Upcoming Changes To Legal Tender Status For Older Banknotes-Discussion

As has been mentioned by few people the $1, $2, $25, $500, $1000 notes are going to be losing their status as legal tender.

This means that the notes will not be accepted at any merchant. It also means that these notes will not be redeemed at face value even at Chartered Banks.

They will only be able to be redeemed at face value at Bank of Canada.

So even though technically speaking they will retain their face value there will be a huge hurdle to get that face value. And who knows if the Bank of Canada will require filling out forms for any large quantities of these notes.

In short in investing language they will become very illiquid.

For most common notes of those denominations and those that are not in good condition there will be no collector premium. So practically speaking unless the owner of these notes is willing to go to Ottawa to redeem them they will just sit with them collecting dust and depreciating in value.

In fact there will potentially be agents (reader dealers) who will offer 80 cents on the dollar for these "non-collector" notes in these denominations. The reason for that is that they will want to discount them to allow them to go to Ottawa to redeem them.

Something similar happened in other places e.g. notes that were replaced by Euros.

My advise to anyone would be that if you have any substantial quantities of these denominations and if you currently are unlikely to get any more than face then take them to the local bank while you can. If currently you could get more than 20% of face from coin and currency dealers you probably could hang on them.

For many people keeping a few bundle worth of ones and twos may not spell such a problem but if the total value of these notes in possession gets higher and they are presently valued at within 20% of face in the catalog it would be best to let Bank of Canada have them while your local bank is willing to ship it to them.

In the U.S. the "retired" larger bills all carry a premium over face value.

@nss-52:
Is the premium growth rate greater than the inflation compound interest rate, and
is that sufficient to cover not only inflation, but also the depreciating buying power of high face value Notes?

It is the background to this sort of question that makes lower face value Notes more attractive to most banknote collectors.

If you read the wording it says


Sending does not mean physically taking the banknotes to Ottawa. Sending by mail or courier is possible.

Also, the wording doe not even mention Ottawa. Its says Bank of Canada which has regional offices in major cities like Toronto, Vancouver, and Calgary. So take it to one of the local offices if need be.




The wording says "after a period" whioh is unclear. It could be short as months or years.

In UK, they have demonetized coins and currency on a regular basis and people can return them to banks for face value regardless of how old the money. Regardless of what the Bank of Canada says, The Federal government can pass legislation saying banks must take back old currency.