Author Topic: Difference Between Legal Tender and Spending Money  (Read 3268 times)

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Offline Bimat

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Difference Between Legal Tender and Spending Money
« on: July 05, 2012, 01:11:40 PM »
Coin collector learns the difference between legal tender and spending money the hard way

Morgan Campbell
Business Reporter

What’s the difference between legal tender and spending money?

A big headache for a Scarborough man who learned the hard way that banks aren’t obligated to honour collector’s coins at face value, even if they come from the Royal Canadian Mint.

Two months ago 32-year-old Orest Fokine took advantage of a deal on a new silver coin the mint had stamped to commemorate Queen Elizabeth’s Diamond Jubilee.

The coin retails for $25, but Fokine was able to buy more than 30 of them at their $20 face value.

On Tuesday he needed money quickly, and with no cash at hand he headed to a CIBC branch near Kingston Rd. and Midland Rd. with one of his silver coins, hoping to exchange it for cash or deposit it into his account.

But the teller there told him he could do neither, rejecting Fokine’s silver coin.

When he appealed to the manager he was again told he couldn’t exchange the coin for cash.

When he tried a nearby Royal Bank and Bank of Montreal branches and heard the same answer, he got steamed. He had bought the coin legitimately and had been assured it was legal tender, so he couldn’t figure out why the banks wouldn’t recognize his coin as real money.

“This is the most ridiculous explanation I’ve ever heard in my life,” Fokine says. “Nothing in the description of this coin states it’s not currency.”

So who is right, the customer with the legal tender coin or the banks who kept rejecting it?

They’re both correct, says Royal Canadian Mint Alex Reeves.

He explains all coins produced by the mint are legal tender – meaning they can be exchanged for goods or services at face value – but only circulating legal tender can be readily spent and traded at business and banks.

Non-circulating legal tender refers to items like Fokine’s silver coins and designated collectibles. Reeves says business can accept the money at face value if they choose, but they’re also free to reject it.

“There’s nothing forcing a bank or a business to accept (the coin),” Reeves says. “If someone offers me a gold Maple Leaf (coin) for $50 face value I’d be crazy not to take it, but it’s still a coin that’s not destined for circulation.”

Reeves points out banks all have procedures by which customers can convert collectible coins to cash but acknowledges staff aren’t always aware of them. In that case he suggests having the branch manager call the Mint so they can work through the conversion process.

Managers at the RBC branch Fokine visited have arranged to meet with him to discuss the coin. And by Wednesday afternoon Fokine says CIBC had offered to convert the coin to cash, but only after keeping it on hold for six months.

But on Tuesday Fokine wasn’t aware of those avenues, or that the Mint could have interevened. Out of options, he called a friend and borrowed some cash.

Source: The Star
It is our choices...that show what we truly are, far more than our abilities. -J. K. Rowling.

Offline Figleaf

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Re: Difference Between Legal Tender and Spending Money
« Reply #1 on: July 05, 2012, 02:12:17 PM »
I have often maintained that legal tender is a non-issue and that circulation is what makes round metallic objects coins. This is just another illustration. Meanwhile, how can you explain someone who spends CAD20 on a CAD15 piece to an amount of at least CAD600, then runs out of money and complains bitterly about banks not allowing him to take a CAD5 loss on each piece? You don't need to be a financial planning wizard to do better. :P

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline chrisild

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Re: Difference Between Legal Tender and Spending Money
« Reply #2 on: July 05, 2012, 02:37:02 PM »
Right, collector coins are not necessarily circulating pieces. But it should not be made difficult for a collector to get them exchanged, in my opinion, if s/he does not want to keep them any more. A six month waiting period at that one bank sounds pretty odd to me. As for the "loss", hmm, the article says that the retail price is $25, "but Fokine was able to buy more than 30 of them at their $20 face value." Seems to me that he did not make any loss ...

Christian

Offline Figleaf

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Re: Difference Between Legal Tender and Spending Money
« Reply #3 on: July 05, 2012, 02:47:01 PM »
The bank faces all kinds of operating cost, ranging from having to consult the manager to having to ship a relatively heavy, cumbersome, easy to damage or lose, non standard sized object back to the powers that issued them, all for no profit and in a country that has suffered from coin diarrhea for decades, making it impossible to know which pieces have been issued legally.

Nevertheless, if I'd been the bank manager, I'd have paid him the CAD 15 from my own pocket and auctioned the piece on eBay. The CAD5 would have covered my trouble and I'd have made a happy customer at the risk that the stupid thing won't sell.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline chrisild

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Re: Difference Between Legal Tender and Spending Money
« Reply #4 on: July 06, 2012, 03:57:54 PM »
But why give him 15 dollars? The face value of that piece is 20 dollars - if a bank manager offered me such a bad deal, I would certainly say that it stinks ...

Christian

Offline Figleaf

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Re: Difference Between Legal Tender and Spending Money
« Reply #5 on: July 06, 2012, 05:06:11 PM »
I mixed up two misunderstandings :P. Forget 15, the denomination is 20.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline <k>

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Re: Difference Between Legal Tender and Spending Money
« Reply #6 on: July 06, 2012, 05:29:40 PM »
I once lent Figleaf 20 pounds. He repaid me the following week, but it was only when I got home that I realised he'd given me a 15 pound note.
Visit the website of The Royal Mint Museum.

See: The Royal Mint Museum.

Offline Figleaf

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Re: Difference Between Legal Tender and Spending Money
« Reply #7 on: July 06, 2012, 05:38:16 PM »
You cheat! I gave you two £7.50 notes because the pound had dropped in value against the EUR again. And only now you tell me you wanted another £7.50 note. I'll send you one by email as soon as the ink is dry. :)

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.