The damaged banknotes hack you need to know

The trend is clear: Australians are using less cash to pay their way, with the share of in-person transactions made with cash halving between 2019 and 2022, according to the Reserve Bank (RBA).

While cash payments clearly aren't as popular as they once were, there were still almost two billion banknotes worth around $101 billion in circulation at the end of June 2023.

And with all this cash still floating around, it's understandable that things sometimes go wrong. Notes tear, they become worn and, in some cases, they are severely damaged.

What do with damaged banknotes

It's no good to anyone having damaged notes circulating in the system, though, which is where the RBA's damaged banknote claims service springs into action.

"When people have a damaged banknote in their possession, they can take it to a financial institution and fill in a claims form, which will then be sent to the RBA," says Greg Dicinoski, chief scientist in the note issue department at the RBA.

How many damaged notes are refunded?

Between 2014 and 2021, the RBA processed roughly 110,000 damaged banknote claims, resulting in around $44 million worth of payments to claimants.

That comes out at an average of about 14,000 claims and $5.5 million worth of payments each year, but as Dicinoski explains, the figures have dropped off in recent years, partly as a result of attitudes towards cash during the pandemic and the broader reduction in the use of cash.

"For the 2023-24 financial year, there were approximately 8500 claims and about $3.5 million that was paid out as a result. So that's almost half of what we used to receive in terms of claims," he says.

How do so many banknotes get damaged?

According to Lynne Cockerell, acting head at the RBA's note issue department, ripped and torn notes account for the largest number of claims at about 50%.

That's followed by heat-affected notes, which account for roughly 30% of the volume and environmentally impacted notes at about 10%. And these claims aren't just coming 
from individuals.

"We do interact with different sorts of people in making these claims," says Cockerell.

"So, a lot of them come from individuals, but they also come through from banks, the cash and transit companies, the ATM providers and a very small percentage through from the police."

In terms of value, though, recent natural disasters such as floods and bushfires have been responsible for some of the largest claims by dollar value.

"Floods account for our biggest value claims over the past couple of years - mainly in 2022 - where there's been about $20 million that has been claimed as a result of natural disasters," says Dicinoski.

Then there are cases of accidental damage that, frankly, belong in the head-scratching category.

"You have people storing banknotes in lampshades, sandwich presses, ovens and toasters that end up damaged by heat," says Dicinoski.

"There are also cases where people have stored notes in tins in garages that have either been damaged biologically or eaten by pests and vermin. People have mowed over them with their lawnmowers and we even had one instance where banknotes were eaten by a cow."

How much of a note do you need to have it replaced?

Claims are looked at based on the type and severity of damage.

The majority of claims where notes are simply ripped or torn are processed through the Reserve Bank's National Banknote Site in Craigieburn, Victoria, where a decision is then made on compensation.

For incomplete banknotes that have been ripped or torn, the value of each claim is worked out on a sliding scale.

If more than 80% of the note remains, then its face value is paid in full, whereas notes with 20% or less remaining won't receive anything.

For claims where between 20% and 80% of a note remains, the value is calculated on a percentage.

For example, if 50% of a $100 note is left intact, then the claimant would receive $50.

What about notes that are unsafe?

Then there are cases where notes have been extensively damaged or are unsafe to handle - these are managed by Dicinoski's team at the Craigieburn site.

"If notes are contaminated by drugs or animals, if they've got chemicals on them, if police have fingerprinted them, or if they're severely damaged through a bushfire or flood, they come to my team where we have the tools to safely assess them in a laboratory environment," he says.

"So, if it's a case where notes have been severely damaged in a bushfire and melted into a ball of plastic, we have the means to determine the value of that claim - to the best of our availability - so that the public can be reimbursed.

"There's a number of forensic methods that we can use. First, we're able to separate it into denominations, but then we can do a chemical analysis that tells us how many of each type of banknote is present, which then allows us to calculate the value of that claim."

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