How Postage Became Uniquely Collectible Currency During the Civil War

During the Civil War, the American economy was in complete disarray. Because of a severe shortage of coinage throughout the nation, many people started using various forms of payment for their daily necessities. Copper tokens, partially or entirely modeled like U.S. cents, were widely used.

On July 17, 1862, Congress signed into law an act that gave the Treasury Department the authority to issue “postage currency.” The postage currency utilized the then-current postage stamp design, printing them on Treasury paper. People generally interpreted this to suggest that postage stamps could be used as legal tender, but the fragile stamps were not suited for the rough handling that currency typically endured. They were thin and easily damaged, and the glue on the back of the stamp made them stick to hands, the inside of wallets, and anything else they might come into contact with.

People began looking for some way to carry the stamps so they would not end up as a ball of sticky paper. They initially put them in envelopes or stuck them to card stock. Needless to say, neither of these methods was workable.

However, as has generally been the case with many instances of American ingenuity, necessity was indeed the mother of invention. Sewing machine salesman and entrepreneur John Gault developed a method to encase stamps in a metal frame shielded by transparent mica that he patented as “New Metallic Currency.” The “postage stamp case” featured a sandwich of materials the approximate size of a quarter consisting of a piece of brass with a hole in the center (the frame), mica, a stamp, a piece of cardboard, and lastly, a brass backing, all pressed together with a button making machine. Early examples of the encased postage stamps featured silver edges, intended to make the cases appear closer to actual coins. However, the process was not cost-effective, and the silver wore off quickly.

The brass frame protected the stamps, and the transparent mica allowed the stamps to be seen. In 1861, the government produced a series of stamps to eliminate the value of stamps still used in the Confederacy. They came in denominations of 1¢, 3¢, 5¢, 10¢, 12¢, 24¢, 30¢, and 90¢.

Gault charged a premium for his invention. He created the encased postage in the most popular denominations of five cents and ten cents, selling them directly to businesses that needed coins for approximately 20% over the face value of the stamp. Gault soon incorporated advertising to the back of the encased postage. Businesses paid Gault a 2% premium above the cost of the stamp to advertise their respective companies. No one took to this new form of advertising faster (and more productively) than the Sarsaparilla King of Lowell, MA, J.C. Ayer, a prolific patent medicine manufacturer of the period and a significant booster of the production of advertisement-type encased postage stamps.

The Lowell Daily Citizen and News from November 22, 1862, had this to say about his use of the medium:

“New Notions. Dr. Ayer, whose extensive trade with all nations illustrates the utility of advertising, has brought out three little medalets, or rather what are made to appear such, by a nice covering of tin, enclosing a small federal coin, and reminding the holder thereof that this is “the currency to pass Ayer’s Cathartic Pills.” On the reverse is a postage stamp on which you observe, through glass, the honest face of Ben Franklin.”

Unfortunately for Ayers, the demand for encased postage began to decline soon after Gault received his patent in 1862. By September of that year, the supply of postage stamps for currency was in short supply. Using stamps in place of money affected the post office’s primary job of delivering mail. Several U.S. Postmasters refused to sell stamps in quantities of more than 25¢. By December 31, 1862, the purging of stamps as currency from the American economy was well underway.

The short circulation and manufacturing period for encased postage can be attributed to a few factors. First, stamps were becoming scarce and unavailable for their original intended use. Second, the encased postage “coins” were expensive, especially in small denominations. A one-cent piece costs three cents to produce. Finally, the number of businesses wanting to purchase encased postage for its advertising value was limited.

Gault had initially chosen the name “New Metallic Currency” to distance his “product” from any future issues that stemmed from postage stamps being used as currency. Consequently, the stamp purge of December 1862 had little effect on the circulation of Gault’s invention. His “New Metallic Currency” was successfully circulated through mid-1863 before giving way to the government’s “paper coinage,” fractional currency, which slowly became commonplace enough to mitigate the coin shortage.

Once that happened, the encasements were stripped of the valuable stamps inside, sadly destroying thousands of the unique brass cases John Gault had made for Ayer and other advertisers. Fortunately for collectors, many survived and can be purchased on eBay and other auction/sale platforms. Prices vary depending upon the condition, but if the token is really all you’re looking for, some reasonably priced encased postage can be found.

Fractional Postage Currency

The actual death knell for encased postage was President Lincoln’s “Postage Currency Act,” signed on July 17, 1862. The first run (or first in the series of five) of “paper coins” were issued in 5¢, 10¢, 25¢, and 50¢ denominations from August 21, 1862, to May 27, 1863. They were initially known as “Postage Currency” and were the brainchild of the Treasurer of the United States, Francis E. Spinner. He had proposed using postage stamps attached to Treasury paper, with his signature at the bottom. The initial design was derived directly from Spinner’s handcrafted original samples. Some even had an edge like a perforated stamp. Postage currency was redeemable for U.S. notes in $5 lots and could be used to settle any outstanding debts to the U.S. up to $5, even though it was not regarded as legal tender.

However, because the original intent of the Postage Currency Act was that stamps should not be used as a circulating currency, Treasury Secretary Salmon P. Chase proposed a new fractional currency that would be more difficult to counterfeit than Spinner’s postage currency. As a result, fractional currency was born. There were four issuings of fractional (non-postage) currency, beginning in August 1862, with the final issue ending in February 1876. Each subsequent issue featured anti-counterfeiting measures, and they would go on to include fiber paper, watermarks, color tinting, and the embedding of silk fibers.

The new fractional currency notes were quite different from the original postage currency, featuring colorful faces, printing on the reverse, experimental paper, and overprints. Single-sided specimens called fractional currency shields were sold to banks in an effort to prevent counterfeit notes from passing through the economy. These notes provided the banks with a standard for comparison to aid in detecting counterfeits.

In 1876, Congress authorized the minting of fractional silver coins, allowing the outstanding fractional currency to be redeemed for coinage.

Because encased postage stamps and fractional currency are rarely seen, many people believe they are quite expensive to collect. Surprisingly, both can be found for less than expected. The 2020 Edition of Scott Specialized Catalogue of United States Stamps & Covers is an excellent resource for those who are curious about collecting these types of historical currency.

Encased postage stamps walk a thin line between numismatics, philately, and advertising collectibles. They cost more to collect than fractional currency. A quick peek through WorthPoint and eBay’s sold listings shows that even examples in mediocre shape can sell for a couple of hundred dollars. However, most in good condition generally sell for $400 – $700, as evidenced below. 

For those who lean to the numismatic side of collecting, fractional currency is often much more modestly priced. Ungraded notes can be found for as little as $10 to $50, depending upon the condition. Obviously, graded notes are more expensive, falling into the range of less than $200 up to thousands of dollars for rare specimens. Still, notes such as the one below, which is in decent shape for its age, can be found for less than $40. That is a fair price for the opportunity to hold history in your hands.

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