Federal Reserve Note Definition, Lifespan, Features

What Is a Federal Reserve Note?

A Federal Reserve note is a term to describe the paper demand liabilities of the Federal Reserve, commonly referred to as "dollar bills," which circulate in the U.S. as legal tender. For practical purposes, the Federal Reserve note is the monetary unit of the U.S. economy.

The term Federal Reserve note is often confused with the U.S. dollar, the official unit of account of the U.S.

Key Takeaways

  • Federal Reserve notes are the paper currency circulating in the United States.
  • These are commonly known as dollar bills.
  • The U.S. Treasury prints the Federal Reserve notes, which are backed by the U.S. government.
  • Each note's lifespan differs according to its denomination.
  • Each note is laden with security features and identifiers to prevent counterfeiting.
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Banknote Definition

Understanding Federal Reserve Notes

Federal Reserve notes were first issued after the creation of the Federal Reserve System (FRS) in 1913. Before 1971, each Federal Reserve note issued was backed by a legally specified amount of gold held by the U.S. Treasury, however, private citizens were not allowed to redeem notes for gold dollars. Because these notes held legal tender status and represented actual dollars, they were commonly referred to as "dollar bills" as they circulated through the economy.

However, under President Nixon, the gold standard was officially abandoned, creating a full fiat currency, where the Federal Reserve notes themselves are the sole circulating legal tender, along with small base-metal coins.

Federal Reserve notes are no longer backed by assets such as gold. Instead, Federal Reserve notes are supported solely by the government's declaration that "this note is legal tender for all debts, public and private" in the United States.


Today, Federal Reserve notes circulate as money throughout the U.S. and the rest of the world wherever dollar-denominated transactions take place. These notes are still commonly referred to as "dollars," which was previously a legally defined quantity of gold or silver but is now simply the official unit of account for U.S. legal tender, including Federal Reserve notes.

The U.S. Treasury prints the Federal Reserve notes at the instruction of the Board of Governors and the 12 Federal Reserve member banks. These banks also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand. Once new Federal Reserve notes are issued, they become a liability of the Federal Reserve, which can be redeemed by bearers on demand for different Federal Reserve notes.

Lifespan of Federal Reserve Notes

The lifespan of the different Federal Reserve notes is dependent on their denomination. In general, the larger the denomination, the longer the lifespan because they are not widely circulated.

According to the Federal Reserve, the average lifespan of each note is as follows:

  • $1: 6.6 years
  • $5: 4.7 years
  • $10: 5.3 years
  • $20: 7.8 years
  • $50: 12.2 years
  • $100: 22.9 years

The term "greenback" is used for any denomination of a banknote. Some specific nicknames are Benjamin for a $100 bill and Tom for the $2 bill, both reference the Founding Fathers depicted on the note.

$3

During the early 1800s, federal and state-chartered banks issued $3 notes. There are also $2 bills in circulation, but which are far less common than other denominations.

Currency in Circulation

In 2021, more than $2.10 trillion of U.S. currency was in circulation, with $2.05 as federal reserve notes and $50 billion as coins. The $100 bill has the largest quantity of notes in circulation, followed by the $1 and $20 bills.

$1 $2 $5 $10 $20 $50 $100 $500 to $10,000 Total
Value ($Billions) $13.1 $2.8 $16.1 $22.5 $234.9 $114.2 $1,636.8 $0.3 $2,041
# of Notes (Billions)  13.1 1.4 3.2 2.3 11.7 2.3 16.4 0.0004 50.3

Federal Reserve Note Features

The U.S. Treasury employs sophisticated tactics to ensure authenticity and prevent the counterfeiting of Federal Reserve notes. Three types of security safeguards include covert features, banknote equipment manufacturer features, and public features, such as watermarks, security threads, and color-shifting ink.

Each note includes an 11-digit serial number, consisting of letters and numbers. The first digit identifies the series year when the Secretary of Treasury approved a new design or the year that a new secretary's signature was used in the design. Serial numbers that end with a capital letter denote a significant change in the note's design. Stars appearing at the end of the serial number, replacing the last digit, signify that it is a replacement note.

For $5, $10, $20, $50, and $100 denomination notes, there is a two or three-digit code that corresponds to the Federal Reserve Bank that accounts for that note. The first digit in this code corresponds to the second digit in the serial number. For smaller denominations, such as the $1 and $2 bills, a seal identifies the Federal Reserve Bank.

What Is the Difference Between a Federal Reserve Note and a United States Note?

A U.S. Note was an earlier form of paper money in the U.S. from 1862-1971, which was backed by and redeemable for physical silver or gold. Between 1933 and 1971 both United States Notes and Federal Reserve Notes were considered legal tender.

Is a Federal Reserve Note a Promissory Note?

Technically, yes, a federal reserve note is a promissory note that does not pay any interest. It is defined as such because it states that "this note is legal tender for all debts, public and private," indicating a promise for the government and private citizens to accept and honor the note as legal tender.

Can I Get Money Directly From the Federal Reserve?

No. Money is only issued through the U.S. banking system which receives its money from the Federal Reserve. Individuals cannot, by law, have accounts at the Federal Reserve.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Federal Reserve History. "Roosevelt's Gold Program."

  2. U.S. Department of State, Office of the Historian. "Nixon and the End of the Bretton Woods System, 1971–1973."

  3. U.S. Federal Reserve. "How Long Is the Lifespan of U.S. Paper Money?"

  4. U.S. Federal Reserve. "Currency and Coin Services"

  5. U.S. Currency Education Program. "Currency In Circulation."

  6. U.S. Federal Reserve. "Does the Federal Reserve maintain accounts for individuals?"

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