INTEREST BEARING NOTES

Interest Bearing Notes are the rarest of all issues of American currency. Even advanced collectors after many years of ardent search may not have had the pleasure of seeing one. Such rarity is only natural for these notes, and applies as well to all three types of American currency which bore interest, the Compound Interest Treasury Notes, the Refunding Certificates and these Interest Bearing Notes. When one considers the perilous state of the nation during the Civil War, the scarcity of money and the general fear, it was a rare person indeed, one either supremely confident or sublimely ignorant, who did not turn in his interest bearing money the moment the interest became payable. That is why so few of these notes exist today and why so many of the higher values are completely unknown.

Like the Compound Interest Treasury Notes, the Interest Bearing issues were authorized by Congress because of the many financial emergencies during the Civil War years.

There are three separate issues of these notes, the One Year, Two Year and Three Year notes which indicate the length of time for which the interest was computed.

The One Year Notes bore interest at five per cent for one year. They were issued under the Act of Congress of March 3, 1863, The interest became payable to bearer at the end of the year upon presentation of the notes for redemption. They were issued in seven denominations from 10 to 5,000 Dollars. Please see the text for fuller descriptions.

The Two Year Notes bore interest at five per cent for two years. They were also issued under the Act of Congress of March 3, 1863. There were only four denominations of these notes from 50 to 1,000 Dollars. In this case, the interest became payable at the end of two years.

There are three known separate issues of the Three Year Notes. All of these bore interest at 73/10 per cent for a period of three years. The three Acts of Congress which authorized these issues are of July 17, 1861, June 30, 1864 and March 3, 1865. This interest of 73/10 per cent is the highest ever paid by the Government on its notes. The Three Year Notes were issued in five denominations from 50 to 5,000 Dollars.

The interest earned on these notes per day is actually stated on the notes. The 50 Dollar note has the clause “Interest one cent per day,” the 100 Dollar note, “Two cents per day” and so on for the other denominations.

All Three Year Notes were made payable to order, and there is a line on the obverse for a name, and another line on the reverse for the endorsement of the payee. See Notes 207-212 in the text.

These notes are also distinguished by a feature unique in United States paper money. When first issued to the public, all Three Year Notes had five coupons attached, each coupon bearing the interest for a six month period. At the end of a six month period, one coupon could be detached and the interest on it collected. In this instance, the notes are like bonds. However, since they are Three Year Notes, there should have been six coupons, not five, and therefore the interest for the final six month period was payable only on presentation of the note itself. This method of payment is so stated on the notes.  For example, the full interest on a 100 Dollar Note was $21.90. Each of the five coupons, therefore, had a face value of $3.65 and the final $3.65 was paid when this 100 Dollar note was presented to the Treasury, at which time the holder received $103.65. (See Note 212 in the text.) This partly accounts for the extreme rarity of these notes, since all holders in the past were anxious to collect the interest. The obligations on these various types of Interest Bearing Notes are similar. On the One Year Notes, for example, it reads as follows, “Legal Tender for____ Dollars. One year after date, the United States will pay to bearer Dollars with interest at five per cent ... This note is a legal tender at its face value, excluding interest, for all debts public and private except duties on imports and interest on the public debt.”

On the Three Year Notes the obligation is “Three years after date, the United States promise to pay to the order of _____ dollars with 7 3/10 per cent interest payable semi-annually in lawful money.” (See note 212 for the convertibility clause.)

Reprinted With Permission
Arthur L. and Ira. S. Friedberg. 2010. Paper Money of the United States.