a magnetically selective token system comprises valid tokens which are nonmagnetically responsive in the peripheral portions thereof and responsive in the central portions thereof and a token acceptor which is operative for segregating valid tokens from various types of counterfeit tokens . unspecified tokens inserted into the acceptor are individually passed to an upper token station where first magnetic elements are operative for magnetically communicating with only the peripheral portions of the tokens so that counterfeit tokens having magnetically responsive peripheral portions are retained at the upper station , whereas other types of unspecified tokens are individually passed to a lower station . second magnetic elements are operative for magnetically communicating with the central portions of tokens at the lower station so that valid tokens are retained at the lower station , whereas nonmagnetically responsive counterfeit tokens pass to a first outlet slot . the acceptor is operative for removing counterfeit tokens from the upper station and guiding them to the first outlet slot and for removing valid tokens from the lower station and guiding them to a second outlet slot so that they are segregated from the counterfeit tokens . the method of segregating valid tokens from counterfeit tokens includes the steps of exposing only the peripheral portions of unspecified tokens to first magnetic elements to separate out magnetically responsive counterfeit tokens and then exposing the central portions of the remaining token to second magnetic elements to separate out valid tokens .