue were of better quality and even more numerous than those of the First Issue had been.

Third Issue notes provide the greatest number of varieties of any issue of Postage or Fractional Currency. Among these are varieties of paper, different colors of backs, ornamental and numerical value surcharges (or none at all), autographed or printed signatures, no signatures, and multiple designs for a single denomination.

In regard to varieties, the 10-cent note is particularly interesting. Through an oversight, the word CENTS does not appear anywhere on the note. The Third Issue varieties are too extensive to be within the scope of these remarks, but they are indicated and priced in the listing which follows.

The Act of June 30, 1864, contained a provision which, by amending the Act of March 3, 1863, authorized the Secretary of the Treasury to determine the form and denominations of Fractional Currency, the means by which it would be made, and the terms of note redemption. This authority permitted Secretary Chase to issue a 3-cent note to facilitate purchase of the new 3-cent first-class postage stamp. Need for the small note was eventually eliminated by the issue of nickel three-cent coins under the Act of March 3, 1865.

Little events can have lasting repercussions, as exemplified by the story of the 5-cent note of the Third Issue. Without the knowledge or authority of his superiors, Spencer M. Clark, then superintendent of the National Currency Bureau, had his likeness put on the 5-cent note of the Third Issue. Clark’s presumptive act so angered Congress that a law was enacted April 7, 1866, prohibiting the placing of the likeness of a living person upon any “bonds, securities, notes, Fractional or Postal Currency of the United States.” However, the wording of the law did not prohibit the likeness of a living person if the plate for the intended item had already been prepared. Consequently, Clark’s portrait didn’t disappear from the nation’s currency until the passage of May 17, 1866, legislation which authorized the issue of a nickel 5-cent piece and prohibited the issue of any note with a denomination of less than 10 cents.

Likewise unaffected were the Third Issue 25-cent note bearing the portrait of William Fessenden, and the 50-cent note portraying Francis E. Spinner, “The Father of Fractional Currency.” The only note affected by the legislation was a proposed 15-cent denomination bearing the portraits of Generals Grant and Sherman, for which the plate had not yet been completed. This note was printed only as an essay, and in uniface form, with face and back being printed on separate pieces of paper.

All of the Third Issue notes were produced by the Treasury Department. Total face value was in excess of $86 million.


The Postage and Fractional Currency Shield was one of the measures by which the Treasury Department sought to overcome and prevent the wide-spread counterfeiting of Fractional Currency notes.

The shields consisted of a type set of the first three issues of Postage and Fractional Currency mounted on a heavy cardboard shield surmounted by an eagle and 13 stars. Size of the framed unit was 24 by 28 inches. The shields were made available to banks and other commercial institutions in 1866-67 to provide them with a file of genuine notes to use as a reference when checking suspect notes. Those qualified to receive the shield paid face value for the notes ($4.66), plus a presumed transportation charge, for a total cost believed to be $7.50.

The 39 closely-trimmed notes (20 faces and 19 backs) mounted on the shield are specimen notes printed on one side only. They include the scarce 15-cent Sherman/Grant essays and the two faces of the 3-cent note, which are distinguished by dark and light backgrounds to Washington’s portrait. The shields upon which the notes were pasted are known in gray, pink and green, with gray being the most common.

Although the shields were produced in a quantity believed to be in excess of 4,500, it is presumed that fewer than 200 remain intact, with many of those folded, faded or water-stained. Apparently demand for the shields was less than the Treasury Department had anticipated and the surplus shields were carelessly stored - by common account in an old shed behind the Treasury Building. The number of intact shields was further reduced by early collectors who obtained them solely to secure the scarcer notes, which they removed from the shield.


July 14, 1869 - February 16, 1875
Denominations: 10¢, 15¢, 25¢, 50¢

The Fourth Issue of Fractional Currency continued the refinements evident in the Second and Third Issues, and further diminished the pretense of stamp money with which the five issues of fractional notes were launched. The unaesthetic bronze overprintings were eliminated, and an improved type of paper - containing silk fibers ñ was used.

Three of the six designs (there are three different 50-cent notes) comprising the Fourth Issue make no mention of “stamps.” Allegorical art claimed a greater role in note design than before; the 10-cent note bearing a representation of Liberty, and the 15-cent note, a representation of Columbia. The 25-cent and the trio of 50-cent notes bear definitive male portraits.

The Fourth Issue was produced outside the Treasury Department while the Bureau of Engraving and Printing experimented with new dry-printing operations that only succeeded in destroying nearly every hydraulic press the Government owned. Combined with increased demand for Legal Tender notes, the Treasury was forced to job out the production of the Fourth Issue Fractionals to the National and American Bank Note Companies.

The total value of the Fourth Issue was more than $166 million.


February 26, 1874 - February 15, 1876
Denominations: 10¢, 25¢, 50¢

The Fifth Issue of Fractional Currency was short and simple, consisting of but three notes, each of a different design. Why a change of design was thought necessary at that time is unclear, but the decision may reflect the Treasury Department’s continuing disenchantment with the cost of notes produced by the two New York bank note firms.

Faces of the Fifth Issue were printed by the Bureau of Engraving and Printing, the backs by the Columbian Bank Note Company of Washington, D.C., and Joseph R. Carpenter of Philadelphia. Printing of this issue was terminated when the appropriations for the printing of Fractional Currency were exhausted.

Noteworthy varieties of the Fifth Issue include the green seal 10-cent note and the “long key” and “short key” 10- and 25-cent notes. All notes have faces printed in black, with green backs. All carry printed signatures.

Fifth Issue notes were printed to the total value of nearly $63 million, bringing the total value of all Postage and Fractional Currency issued to about $369 million, of which an estimated $1.8 million remains outstanding.

For more information on fractional currency and other forms of U.S. paper money, check out Standard Catalog of United States Paper Money at

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