The quaint coin store of yesteryear has evolved into the multimillion-dollar rare coin investment firm. Many coins are no longer bought by the consumer; they are sold by the coin firm to the consumer.

If you are sold coins, there are a number of precautions — besides exercising healthy skepticism — that you should heed.

The dozen consumer protection tips presented here are not meant for the casual coin buyer perusing the web who might stumble upon a coin or two for a few hundred dollars that an advertiser has for sale. These precautions are designed for persons investing large sums of money in coins.

A greater ethical burden rests upon the shoulders of the coin merchant than on the merchant selling a uniform commodity. The average consumer, however well read, might never be able to tell the difference between a coin in Mint State-64 condition and one in Mint State-65; the dealer is expected to be honest in telling the coin buyer which is which.

The single most important precaution is to know your dealer (thus, it is the most detailed tip presented here). You can make money in coins even if you don’t know coins. But be absolutely sure you know your dealer.

FIRST PRECAUTION: Deal with reputable dealers.

This used to be a simple caveat for any coin buyer. You could do business with any dealer who displayed emblems of membership in various dealer organizations and almost be assured of a good deal.

Today, however, the coin buyer must apply greater sophistication in checking out his or her dealer. A call to the Better Business Bureau is not enough.

A former customer of a large coin firm recently showed me coins for which he had paid tens of thousands of dollars to a coin firm accused of false and misleading practices in trade and in commerce by the Federal Trade Commission. In my opinion, the coins were worth a mere fraction of the purchase price.

But, before this buyer dealt with this firm, the Better Business Bureau, in an answer to his inquiry, wrote:

“Bureau file reports are confined to the past three years. BBB files show this firm has been cooperative in any matters brought to its attention and has maintained a satisfactory business performance record according to our files.

“The Bureau has no reason to deter anyone from doing business with this firm.

“[This coin firm] is a member of the BBB and has demonstrated its support of BBB goals of private business promoting the public interest through self-regulation.”

It certainly would not hurt to get a Better Business Bureau “Business Referral” (the BBB’s own words for the text quoted) for the dealer you intend to deal with. But you would be much better off making inquiries to the attorneys-general in the state in which you live and the state in which the firm is based (if it is different). If the prospective dealer checks out with the attorneys-general, contact the Federal Trade Commission and U.S. States Postal Inspector’s Office.

These agencies will not, however, confirm or deny any ongoing investigation, but they will confirm if a dealer has already been charged or convicted.

In the New York area, many telemarketers have been charged with defrauding customers. And, not surprisingly, the area is home to one of the most active postal inspectors in the country specializing in rare coin investment schemes.

After you’ve made these basic inquiries, you should be certain your dealer has operated under the same corporate name for a number of years. The question you should ask of your dealer is not how many years he or she has been in the coin business, but how many years he or she has operated under the same corporate name. Some dealers change their company names every two years, others every two months —and some as often as every two weeks.

Try to choose a dealer who has not been convicted of a felony or found guilty of racketeering in civil court.

The Professional Numismatists Guild (PNG) has strict membership requirements and polices its members. PNG member dealers are required to submit to legally binding arbitration if requested by the consumer.

In all fairness, it would be unreasonable for me to advise you never to deal with a dealer who ever has declared bankruptcy. Many of the nation’s leading dealers have done it more than once, and a recent declaration of bankruptcy might even have a positive aspect: It might mean that the dealer can’t declare it again in the near future.

There are some truly expert coin dealers with otherwise awesome credentials who would not qualify to be your coin seller if you follow my advice.

SECOND PRECAUTION: Buy the book or videocassette before the coin.

You should educate yourself to the ways of the marketplace. This doesn’t mean you’re expected to be able to tell whether a coin is a high-end MS-65 or an MS-66. It does mean you should learn basic grading techniques, as well as how the marketplace works.

A number of books will be helpful in your quest for knowledge, including some of my own.

Many people are more comfortable having information read to them, with photographs carefully presented. Some excellent coin videotapes are available from Media Resource Corporation (3100 Arrowwood Lane Boulder, CO 80303-2419).

It makes no sense to invest thousands of dollars in coins without basic knowledge of grading when you can be taught grading via videotape for less than $100.

THIRD PRECAUTION: Buy high-quality coins that are scarce or rare.

Coins which are scarce can become scarcer or rare; coins which are rare can become rarer. Coins which are common now will probably remain common in the near future.

Historically, United States coins in high levels of preservation have been the top performers. Coins touted by mass marketers as having potential to increase 500 percent in six months might not increase even 5 percent in six years. Mass marketers often need large quantities of a coin in order to fill orders. A mass marketer couldn’t possibly promote a proof Liberty Seated quarter — which has a mintage of 800 — when it anticipates 2,000 orders. Thus, less popular foreign coins are promoted and lower-grade (but very available) United States coins are hyped.

FOURTH PRECAUTION: Don’t shy away from certain scarce U.S. coins that can be promoted.

There are some coins which have universal appeal to investors. Morgan dollars and Saint-Gaudens double eagles are two such types. These coins are scarce enough to be considered investment items, but common enough to be promoted or hyped. If you buy these coin types in MS-65 at the market low, you can make a lot of money in a short period of time. But, if you buy them at the high (as too many people do), you can lose a small fortune in just as short a period of time.

If you do buy these coin types that can be promoted, you not only need to deal with a reputable dealer, you also need to deal with one who knows coin market trends and who regularly offers advice on when to sell these coin types. Further, my personal advice to the investor is to buy only those Morgan dollars and Saint-Gaudens double eagles which have had their grade and authenticity confirmed by an independent certification organization (more about that later).

You can monitor what’s happening with these types of coins by reading The Coin Dealer Newsletter (Box 11099, Torrance, California 90510), or just by reading COINage every month. In fact, some months ago, when Morgan dollars were at their peak and a number of other dealers were sounding the buy alert, I sounded the sell alert — in COINage.

The grading of Morgan dollars and Saint-Gaudens double eagles is very tricky, and I would advise anyone who isn’t a collector to buy these coins only if they have been graded by one of the leading grading services — or to send the coins in to be graded if they are sold “raw.”

FIFTH PRECAUTION: Be certain the dealer states in writing what grading standards are being used.

There is no uniform industry standard. Any dealer can look at a coin and say that it is, or is not, MS-65. But a multiplicity of organizations pass judgments on the grades of coins, and no two of these organizations grade coins alike.

For example, a little-known grading service might grade a coin MS-67; a more reputable grading service might grade that same coin MS-66; and the Professional Coin Grading Service (PCGS) might grade the coin MS-65. Each of these organizations could be correct — by its own standards — in the grade it has assigned. But this is of little help to you if you pay an MS-67 price for a coin that PCGS would grade only MS-65.

I recommend that you regularly use The Certified Coin Dealer Newsletter as a guide to the sight-unseen values of certifed coins and an indicator of what dealers are willing to offer for coins graded by the various grading services.

SIXTH PRECAUTION: Use common sense, and look at the coins.

Common sense is not all that common. If a coin looks like you had taped it to the bottom of your shoe and done a tap dance on it, it probably isn’t an MS-65 — no matter how many certificates say that it is.

You also should check the coins you receive against the invoice. You might have received somebody else’s coins. And, by all means, do open the box. I know one investor who never bothered to open his box of coins until it was too late: The box was empty, and the dealer had gone out of business.

Your coins should stand on their own merits, not those of a dealer’s guarantee or certificate of grade. And you should not borrow money to buy coins. No more than 15 percent of your total net worth (excluding the value of your primary residence) should be invested in rare coins.

SEVENTH PRECAUTION: Become familiar with the basic standards of certification services.

You should become familiar with the idiosyncrasies of the certification organizations — for the reasons listed above, as well as so you don’t get angry at your dealer when you submit coins.

Mint-state coins can be graded with any number from 60 through 70.

Leading grading services include, but are not limited to, ANACS, PCGS and the Numismatic Guaranty Corporation of America (NGC).

EIGHTH PRECAUTION: Buy a rare coin, not a certified product.

Buy the coin, not the papers. Coins can be a wonderful investment; certified products rarely are.

Michael R. Fuljenz, a former American Numismatic Association Certification Service authenticator-grader, said in 1987 that “ANA certified coins, unlike fine wines which increase with value as time progresses, turn to vinegar.” ANA has tried to halt this problem by removing the dates from its certificates. Grading standards have changed — and, for that reason, some certification organizations are not as popular as others.

A coin might be priced at $4,000 in MS-65, $1,200 in MS- 64 and $200 in MS-63 — so even a slight variation in grade can mean a big difference in market value.

There probably are more coins of this type which trade between $200 and $1,200, and between $1,200 and $4,000, than trade at the exact MS-63, MS-64 and MS-65 prices. Don’t balk at paying a bit above an MS-63 or MS-64 price for a high-end or premium-quality specimen of that coin. When you pay the minimum price required to secure a certified product, your investment is in the certification organization. When you pay the premium, it’s likely that you have a nice coin, provided you are an educated consumer and the seller is honest.

All MS-65 coins from each respective certification organization are not the same. A coin could, for example, be a dramatic cameo Proof-65, with startling contrast between snow-white fields and reflective devices. Or it could be a non-cameo Proof-65, with toning that isn’t so attractive. If you pay the lowest price for the grade, you’ll get the lowest quality coin for the grade.

NINTH PRECAUTION: Don’t give your credit card number to anyone that you haven’t called.

I’m not saying you shouldn’t buy coins from telemarketers. But, if a dealer calls you on the telephone and asks for your credit card number for a coin sale (and it is your prerogative to buy coins that way if you so choose), at the very least get the dealer’s telephone number and call him or her back.

Many wildly criminal activities have occurred with credit cards: non-delivery; unauthorized charges; no credit for returned merchandise; and charges to the card after the death of the card-holder. Further, if a reputable dealer is asking for a credit card, you might be able to strike a deal and pay a lower price for the coins by paying cash instead. If a coin firm has to give the credit card company 5 percent of the value of the transaction, you might be able to get a 2-percent or 3-percent (or even higher) discount on your order by not using a credit card.

The advantage of using a credit card is the recourse this gives you through the credit card company if the coins are misrepresented or not delivered. The disadvantages are limitless.

TENTH PRECAUTION: Take action against anyone who has sold you overpriced or overgraded merchandise. If you discover that you have purchased such material, take swift and immediate action.

Government agencies such as the Federal Trade Commission have been very helpful in looking out for the public interest. But the FTC is so structured that it helps consumers collectively, not individually. The FTC can and will do little for an individual investor who claims to have lost $1,000 — or even $10,000 — to a particular coin firm. But it can help if many thousands of investors appear to have been bilked out of millions.

In seeking redress, you’d be much better off getting the dealer to agree to legally binding arbitration if you can’t reach an amicable agreement between yourselves. As discussed earlier, PNG requires its members to submit to arbitration in disputes.

ELEVENTH PRECAUTION: Save all original holders, receipts, canceled checks and other proofs of purchase.

This material will come in handy to prove you purchased the coins when you say you did. It also will confirm that these coins were sold to you by the dealer who you claim sold them to you.

Coins in unsealed holders without photographs signed by the coin firm are an unending source of frustration for the investor. Some firms have been known to accuse investors of switching coins. When you buy “certified” coins, have the coin firm record the certification number on your invoice.

TWELFTH PRECAUTION: Be certain your coins are maintained in the same grade in which you purchased them.

With coins, there’s an unfortunate risk that if you buy a coin for $5,000 and drop it on the way home, its value may plummet to $1,000. An improperly preserved coin can be just as financially harmful as an overgraded or overpriced one.

Coins should be neutralized in Koinsolv for long-term storage. A vapor-phase inhibitor, such as Metal Safe (E&T Kointainer Co., P.O. Box 103, Sidney, Ohio 45365) should be used to prevent deterioration. Vapor-phase inhibitors change the molecular composition of the air so the coins don’t deteriorate.

There you have them: a dozen helpful hints on how to protect yourself when buying coins.

None of these safeguards is foolproof; there still may be occasions when a coin deal doesn’t work out as well as you’d hoped.

But, if you observe these 12 important rules, the setbacks will be less frequent and less painful — and the triumphs will outnumber the tragedies.

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