How To Protect Yourself when buying rare coins
If you intend to buy rare coins or bullion coins for investment, your best
protection is to spend time learning about the coins you are being asked
to buy. In the past, most investment gains have gone to collectors, often
known as numismatists, who have taken the time to carefully study various aspects of coins, including rarity, grading,
market availability, and price trends. Investment success over the years
is the result of prudently acquiring coins of selected quality, proven
rarity, and established numismatic desirability.
Many careful buyers study coins for some time before buying even a single
rare coin. Success also can be enhanced by researching dealers, as well as
If you receive any solicitation about investing in coins, keep these
points in mind.
- Use common sense when evaluating any investment claims and do not
rush into buying. Remember, anything that sounds too good to be true
usually is not true.
- Make sure you know your dealer's reputation and reliability before
you send money or authorize a credit card transaction. If you can,
find out how long the company has been in business. Don't rely just on
what a dealer's representative tells you on the phone. For example, if
a dealer claims to be a member of a professional organization, call
the organization and make sure that the claim is true. If you cannot
confirm the reliability of the dealer, consider investing with another
- Do not be taken in by promises that the dealer will buy back your
coins at or for more than the price you paid or that grading is
guaranteed unless you are confident that the dealer has the financial
resources to stand behind these promises. Many of the rare coin sellers
prosecuted by the Federal Trade Commission in the last several years
have not been able to meet guarantees and other obligations to their
- It is wise to get a second opinion from another source about grade
and value as soon as you receive your coins. So, before you buy, find
out what remedies you will have if the second opinion differs. For
example, some companies offer a 30-day return period if you are not
satisfied with your purchase. Check the information that you are
given. Will the full purchase price be refunded or will you be given a
credit to be used for the purchase of other coins? If a dealer
promises to buy back the coins at the same grade at which they were
sold, does that mean at the price you paid or at some discounted
- Check the grades of any coins you buy with an independent source. Be
cautious about grading certificates and "slabs," especially
those furnished by coin dealers. Many of the third-party grading
services encapsulate or "slab" a coin in an acrylic holder
with a grading number. This can protect the coin from further damage
and reduce the chances of having a coin of a lesser grade substituted
for one of a higher grade. If you use a grading certificate or slab as
a second opinion, be sure you understand what they represent. Grading
is not an exact science, and a certificate or slab represents no more
than the opinion of the certification or grading service. Find out if
the grading service is indeed independent of the dealer, what grading
standards the service used, and what is the service's reputation in
the industry. Also because grading standards vary, coins certified by
different services will be worth more or less than other coins of the
same grade. Weekly periodicals or sight-unseen trading networks list
prices for coins that have been certified by various services. Check
the prices for those coins you are considering.
- Comparison shop. You need to be concerned not only with grades, but
with prices as well. Consult several dealers before buying. Check
prices in leading coin publications or sight-unseen trading network
lists to make sure you are not being overcharged. Sight-unseen coin
trading networks offer only the lowest-priced bids being offered for
coins. Several publications list representative wholesale values for
fine coins of various issues and grades. These values generally are
higher than the prices consumers can expect to receive if they were to
immediately sell their coins, and lower than the retail prices
consumers may be charged to buy the coins. Consult such publications
prior to trusting dealers' representations about the current value of
coins. If a dealer's advertised price is much lower than the price
listed in these publications, then the dealer may be misrepresenting
the quality or grade of the coin.
- Take possession of any coins you purchase to ensure they exist and
to be sure that they are properly stored.
- As with any consumer purchase, be wary about giving your credit card
number to strangers, especially over the telephone.
How To Identify Fraudulent Sellers
The fact is: It is very difficult to identify fraudulent sellers of rare
and bullion coins because they often look like legitimate dealers. For
example, fraudulent sellers frequently have elegant offices in the
financial districts of major cities, employ "account executives"
or "investment counselors," and produce glossy, attractive
brochures on investment strategy. They may claim tohave leading coin
experts on their staffs, or claim to be the largest or finest dealers in
the business. Because fraudulent sellers often appear to be reputable, it
is particularly important to check the information you are given.
Also, fraudulent sellers of rare and bullion coins often use many of
the same techniques as legitimate dealers to attract buyers. Some
advertise in newspapers and magazines and sometimes meet prospective
clients through financial planners and insurance agents. Others use a
popular sales method known as telemarketing. For example, you may be
approached about coin investingthrough an unsolicited telephone call, or
you may be called after you have responded by mail to an advertisement.
Because telemarketing fraud has grown rapidly over the last several years,
you should be particularly careful about committing yourself to any
purchase from an unsolicited caller.
Recently, some fraudulent sellers have been using multi-level marketing
systems, also known as pryramid schemes to sell coins. Listed below are
some sales techniques commonly used by dishonest dealers.
False Grading Claims
Usually, the value of a rare coin is determined by its grade and rarity,
so it is very important that the rare coins you buy are graded correctly.
The grade of a rare coin is a shorthand method of describing its
condition. Because grading includes such factors as "overall
appearance" and "eye appeal," it necessarily involves some
degree of subjectivity. As a result, the grade assigned to a particular
coin may vary even among legitimate dealers, especially in the higher,
investment- quality grades where distinctions in condition are more
subtle. Because the fine distinctions between grades often mean large
differences in the value or price of a coin, the subjectivity in grading
means that there is some inherent risk in coin investing. Fraudulent
sellers, however, often intentionally inflate the grades of the coins they
sell, charging prices many times the coins' actual value. For example, you
might pay $450 for an 1882-S Morgan dollar, that was described to you as
having a high grade because of its excellent condition. Later, however,
you may find that the accurate grade for the coin is two or more grades
lower, and that the coin is actually worth only $50. Prior to the advent
of independant certification services, false grading was the most common
form of rare coin fraud.
False Slab Certification Claims
Many consumers and financial planners use third-party grading or
certification services to verify grade before they buy. These services
"certify" coins as to grade and usually encapsulate them in a
"plastic" holder with some form of grading certificate or
"slab." However, consumers can lose money even when a
certification or grading service is used. Certification services provided
by dishonest coin dealers too often are part of fraudulent sales schemes
and are intended to mislead consumers. In some instances, even
certificates or slabs from legitimate services can be misleading. For
example, some certification services use looser standards than those
generally accepted by dealers in the rare coin market. As a result, the
coins they certify may be worth less than other coins of the same grade.
There are special pricing publications and sight-unseen trading networks
for coins certified by major services. Before you buy any certified coin,
make sure that you check its current value in one of these sources. Some
fraudulent sellers may use an old certificate to mislead you into
believing that a coin's grade is accurate by today's standards. Check the
date of any certificate or slab you are offered and investigate the
certification service before you commit to a purchase.
False Claims About Current Value
Some dishonest sellers of rare coins grade their coins accurately, but
mislead consumers about the value of their coins. In other words, they
overprice their coins, charging significantly more than a coins's actual
value even though the coin is accurately graded. For example, they may
charge $5,000 for an accurately graded $10 Indian gold piece, which has a
current retail value of only $1,750. False claims about value are becoming
increasingly common in rare coin fraud. Despite statements to the
contrary, there is a great deal of risk in coin investments. If you are
not knowledgeable about rare coins, you may lose all or most of your
False Appreciation Claims
Dishonest dealers often mislead buyers by quoting appreciation rates for
rare coins from an index formerly compiled each year by Salomon Brothers,
a New York investment bank. These quotes show appreciation of 12 percent
to 25 percent a year. However, the Salomon index was based on a list of
twenty very rare coins, while the coins sold by dishonest dealers are more
common coins that are not likely to appreciate at the same rate, if at
all. However, almost all dealers, legitimate and dishonest alike, have
used the Salomon quotes. Therefore, it is particularly important that you
choose your dealer carefully. Remember, there is no guarantee that any
coin will appreciate in value. In fact, coins as an investment have been
stagnant for the last several years.
False Claims About Bullion Coins
Technically, bullion coins are not "rare" coins because their
values are determined principally by their gold or silver bullion content,
rather than by rarity or condition. The best known bullion coins are the
U.S. American Eagle, the Canadian Maple Leaf, and the South African
Krugerrand. These coins are bought and sold worldwide through banks,
brokerage firms, coin dealers, and precious metal dealers, who offer
competing prices for the coins. Bullion coin prices change daily depending
on the varying prices for gold and silver in the world markets. Fraudulent
sellers of bullion coins often overprice their coins, or mislead consumers
about the coins' bullion content. When purchasing bullion coins, call
several reputable dealers or brokerage firms to compare prices and be sure
to ask about any additional transaction or delivery costs. Fraudulent
sellers also mislead consumers into buying "coins" that are not
really coins at all. Make sure the bullion coins you purchase are not
imitation medals created by fraudulent "mints." Some private
mints issue bullion pieces with the same design as coins from the U. S.
Mint, but in different sizes. To make sure you know what you are buying,
your best protection is to study the bullion market before you buy, and to
choose your dealer carefully.
Where To Go For Help
If you have a problem with a coin dealer, and the dealer has not resolved
the problem to your satisfaction, there are a number of places you can go
from help. Some dealers will resolve disputes through binding arbitration
by an independent third party, usually through one of their professional
organizations. Consumer protection agencies, including the Federal Trade
Commission, are interested in getting your complaint information to build
cases against fraudulent dealers. Although most government offices are not
able to resolve individual disputes, they can usually give you sound
advice about how to proceed. Most coin organizations can help you if the
dealer is a member of their organization. The following list of
organizations and government agencies is provided for your information.
The American Numismatic Association ("ANA")
is a non-profit organization of collectors, but many dealers are also
members. The ANA provides many educational programs for both novice and
experienced collectors. If you have a complaint about an ANA member, you
can write to the Association at 818 North Cascade Avenue, Colorado
Springs, CO 80903.
Industry Council for Tangible Assets ("ICTA") is a national
trade association of coin and precious metals dealers. ICTA urges its
members to subscribe to a program of binding arbitration administered by
the American Arbitration Association (AAA). It also keeps records of other
programs of arbitration or mediation its members adhere to. If you have a
question whether or not an ICTA member subscribes to the AAA program or
another, you may write to ICTA at P.O. Box 1365, Severna Park, MD 21146.
The Professional Numismatists Guild
("PNG") is an organization of coin dealers and numismatists.
Membership in PNG is selective; to qualify, a dealer must have a minimum
number of years experience and meet a minimum net worth requirement. The
PNG also requires its members to submit to binding arbitration in order to
resolve complaints filed by consumers or other dealers. If you have a
complaint against a PNG member, you can write to PNG at 3950 Concordia
Lane, Fallbrook, CA 92028
The Better Business Bureau ("BBB") is interested in the business
practices of companies in its area. Contact the BBB in the city where the
coin dealer is located.
Your state consumer protection agency or Attorney General's Office may
be interested in your complaint information. Contact the state consumer
protection agency or the Attorney General's Office in the state where the
coin dealer is located.
The U.S. Postal Inspector should be contacted if you have a complaint
and you ordered, received or paid for your coins through the mail. Postal
Inspectors are listed under "Postal Service" in the U. S.
Government section of your local phone book.