Don't Throw Away Your Mutilated Cash: There's A Clever Way To Salvage It

In Stanley Kubrick's movie "Eyes Wide Shut," Bill Harford tears a $100 bill in half, giving half away as a partial payment while keeping the other part of the banknote for himself until a task is complete. Viewers might wonder whether a bill damaged in that way is good anymore in real life. As it turns out, it most certainly is.  

Cash that's heavily damaged can potentially be exchanged for new funds by the Bureau of Engraving and Printing's (BEP) Mutilated Currency Division. According to the BEP, the most common causes of paper currency damage — shady methods of installment payments notwithstanding — are "fire, water, chemicals, and explosives; animal, insect, or rodent damage; and petrification or deterioration by burying."

However, certain conditions must be met to take advantage of the BEP's exchange program. For instance, more than 50% of the bill must be identifiable and contain some of its security features. If the cash is more significantly damaged and less than 50% of a banknote is legible, the owner may still be eligible for redemption if the circumstances of mutilation and the proof of destruction satisfy the BEP.

Of course, the BEP's mutilated currency submission rules are designed around the potential for dishonest types to "double dip" by attempting to redeem a damaged note as part of fraud or other shady financial practices. Other reasons for rejection include deliberate mutilation, bills disfigured beyond identification, or a lack of supporting evidence that the missing remnants of a damaged bill are fully destroyed.

Persons who wish to have their damaged cash examined to take advantage of this exchange program can do so in person in Washington, DC, during limited business hours. Otherwise, the BEP also accepts mutilated currency deliveries by USPS registered or certified mail, or by courriers like FedEx or UPS. Regardless of whether the burned, ripped, or rodent-chewed cash is shipped or brought in-person, it must be accompanied by a completed and signed copy of the BEP's Form 5283. 

Note that for amounts greater than $500, you won't actually receive paper money or a check in return for the damaged cash. Instead, funds will be dispersed to your bank account via Electronic Funds Transfer (EFT). If the amount is less than $500, you'll get a check instead, but — insert sad trombone sound effect — not replacement bills. 

According to the Bureau of Engraving and Printing, it receives more than 22,000 requests every year to examine damaged currency for possible replacement. In dollar terms, those requests total more than $35 million. Because of high demand, some commenters on online message boards report wait times of 12 to 18 months to have their currency examined. So, if you have a small quantity of mutilated bills — like perhaps just one or two — it may be more effective to visit your local bank or credit union instead. Policies vary, but many institutions will exchange lightly damaged cash.

Speaking of bank accounts, perhaps they're a better place for your surplus cash than a hole in the backyard or secret hiding place in a leaky basement. Besides the benefits of being FDIC-insured up to $250,000 if a bank happens to fail, you'll also earn interest income. This can add up significantly in a high-yield savings account.