Buying Guide
Where To Find Junk Silver
The best places to buy small amounts of silver are reputable local coin shops (LCS). Most coin shops will have some junk silver and silver bullion for sale. They usually do a good job filtering out counterfeit coins for you. The employees at the coin shop should be courteous, patient and helpful - if not, find a better shop. Some of the better shops will let you rummage through their boxes of junk silver and pick out what you want. Other shops will just toss how much you ask for on the counter and you can take it or leave it. Some pawn shops will also sell junk silver. My favorite local coin shop is Heartland Coin Gallery in Wichita, KS. They represent the "gold standard" in coin shops. They have friendly, knowledgeable staff, a beautiful shop and competitive prices. If you're ever anywhere near Wichita you should definitely pay them a visit.
If you can't find a local shop another option is eBay. Please be cautious when buying on eBay. Be sure to check seller feedback and shipping costs. Read the details of the listing carefully. The amount of junk silver being sold is traditionally specified in "face value" or troy ounces. However, some sellers specify the amount in other ways, like pounds, traditional ounces (not troy ounces), grams, etc. You can convert different weights to face value and troy ounces but it can be difficult (refer to the junk silver calculators section). I suspect that selling silver in non-standard weights and amounts may be a way for sellers to make a little extra money from unsuspecting buyers. Be careful not to confuse troy ounces and standard ounces when buying and selling. If you're buying standard ounces thinking you're getting troy ounces, you're being shorted about 10%. When dealing with silver, people often say "ounces" when they mean "troy ounces", which can result in some confusion. If you're not sure what they mean, just ask. Sometimes sellers offer lots without specifying what coins are in the lot. Often the lot will include war nickels and other coins. It's impossible to determine exactly how much silver you're getting unless you know exactly what coins you're buying. For example, 1 lb of dimes does not have the same amount of silver as 1 lb of war nickels. Small 1/10th troy ounce Silver Eagles are becoming popular. These coins look exactly like a full size Silver Eagle, but are only about the size of a dime. Unfortunately, many of the pictures on eBay listing don't provide a scale. It's easy to mistake these little coins for a full sized 1 troy ounce Silver Eagle.
Another option is craigslist. Some good deals can be found but precautions should be taken. Insist on a public meeting place, tell a friend or family member where you're going, take your cell phone, consider asking a friend to accompany you, and trust your instincts. More safety guidelines can be found on the craigslist personal safety page. Be sure to look over the counterfeit section and carefully examine the coins.
Online dealers typically require minimum orders of several hundred dollars, so they're only practical for large orders. Payment options vary between dealers. They usually charge an extra fee for using a credit card. I do not personally endorse any online dealer, and you should conduct your own research into the online dealers you're interested in dealing with. I have an acquaintance who has successfully completed several orders with Texas Precious Metals and CMI Gold and Silver. They both offer good prices, service, selection and inventory. They also hold "A+" ratings from the Better Business Bureau. There are several online dealers you can find in the Helpful Links section.
In the past people could search through rolls of coins from the bank and find a few junk silver coins. Unfortunately, it's becoming much harder to find junk silver by "mining" rolled coins. Most people have decided there are better ways to acquire junk silver and better ways to spend their time. You'll probably spend more in gas driving to and from the bank than you'll make searching the rolls of coins. Also, some banks are reluctant to give out large amounts of coins. I'd skip searching rolls of coins for junk silver unless you have the spare time and you can keep your expectations low.
How To Deal With Sellers
Small amounts of junk silver are usually sold in $1 face value increments. $1 face value contains about 0.7 ounces of silver, so the price for $1 face value is usually about 70% of the spot price plus the dealer markup or premium (refer to the junk silver calculators section). The price is usually stated as a dollar amount times face value. For example, "$20 times face". At that price, 4 quarters will cost $20 or 8 quarters will cost $40. Larger amounts of junk silver is commonly sold by the bag. Bags will typically contain $50, $100, $250, $500 or $1,000 face value.
Silver Eagle coins can be purchased individually, in a tube of 20 coins, or a "monster box" which contains 500 coins. Silver Eagles and bullion are often sold by the ounce (troy ounce) and priced according to the spot price plus a dealer markup. For example, a 1oz Silver Eagle coin may be "$3 over spot". If the spot price happens to be $30, the Silver Eagle will cost $33.
An example of a typical junk silver transaction...
Buyer: Hello, I'd like to buy $1 face value of junk silver.
Seller: Sure, spot price is $20 today, so the junk silver is $17.20 times face.
Buyer: I'll take it! Here's your $17.20 (or negotiate better price). I think I'd also like a Silver Eagle.
Seller: Certainly. The eagles are $3 over spot, so they cost $23 each.
Buyer: I'll take it. Thank you!
How Much To Pay
The price for junk silver is based on the "spot price". The spot price is basically the price that paper contracts are selling for on Wall St. The spot price changes constantly during the day.
Junk silver has a 90% silver content, therefore the value of junk silver is simply 90% of the spot price. However, the spot price is for 1 troy ounce of silver but junk silver is rarely sold by the troy ounce. Typically, junk silver is sold by "face value", which is the $ amount on the face of the coin. For example, a quarter is $0.25 face value. The face value of 4 quarters is $1. To convert the spot price in troy ounces to face value you multiply the spot price by 0.714. For example if the the spot price is $10 then $1 face value is $10 * 0.714 = $7.14
Junk silver is almost always sold with a markup or premium, so the total cost of junk silver will be the (spot price * 0.714) + premium.
The current spot price today is about $0.00 / troy oz. The live spot price can be found on the monex website.You should generally expect to pay about 5% to 15% dealer markup or premium over spot price for junk silver and bullion (excluding silver dollars), and about 10% to 20% over spot for silver dollars and Silver Eagles. The dealer markup can vary quite a bit. Premiums often increase when the spot price is decreasing. Be prepared to pay higher premiums following a drop in spot price. You can usually pay lower premiums by buying larger amounts.
Some states collect sales tax on junk silver, and some states don't. I'm not going to wade into the tangled web of state tax laws!
Occasionally you may notice a significant discrepancy between the spot price and the price at your local coin shop or on eBay. It's important to realize the spot price is set by day traders, hedge fund managers, etc. trading futures and "paper" silver contracts on Wall St. The average person doesn't trade on Wall St. and shouldn't always expect to pay Wall St. spot prices. You're dealing with Main St. prices, which are subject to different market forces and are often a bit higher than the spot price.
What To Avoid
Note - This is not investment advice.
If you're buying strictly for investment purposes, then it makes sense to avoid any coin that has value beyond the silver content (collectible, numismatic or historic coins). You'll only want to pay for the silver in the coin, not the fact that the coin may be rare or special.
Some people may not be very interested in 35% war nickels or 40% silver coins. Less silver content makes them generally less desirable.
Morgan silver dollars are more collectible and demand a higher premium. Many investors consider them over-priced.
Some people avoid silver bars and most bullion (except Silver Eagles) because they're not as recognizable or trusted. You'll probably want to sell or trade your silver one day and you don't want a buyer to change his mind because he doesn't recognize your coins or thinks your silver bar may be filled with lead.
Many investors avoid silver jewelry, Sterling silver items or silver antiques because they often demand a higher premium, they're difficult to store and it can be difficult to place a value on them.
I will caution you about investing in silver funds, stocks or certificates. I believe it's important to have real, physical silver. Many people have learned the hard way that if you can't actually hold it, you don't actually own it.
Some people are cautious about keeping silver in a bank deposit box (unless you have a significant amount). The banks may be closed when you need access to your silver. In the past, gold and silver has been confiscated by the government (Executive Order 6102 in 1933).
I also caution against waiting for silver prices to fall significantly before buying. In the past, local coin shops have sold out of all junk silver and bullion in a matter of hours. In this case you'll probably have to resort to large, online retailers. You can also expect premiums to increase just as fast as spot prices fall, so you rarely get a better deal after the spot price drops.
Counterfeit Coins
In the past junk silver has not been widely counterfeited because of it's relatively low value, but as silver prices continue to rise counterfeit silver coins are becoming a concern. You should be at least a little bit suspicious of every silver coin regardless of it's age, condition or value - even if it's in an "official" NGC or PCGS holder. Buying from a reputable, local dealer with a long history of good business practices and customer service is the best way avoid counterfeit coins. Be especially cautious when buying on eBay. If you don't have a trusted seller there are a few simple tests you can perform to avoid many counterfeits.
Spotting Counterfeits
For me, the quickest and easiest way to identify counterfeits is to compare them to a known good coin of the same type. Here's some things to look for...
The ring test or ping test is quick and easy (dimes and quarters may be too small). Balance the coin on the tip of your finger then gently tap it with another coin and listen to it ring. Note the pitch of ringing and compare it to a known good coin. You can also flip the coin in the air (as if playing heads or tails) and listen to the ring. Only perform this test over carpet or soft surfaces. Apps are available that can turn your smartphone into an audio spectrum analyzer. By viewing the frequency profile of the ringing tone, you can determine the metallic content of the coin.
A careful visual comparison can also spot some counterfeits. A magnifying glass should be used to inspect the date, mint mark and other details for size, shape, depth, etc. Also check for green-ish oxidation, especially around the edges. Silver will turn black as it oxidizes. The rim should be even around the entire circumference. Be sure the front and back are properly lined up.
Some counterfeits can't be detected by ringing or visual inspection, in this case the coin can be weighed with a high precision scale and the dimensions measured with calipers. A device called The Fisch can help verify the dimensions and weight of various coins.
Silver coins should not be magnetic. Few counterfeits will be magnetic so this test won't offer much protection. However, the test is so quick and easy, it's worth a try.
An acid testing kit can be used to determine silver content. Nitric acid will change color when it comes in contact with metals. Different metals will create different colors. The kits are fairly inexpensive. The acid will etch the surface of the metal being tested. The damage can be minimized by only using a very small amount of acid in an inconspicuous location and wiping it off as soon as possible. A little polishing will usually fix the damaged spot. The acid can be dangerous, so handle it with care and keep it out of the reach of small children. Nitric acid can eat through some types of plastic bottles, so it may be wise to either use it fairly quickly or transfer to a small glass container.
When buying online, be suspicious of unusually high shipping costs. Often a counterfeiter will not refund shipping costs, so even if the counterfeit is returned they still make money. Be suspicious of junk silver in uncirculated condition - it's probably either counterfeit or being sold at a significant markup due to it's good condition. Both are good reasons to avoid it. Finally, if the price seems too good to be true - it probably is!
Grading Coins
Note - I'm not a coin grading expert.
The condition of junk silver coins is usually not a significant factor for buyers that are only concerned about the silver content of the coins. Of course, some collectors will be interested in the numismatic value of the coins, in which case the condition will be very important.
Coins are graded on several properties, but wear is the most important when dealing with junk silver.
Most junk silver coins will be in "good" to "very good" condition. Some "fine" coins can be found, especially 1964 coins. Coins worn down to "fair" condition will only lose a couple percent of their silver content. The small loss of silver due to wear does not seem to concern the vast majority of buyers and sellers. This leads many sellers to claim that the condition of junk silver coins is not a factor because they are not collectible and they're valued only for their silver content. However, I believe a coin in better condition is generally more desirable, and therefore slightly more valuable. I try to avoid "good" or lower grade coins.
There's several coin grading systems in use. An entire page could be devoted to the subject, so I'll just offer some links to additional information for those who are interested.
PCGS coin grading service.