Are we in the midst of a coin shortage?

Good question. Some say yes, others say no. The U.S. Mint acknowledges people use far fewer coins now during the pandemic due to the increased use of cashless commerce. They insist, however, it’s not a coin shortage or supply problem. Rather, they say, it’s a circulation problem that can be solved only with help from the general public. 

What’s happening is that coins aren’t circulating through the economy right now. The trend toward credit cards, venmo, apple pay and other virtual payment systems began before Covid-19 came on the scene. However, coins touch a lot of hands and spread germs, and with our current efforts to stay safe and stop the spread of the virus, we use them less than ever now.

Why Should We Care?

Personally, I don’t. I hate coins. They accumulate unloved under the car seats, between the sofa cushions and rattle around in the washing machine if left in pockets. They make my wallet bulky, and waste valuable time at the grocery store while people wait for change from their bills. Basically, coins are a nuisance.

I didn’t always dislike change. As a kid, I loved to buy penny candy. In high school, quarters were a necessary commodity to play pinball or Pac Man. In college, I kept a jar on my desk where I threw my loose change, then used it in the soda machine or at the laundromat. Ah…the good old days.

Fast forward to 2021. Almost nothing costs under a dollar today. Vending machines use credit cards, and viral payments are an option for just about everything, online or not. When was the last time you saw a millennial pay for anything with cash?

If coins disappear, will anyone get hurt?

While it seems small businesses adapted reluctantly to a cashless world, tech firms, banks and credit card companies pushed for one. The convenience comes at a cost, though. For example, many small businesses still rely on coins to avoid credit card processing fees to enable them to stay in business. In addition, for the growing segment of the population that lives in poverty, the hidden fees of going “cashless” can be problematic. Failure to pay off a credit card or keep a minimum balance in an account may create unanticipated expenses. Credit cards also provide consumers with less privacy than cash by leaving a digital trail and can make it easy to scam vulnerable people. Finally, people tend to spend more when they use credit or digital currencies instead of cash; there is a reduced pain point.

Trade groups for at risk businesses like grocers, gas stations and convenience stores pleaded for help from the government this summer when the problem was at its worst. With more people staying home and shifting their purchases online,  the natural flow of change through banks, restaurants and retail stores simply dried up. In response, the Federal Reserve rationed coins and the U.S. Mint increased production. The government also urged people to put their change back into the economy. 

The bottom line

The U.S. Mint has been working overtime, and as of December 2020, was on track to mint the most coins it has in 20 years. But does it matter? Will we get to a point where they are well circulated again?

Keep in mind that though moving toward a cashless society can benefit some, this transition can be problematic for others. Perhaps we should slow down.