What is the Guarantee Premium for?
Batman23
Posts: 4,999 ✭✭✭✭✭
I was looking to send in a crossover. I was reading about the 1%/$5 Guarantee Premium that is charged in addition to the base crossover grading fee. A search of the past posts has talk and speculation and a lot of people now cracking/submitting instead of crossing in holder. What I can't find is a definitive explanation on what this 1% Guarantee Premium fee is for.
Looking at the PCGS site and forms it seems that this an additional fee to the mandatory grading fee. What I do not see is how this "Guarantee Premium" is benefiting me. Is there ever a time when I would see a benefit from this fee? Authenticity and grade guarantee is standard with the PCGS holder and comes with the service fee?
I am not understanding this one. If this only benefits PCGS as an additional service fee then why the fancy name? Why not just increase the service fee accordingly? If I get a crossover and have to pay $5 or $25, or $100 in addition to the base service fee, what is that money going towards?
Comments
I believe it’s to cover the risk that when they crackout the slab that there isn’t a hidden flaw that would affect the grading that couldn’t be seen while in the holder.
TurtleCat Gold Dollars
I don't know @Batman23
and like you I could not find a clear definition..
Good question and I'm sure we will find the answer with all of the knowledge on this forum
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So if PCGS makes a bad call and cracks a slab, they send a check to me? If so how is the paid amount determined?
I take it as a fee increase to cover their now limited grade guarantee.
That I don’t know. But PCGS does say that the pricing is based on wholesale pricing and is at their discretion. The specifics of that are outlined https://www.pcgs.com/guarantee
“ IT IS UNDERSTOOD THAT PCGS WILL BE THE SOLE DETERMINER OF THE CURRENT MARKET VALUE OF THE COIN AND THAT CURRENT MARKET VALUE IS DEFINED AS DEALER REPLACEMENT VALUE, I.E. THE PRICE A DEALER WOULD MOST LIKELY HAVE TO PAY TO REPLACE THE COIN..”
TurtleCat Gold Dollars
That is the PCGS guarantee that all slabs have. This is provided with the base service fee paid when graded. I think that is completely different from what a "Guarantee Premium" is, which is in addition to the base fee.
Under Guarantee Premium values are based on PCGS price guide "of the coin in its final grade" as slabbed by PCGS.
TurtleCat is correct, think of this as PCGS's insurance policy. Funds that they hold and use to pay out when a crossover is approved and then an issue discovered after the coin has been cracked.
My Collection of Old Holders
Never a slave to one plastic brand will I ever be.
OK, so if I send in an XF45 quarter to cross and PCGS thinks it will cross at what ever grade is appropriate. They crack it out and find a damaged rim. They determine the value lost and send the details coin back with a check to cover the loss? That seems more reasonable... Just seems like it can get a bit expensive if you cross very many.
I don't do crossovers (they are a waste of money imo as I am a coin collector not a plastic collector) so I don't know all the details of how the transaction goes but I assume that your example is generally how it goes. And yes this could get very expensive if you plan to do it often and with high value coins.
My Collection of Old Holders
Never a slave to one plastic brand will I ever be.
Has anyone here ever benefited from this guarantee? Or know of someone that has? If they don't make any payments out I would expect the 1% account should be flowing large. Assuming that the guarantee only covers the loss in value and not the whole coin value...
When/if stuff like this happens, they will either keep the coin and offer you a settlement or return the coin in a (less than desired) holder and send a check for the difference.
Like all businesses, they do their best to limit their liability and their losses. The guarantee is sometimes completely acceptable and sometimes it isn't, but people have variable expectations and that's the game. I'm guessing the crossover thing bit them a time or two and they instituted the 1% fee to cover future occurrences.
For me, it's just one more reason to buy the coin in a holder that is acceptable to me in the first place. Let someone else pay to get it there.
If they took a few large hits I could see the need. But I also think that cracking other holders to get more PCGS holders on the market is value too. Seems there should be a fee schedule that helps promote putting all coins in PCGS plastic, not deter it. Besides, what about the therapeutical benefits of letting them break competitors holders, that should be worth something
Wait. The guarantee premium was introduced, originally, to apply to crossovers. Supposedly due to some risk associated with an increase in value to the new, higher grade. I'm not sure anyone understood the rationale beyond the obvious bottom line benefit.
It had nothing to do with any hidden flaw that might be revealed after approving a cross and cracking. That risk is addressed through conservative cross judgments.
The guarantee premium now applies to upgrades from regrades; regrades are always cracked first. So much for any argument about risky surprises.
It's obvious that PCGS is doing all it can to improve its finances. No argument here. I play when I think it pays. I don't begrudge PCGS for trying to improving its business.
Lance.
(edit typo)
So it is not to cover risk of hidden flaws? I don't understand what risk there is with increased value or higher grade. PCGS might lower the grade and thus the "value" but that is part of the grading fee and the customer's minimum acceptable grade.
What difference is there if I submit a coin as crossover or that same coin raw? I pay the same base fee for both. The same PCGS grade guarantee applies equally to both after it is graded and slabbed. There is no difference in the coin but I have to pay an extra 1% of my coins value if crossed.
I would hope that PCGS is not looking for a cut of the customer's coin value with crossing a coin. A grading fee, yes but not a percentage of the coins value. However that appears to me what is going on. I must be missing something here...
$$$
I'm not much of a spin doctor. But I think PCGS would argue that a higher grade coin has a greater liability, when it comes to its genuineness. Their guarantee has more risk and therefore requires a higher premium, just like insuring your more valuable remodeled home.
I'm not really comfortable defending it.
Lance.
In addition to the risk coverage highlighted above for non-PCGS graded coins, the application of a premium on coins already graded by PCGS can only be to capture a share of the value increase when a coin upgrades.
Latin American Collection
I was wondering why there would be a similar 1% on a regrade too. The PCGS grade guarantee is already in place from the original submitter. PCGS did the previous grading and encapsulation and was compensated for that previously. They should not have any hidden surprises upon cracking out the coin. So why charge extra, above the standard grading fee, for something that isn't a risk?
It would be pretty lame if PCGS feels the entitlement to part of your earnings. I mean the customer is the one with the cash layout and time invested in the selection and purchase of the coin. PCGS gets paid decently for their service of grading and encapsulating as it is. They really should have no personal interest or benefit in whether the value of the coin increases or not. In reality PCGS is monetarily benefited to giving a grade bump on a regrade... how does that make for impartiality in grading and value determination? PCGS now can't claim they are "only" providing an accurate grade opinion when they are also being paid an extra stipend to provide a change of opinion.