What You Need To Know: (terms) holder, grade, encapsulation, certification
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NOTE: You may view the PDF version of this article on my website HERE . The PDF version is easier to read and includes captioned images.

 

Numismatic Concepts and Definitions

the numismatic meaning of “certification”

 

As is the case in many hobbies or fields of endeavor, communication is an important key to success in collecting coins, but sadly, the value of clear and accurate communication is often overlooked. In particular, the correct use of numismatic terms in an unambiguous manner, and the ability to recognize when a specific term is being used improperly (or even with the intent to deceive) can mean the difference between a pleasant and meaningful numismatic experience, and a costly mistake. It is the responsibility of every numismatist to understand the vocabulary peculiar to his hobby, and to use the words properly.

 

For better or for worse, the encapsulation of coins in what are popularly called “slabs”, as well as the certification that often accompanies a slab, has become an integral part of the process of buying and selling coins, and is probably here to stay. The original purpose of certification was to ease the process of buying, selling and trading coins by allowing a grade to remain permanently associated with a coin, and therefore removing the subjective bias that was a part of every transaction. Once certification became popular, other companies began to mimic the process of encapsulating coins, but without accompanying the encapsulation with certification. This is a crucial point regarding the difference between a coin that is certified and one that is merely encapsulated, and forms the basis of this article. If you purchase what you believe to be a “certified” coin, only to discover later that the company that “certified” it does not back their service and product with any sort of financial guarantee, then you have likely made a financial error.

 

We will concern ourselves with the correct definition and use of the following terms and their variants:

 

- holder (holdered)

- grade (graded)

- encapsulation (encapsulated, capsule, slab, slabbed)

- certified (certification)

 

“HOLDER” explained

Although in current numismatic slang, certified and slabbed coins are often referred to as being “holdered”, this is a misleading term that means very little, but can be quite confusing to a novice coin collector. A holder is simply any vessel in which a coin is placed. It can be nothing more than a paper envelope, a vinyl 2x2 flip, a 2x2 cardboard staple-type holder, a snap-together plastic holder or, yes “holder” may refer to a slab.

 

Often, it is the intent of a seller to mean a coin has been slabbed or certified when he refers to a coin as having been “holdered”, but again, this can be misleading when a novice is led to believe that this also means the coin has been certified (which will be defined carefully later). There is absolutely no sort of financial guarantee or assurance that arises as the result of a coin being in any general holder. It merely means that some effort has been made to assure the safety of a coin by placing it in safe containment.

 

If one is referring to an encapsulated coin (ie. in a slab), it should be referred to as having been encapsulated or slabbed, not “holdered”.

 

“GRADE” explained

The “grade” of a coin is an assessment of its condition, and therefore its value. Overall, it is primarily a subjective assessment, though some of the factors comprising the grade are in fact objective qualities. It is not correct to state that grading is entirely subjective, but it is also not correct to believe that an entirely objective process can ever be invented for grading coins.

 

For example, the amount of wear that a coin has experienced plays an important part in a coin’s grade, and can be estimated with fair objectivity by evaluating the quantity of metal displaced from a coin through surface friction while in circulateion. Also, it can be objectively determined whether a coin has been damaged in some way, for example by being bent, holed, or scratched in some manner, and the surface quality can be stated objectively (rough, smooth, altered, etc). These objective criteria can be reasonably measured or determined factually, and generally serve as the starting point in determining a coin’s overall grade.

 

The remaining process for grading a coin deals with subjective criteria, such as the attractiveness (as opposed to the quality) of a coin’s surface, its color, the strength of its original mint luster (if any), the quality of its strike, and the coin’s overall aesthetic appeal. Opinions can (and should) differ with regard to these factors. Individual collectors will value each of these criteria differently, and prefer some criteria over others, and therefore any number of collectors will propose a variety of different grades for a specific coin, based on his preferences. The different grades assigned by various collectors results in different values, and this potential difference of opinion lends much to the excitement and interest of the hobby. Contrary to what many novices believe, it would not be beneficial to the hobby if everybody graded every coin in the exact same manner.

 

Given a population of coins of the same date, mintmark and die-variety, the most influential factor on an individual coin’s value is it’s grade. The opportunity to have different opinions on the grades and values of coins is an important and positive attribute of coin collecting, but being able to rely on the grade assigned to a coin as a starting point in negotiations greatly facilitates ease of assigning a value to it. Thus, when there is general agreement on what constitutes a coin being of a certain grade level, its approximate value can be referenced in a price guide. This is the reason grading standards have evolved and become such an important part of the hobby, provided individual opinions and disagreements are always respected.

 

Anyone may at any time assign a grade to a coin, and his opinion may even change over time due to changing tastes. There is no license or legal requirements that must be met to grade coins, nor is there a legal standard by which all coins must be graded. Indeed, it is highly improbable that a legally binding standard could ever be created because so much of the process is subjective. For that matter, there is no one legal set of grading terminology that must be used in describing coins (though the standards set forth by the ANA [American Numismatic Association] are observed by the great majority of coin collectors). New standards have been proposed at various times, and if one is attempting to grade a coin according to a specific standard, it should be so stated, but in general, a coin collector is given great freedom in applying grading standards in any manner he chooses. Again, this freedom to express an individual opinion regarding the grade of a coin is of fundamental importance to the hobby, and must always be valued and encouraged.

 

It is always acceptable and proper to state that a coin has been “graded”, even if the seller himself was the one who applied the grade. The term has nothing whatsoever to do with whether or not the coin is encapsulated, certified or professionally appraised. Therefore, one ought not to state that a “coin has been graded” with intent to imply that it has been encapsulated or certified, because there is no such implication. To state that a “coin has been graded” merely states that some party has formed an opinion of its grade, though that party could be the seller himself, a third party, or an unknown party.

 

Beware of advertisements that merely state that coins for sale have been “graded”. There is nothing that legally binds the assigned grades to the coins being offered. Likewise, you ought not to expect a coin described as “graded” to be anything more than just that, a coin with a grade assigned by somebody; by no means must that “somebody” be a professional organization.

 

“ENCAPSULATION” explained

Encapsulation of a coin entails enclosing the coin in a tamper-evident holder. In theory, if a coin has been encapsulated, it cannot be removed from the holder without damaging the holder in some manner that demonstrates that the integrity of the holder has been compromised. Most often, such holders, or “capsules” (called “slabs” in numismatic slang) are comprised of two shells - a front and a back – made of plastic, and the coin is placed between the two halves, which are then sealed in some manner such that they cannot be separated without damaging the seal or the plastic shells themselves.

 

Because of the ability to demonstrate to the observer whether or not the capsule has maintained its integrity, written information can be enclosed in the capsule along with the coin, and as long as the capsule’s integrity is not violated, that information cannot be changed, and therefore can remain permanently associated with the coin. The only way the association between the coin and the information can be destroyed is by destroying the capsule itself. Thus, the introduction of the coin capsule make it possible to permanently associate the coin with relevant information, such as it’s denomination, die variety, authenticity, and perhaps most importantly, its grade.

 

Without a good seal, an unscrupulous person could separate the two halves of the capsule, or otherwise open it up so as to allow removal and replacement of the enclosed coin, or alteration of any grading or other information also contained in the capsule. Technology has been used to enhance the quality and design of coin capsules with the goal of making such tampering obvious. For example, very brittle plastic can be used so that the slightest effort to open the capsule results in heavy and readily apparent stress fractures in the plastic. A fragile pressure hologram can be applied to the interior of the capsule, with the idea that it would instantly deteriorate if any attempt were made to open the capsule. But despite the efforts of encapsulation companies to ensure the integrity of their coin capsules, it is incumbent on the purchaser of a coin so holdered to make sure the capsule is intact, and that it’s seal has not been violated.

 

Regardless of the accuracy of the additional information that might be housed with a coin in its capsule, it is always correct and accurate to refer to a coin so holdered as an “encapsulated” or “slabbed”. Either term refers strictly to the fact that the coin is securely encapsulated, and in no way is the use of either term dependent on the accuracy of the grade or any other information included, regardless of whether the information is deemed correct or misleading. The fact that the coin is properly encapsulated is sufficient to warrant it being called an encapsulated (or slabbed) coin.

 

It is important to note that recently, the market has seen introduction of kits that allow the coin collector to enclose his coins in holders that look very much like the capsules of well-known encapsulation companies. These holders do not generally qualify as “slabs”, because after the coin is holdered, it is not difficult for it to be removed or replaced without this being apparent upon examination of the integrity of the holder. In other words, such holders are not tamper-evident. Of course, if the user of such a holder does in fact find a way to seal it and make it tamper-evident, then it would qualify as a slab, but these are usually snap-together type holders, and are not particularly easy to seal permanently.

 

There are also various holders on the market that use plastic or metal screws, or clips as the sealing mechanism. Again, these would not qualify as capsules or slabs, since they enclosed coin can easily be removed and replaced without it being evident from the condition of the holder that this has taken place.

 

“CERTIFICATION” explained

After it was realized that, through the process of encapsulation, a coin could be assigned a permanent grade, the opportunity arose for companies to begin certifying the grades assigned to encapsulated coins.

 

In day-to-day conversation, the word “certified” merely means that an assertion of fact has been endorsed authoritatively as having met certain requirements. Thus, one may speak of a “certified automobile” as having met the requirements spelled out in a checklist of characteristics that have been found to be true of the vehicle in question. A “certified letter” has been confirmed by the United States Post Office as having been posted on a certain date at a certain time by a certain person, and subsequently, to have been acknowledged by the signing party at a certain time and date. In short, someone has staked their reputation on the truth that an asserted fact is true, and the assumption is that they would only take this risk if they truly believed in the strength of their convictions.

 

In numismatics, as in many other hobbies or activities entailing the exchange of property, this term takes on a more meaningful connotation than that used in daily conversation. A coin is certified only if it is permanently guaranteed to be valued at the grade assigned to it by the company that has certified it. This guarantee must be stated publicly in a legally written format to have any value, and virtually by definition, the guarantee must by indefinitely backed financially by the grading company. If such a guarantee for an encapsulated coin and assigned grade is lacking, then the coin is not certified. It is merely graded and encapsulated. This is an extremely important point, so please be sure that you understand it!

 

To phrase it another way, certification requires three characteristics to be in effect:

 

(1) A grade must be assigned to the coin according to some formal manner

(2) The coin must be encapsulated along with the assigned grade

(3) The value of the assigned grade must be indefinitely financially backed by the grading company’s publicly advertised guarantee

 

If a coin whose purchase you are considering lacks any of these characteristics, then it simply is not a certified coin.

 

At the time that this article was written, there were four, and only four, U.S. companies in existence that certify coins. They were, in alphabetical order:

 

(1) ANACS

(2) ICG

(3) NGC

(4) PCGS

 

All other companies are merely grading and encapsulation companies, and do not certify coins. In other words, coins encapsulated by companies such as PCI, SEGS, NTC, ACG and NGS, along with many others, do not qualify as certified coins, because although all of these companies will encapsulate coins - and indeed their slabs appear very similar to those of the four certification companies listed above – none of these companies offers a financially-backed indefinite guarantee as to the grade they assign to coins.

 

Why these concepts are important

Because the coin capsules used by companies that grade and encapsulate (but do not certify ) coins look so similar to the coin capsules used by companies that grade, encapsulate and do certify coins, it is possible for someone not familiar with these concepts to be deceived into thinking he is purchasing a certified coin when in fact he is not. I have frequently seen coins in on-line auctions being offered as “certified”, when in fact they are only encapsulated by a company other than ANACS, ICG, NGC or PCGS.

 

It is perfectly fine to buy a coin that is not certified, provided that is what you are truly looking for – a non-certified coin. (In fact, the very large majority of coins bought and sold on any given day are not certified.) But for those collectors who value the added protection of certification, it is essential to understand whether you are purchasing a coin that truly is certified – or merely encapsulated.

 

Do not pay extra for the protection that certification offers unless you know the coin actually is certified.

 

Conclusion:

Armed with the knowledge provided in this article, you now know that if you wish to purchase certified coins, they must be certified by either ANACS, ICG, NGC or PCGS. Although many other companies encapsulate coins in professional holders of excellent quality, they do not financially guarantee the value of the grades they assign coins, and therefore, their coins are not “certified”. They are merely “encapsulated” or “slabbed”.

 

Lack of certification does not preclude a coin from consideration for your collection. There are many outstanding quality coins available that are in slabs, but that are not certified. You do need to be aware of the reason certified coins command a premium over coins that are merely encapsulated – regardless of the similarity in appearance of one company’s holder to another. The indefinite financial guarantee is the key. Only certified coins are backed by a financial guarantee. All other slabs are not.

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James----Thanks for taking the time to explain the 'basics' to our young numismatic community. Information like this is fundamental to starting our hobby in a correct way. I hope your words will help our YN and keep some of them from making unnecessary mistakes. Thanks. Bob [supertooth]

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As always, Excellent!

 

Is writing part of what you do for a living? You'd make an excellent technical writer.

Edited by Larry Dreher

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I appreciate the comments about the writing style. Although I am not a professional writer, I have been occasionally commissioned to write technical documentation in the past, and as a matter of fact, am writing a technical manual now for a highly specialized software package that will be distributed nationwide. However, it's just a way to earn a little extra income (more coins! smile.gif).

 

At the risk of being admittedly a little verbose, I want my contributions to the WYNTK to flow in such a way that non-numismatists can follow their logic. But I also hope to be thorough and for the information to be accurate.

 

Thanks everyone for the kind comments! I strongly believe in the idea of the WYNTK series of articles, and thank SuperTooth et. al. for the idea.

 

James

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This thread, as well as all of the WYNTK threads, is outstanding. I have read most all of them and am learning more every time I read one. I do have a question maybe someone would be willing to tackle. Here goes: What criteria do you use to make the ultimate decision to have a coin graded and certified? I realize any coin can be graded but what factors make the final decision easier to make. I have taken, what I think, are some really nice coins to a local dealer who has basically told me they are not worth grading. As a different WYNTK thread indicated, I think I visited a maybe not so reputable dealer. He really didn't tell me why he would not get them graded when I asked him. I am interested in what your criteria are for sending in a coin for grading. I would really like to get a few in my collection certified and would appreciate any help given.

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I don't have my coins graded because "They are not worth grading". My reasoning is the value of a coin. I'm not out to make money but I wouldn't invest more money into something that would never get it's return back. There are coins that are worth alot in high grade, but there are also alot of hidden details that are not known to unknowledgeable collectors that will prevent coins from seeing that extra point grade that makes all the difference. JMO. Welcome to the forum Jim.

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Thank you for the welcome. I can follow your reply and I think you are saying you do not want to spend more on grading a coin than what that coin is worth (coin worth $7 - wouldn't spend more than $7 to get it certified) or that it might be an incremental factor. For example: If I have a coin I think is MS60 but is really MS62 (if certified), and the difference in value between the 60 and the 62 is $20, I would not spend $30 to get that coin graded. The reason I raised the initial question is I am not sure exactly what grade my coins would be if certified. The coins I mentioned in my earlier post that I had taken to a dealer are easily worth more than $30. Specifically, I showed him BU coins (he agreed they were all MS-60 or better) and consisted of 1912 Liberty V nickels, 1913 Buffalos (Type 1), 1916 Mercury dimes, etc. I had indicated to the dealer I had no interest in selling these and that I would pay for his time to help me out. Bottom line - he told me not to bother getting them graded. I fully realize if I want to get these coins certified/graded, I certainly am capable of doing that. I have never sent a coin in to any of the TPG's and I went to this particular dealer because he is an authorized to send coins to PCGS and ICG. I think what I need to do is find a dealer or knowledgable collector who is willing to help me and explain why I should or should not submit a particular coin for grading. I just was curious what factors or considerations other collectors use to decide if a coin should be sent in or not. I tried various searches but was not able to find any specific information related to my question. If anyone can refer me to a thread that might help, I would appreciate that.

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The reason you stated is probably why this dealer did not recommend that you send in the coins for grading. I only collect world coins, but for the coins that you mentioned, I probably would not recommend grading for them either from a financial standpoint because the incremental value (if any) is likely to be minimal. The coins you mentioned are common in low uncirculated grades.

 

For my collection, I have my coins graded for two reasons. The first reason is that the difference between a raw and slabbed coin (assuming it is NGC and PCGS) is very large proportionately. So though I may buy (for example) a South Africa 1897 AU-58 3P raw for $25, I could sell it for $100 (or more) in an NGC slab with that grade. But the catch is that most of these coins do not grade (that is the primary reason the premium is so large) and if the collector cannot distinguish the difference, they are going to burn a lot of money on grading fees with nothing tangible to show for it. (The intangible is the incremental knowledge you obtain from the "bodybag".)

 

The second reason is for the benefit of my heirs. It will make it easier for them to sell the coins when they inherit them and (hopefully) make it less likely that they will sell for them for much less than their current market value. I have also written a general collecting guide for them. But the catch is that the collection must still be valuable enough to make this worthwhile.

 

A third reason is some collectors just prefer to have their coins graded. For example, to compete in registry sets though these are mostly high grade sets and I presume (since I do not care for registry set competition) that financial consideration still exist for most of them.

 

Ultimately, it is a personal preference. But based upon your posts, I would expect that you would be better off using your time and collecting funds elsewhere until you have enough personal knowledge to make a better decision. A good way to keep up to date with the financial aspects of collecting (as opposed to technical and historical) is to follow auction results. For most raw coins, I would use eBay. For more expensive coins, I would use Heritage which also has an extensive archive price database.

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:shy:

 

Hello, everyone! I am Grandma Sue and very new to this.

 

I hope you are all doing well today and that each and every one of you find a nice coin!

 

Here comes a stupid question, but it needs to be asked. Please, someone, help! I have some raw coins (Pandas). I want to submit them for grading. How do I know if they are MS or PF? They are all equally nice and shiny. I know they are uncirculated because it is obvious.

 

I also keep seeing the expression "tough coin". What does that mean?

 

I am not much of a "poster", so if this is in the wrong place or inappropriate, please let me know that, [font:Comic Sans MS]2[/font]. I need to learn!

 

Any help will be SO appreciated!

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:shy:

 

Hello, everyone! I am Grandma Sue and very new to this.

 

I hope you are all doing well today and that each and every one of you find a nice coin!

 

Here comes a stupid question, but it needs to be asked. Please, someone, help! I have some raw coins (Pandas). I want to submit them for grading. How do I know if they are MS or PF? They are all equally nice and shiny. I know they are uncirculated because it is obvious.

 

I also keep seeing the expression "tough coin". What does that mean?

 

I am not much of a "poster", so if this is in the wrong place or inappropriate, please let me know that, [font:Comic Sans MS]2[/font]. I need to learn!

 

Any help will be SO appreciated!

 

As far as I know, all Pandas issued directly to collectors are proof coins. Proof coins generally are muck better struck than MS coins and have a mirror-like surface. Business strike (MS) coins were not made with any kind of special care, and often show minor imperfections.a "tough coin" is a coin or specific date that is significantly hharder to find than other coins in a seiries, or is just by itself rare.

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I purchased a bunch of snap together plastic holders. I decided to try to remove the coin from the holder. It's harder than trying to remove a staple from a cardboard flip. Will NGC accept the plastic holder. They are non-pvc...but hard to open...

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I'm a little confused as to the "Certified" concept. I had some coins slabbed by ICG. I think their grades were either correct or too conservative, but in any case, i got my coins back with the grades they assigned. I took them to a coin shop and the guy said he would offer me a dollar (a dollar!) for a MS-65 steel cent i had (43-s). He said it wasn't a 65. So what good does certification do? How does the concept come into play? I think ICG is a good company, but from mostly what i hear, i should stick with NGC and PCGS. Hope someone could clear this up a little.

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I appreciate your coin grading tips and I have a question to whoever thinks they know the answer. At the risk of offending our host NGC it is an ANACS related question. Does anyone know when the old small ANACS white or clear plastic ceased to be used? About what year. I checked on the ANACS website and tried to ask their but, it wouldn't function although I didn't register on their site. and maybe that is why. I find the members here to be very knowledgeable and thought someone might know

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