Demand Note – an United States Paper Money

Demand Note is a promissory note payable on demand. It is a loan with no fixed term or repayment schedule. It is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 US$. Demand Notes were the first issue of paper money by the United States that achieved wide circulation and they are still in circulation today, though they are now extremely rare. The U.S. government placed the Demand Notes into circulation by using them to pay expenses incurred during the Civil War including the salaries of its workers and military personnel. Due to their flexible nature, demand notes are common in informal lending between family and friends and often involve relatively small sums. Although this type of flexibility may not be ideal for many business situations, demand notes are an excellent form of borrowing for more informal situations, such as those involving friends and family.

A demand note is an example of a unique loan format that accommodates a wide variety of situations and scenarios. Because of the distinctive green ink on their reverse, and because state-chartered bank and Confederate notes of the day typically had blank reverse, the Demand Notes were nicknamed “greenbacks”, a name later inherited by United States Notes and Federal Reserve Notes. A demand note typically does not carry with it a payment schedule or fixed term, and the lender has the right to request the funds back at any point. The obverse of the Demand Notes contained familiar elements such as the images of a bald eagle, Abraham Lincoln, and Alexander Hamilton, though the portraits used on Demand Notes are different from the ones seen on U.S. currency today. However, banks can also issue demand notes to long-standing customers who have sound credit profiles.

A demand note is commonly defined as a loan in which there is no fixed or explicitly stated repayment schedule or length of applicability. When Demand Notes were discontinued, their successors, the Legal Tender Notes, could not be used to pay import duties, a large part of the U.S. federal tax base at the time, and thus Demand Notes took precedence. In some situations, banks that have established a long track record of quality transactions with a borrower may also allow for a demand loan to occur. As a result, most Demand Notes were redeemed, though the few remaining Demand Notes are the oldest valid currency in the United States today. Understanding when and how these loans are deployed is valuable for all borrowers, regardless of their current needs.