Early Currency

Early American colonists used English, Spanish, and French money while they were under English rule. However, in 1775, when the Revolutionary War became inevitable, the Continental Congress authorized the issuance of currency to finance the conflict. Paul Revere made the first plates for this "Continental Currency". Those notes were redeemable in Spanish Milled Dollars. The depreciation of this currency gave rise to the phrase "not worth a Continental".

After the U.S. Constitution was ratified, Congress passed the "Mint Act" of April 2, 1792, which established the coinage system of the United States and the dollar as our principal unit of currency. By this Act, we became the first country in the world to adopt the decimal system for currency. The first U.S. coins were struck in 1793 at the Philadelphia Mint and presented to Martha Washington. The Government did not issue paper money as we know it today until 1861. In the interim years, however, the Government did issue "Treasury Notes" intermittently during periods of financial stress, such as the War of 1812, the Mexican War of 1846, and the Panic of 1857. During this same period (1793 - 1861), approximately 1,600 private banks were permitted to print and circulate their own paper currency under State Charters. Eventually, 7,000 varieties of these "State Bank Notes" were put in circulation, each carrying a different design!

United States Notes/Legal Tender Notes

United States Notes are also known as Legal Tender Notes because of the wording of the obligation. These notes are the 2nd earliest type and longest issued U.S. paper currency. On March 10, 1862 the first United States paper money was issued. The first denominations were $5, $10, and $20, followed by more later.The issuance of these notes stirred a great deal of Constitutional debate over the legality of notes backed only by the credit of the U.S. government. Large size U.S. notes consisted of 5 issues from 1862 to 1923. All series were titled "United States Note" except for the series of 1869 which were titled "Treasury Note" and the series of 1862-1863 which had no title on the note. The wording of the obligation carried on the reverse of the notes was changed several times during the entire issue.

The first issue, dated March 10, 1862 consisted of all denominations from $5 to $1,000. The earlier notes in this series carry the following obligation:
"This note is legal tender for all debts, public and private, except duties on imports and interest on the public debt, and is exchangeable for U.S. six per cent twenty year bonds, redeemable at the pleasure of the United States after 5 years."

Later notes in this series, as well as notes from the second and third issue carry the following obligation:
"This note is legal tender for all debts, public and private, except duties on imports and interest on the public debt, and is receivable in payment of all loans made to the United States." (Some information from: Ron’s Currency, Stock & Bonds)

Fractional Currency

Fractional currency notes were issued from August 21, 1862 through February 15, 1876. Secretary of the Treasury Salmon Chase proposed to authorize postage stamps of some type as a new currency. Much of the public were using stamps as in lieu of change due to a severe shortage of coins. The post office did not like selling stamps for currency and they did not provide refunds for soiled stamps. Congress and President Lincoln approved the Postage Currency Act on July 17, 1862, which authorized an issue of 5, 10, 25, and 50 cent notes. The 1st Issues became known as Postage Stamp Currency because they bore facsimiles of the then current 5 and 10 cent postage stamps. Postage Currency (1st Issue) were never legal tender but could be exchanged for United States Notes in $5 lots and receivable in payment of all dues to the United States, up to $5. In the first few months of production, the sheets were perforated like stamps. These sheets were sold to banks and the public in sheets and you could tear off the notes needed with ease. The perforating machine could not keep up with the heavy demand so the bank note company started producing plain sheets that were cut with scissors. In 1863, Secretary Chase asked for a new Fractional Currency that was harder to counterfeit than the Postage Currency. The new Fractional Currency notes were different from the 1862 Postage Currency issues. They were more colorful with printing on the reverse. (Some information from: Rebel State Currency)