There are many ancillary effects expected from the COVID-19 pandemic, but no one anticipated a nationwide coin shortage. Convenience retailers rely on coins to complete cash transactions, but in mid-June, store operators and retailers across the country were struggling to make change.
To keep coins in circulation, the U.S. Mint and Federal Reserve depend on Americans using coins and cashing them at banks or at coin-cashing machines. The U.S. Mint also produces a small percentage of coins each year to supplement additional needs.
But 2020 has been nowhere close to a normal year. With the COVID-19 pandemic and nationwide stay-at-home orders this spring, Americans were not cashing in coins, and at the same time, the U.S. Mint closed and scaled back its operations, reducing the amount of coins in production. This caused the Federal Reserve’s coin inventory to drop below normal levels. In response, the Federal Reserve has had to limit the amount of coins it can distribute to its depository institutions, resulting in banks getting far fewer coins, and, thus, businesses.
This created a panic among businesses around the country who have cash-paying customers, and the shortage disproportionally affects low-income Americans. In the United States, more than one-third of all in-person transactions are made with cash. That number rises to nearly half of all funds for transactions under $10. Low-income Americans rely heavily on cash, with cash representing 43% of payments made by people with annual incomes below $25,000 and 35% of payments made by people with annual incomes between $25,000 and $50,000.
At a House Financial Services Committee hearing in June, Federal Chairman Jerome Powell said that “with the partial closure of the economy, the flow of coins through the economy [has] kind of stopped,” in response to a question from Rep. John Rose (R-Tenn.), who raised concerns that banks in his district say they are running out of coins. “Stores have been closed. So, the whole system of flow has kind of come to a stop. We’re well aware of this.”
With the partial closure of the economy, the flow of coins through the economy [has] kind of stopped.
The Federal Reserve issued a notice in June that it is taking the “strategic allocation of coin inventories” to resolve the short-term shortage. Federal Reserve Banks are allocating “available supplies of pennies, nickels, dimes and quarters to depository institutions as a temporary measure,” using a methodology “based on historical order volume by coin denomination and depository institution endpoint, and current U.S. Mint production levels.” The Mint has also ramped up production of coins.
In response to this emergency, NACS and other associations sent a letter to the Department of Treasury advocating that more coins be produced by the U.S. Mint and that the current coin inventory be fully distributed by the Federal Reserve. NACS also asked members of Congress to weigh in. Congressman Rose and 11 members of Congress sent a letter to the Department of Treasury, which oversees the Mint and the Federal Reserve, asking them to work to increase coins in circulation as soon as possible.
NACS will continue to follow the coin emergency and urge swift action by the Treasury. If you’re sitting on a stockpile of quarters, dimes, nickels or pennies, now is the time to cash them in!