National Coin Shortage: Another impact of the pandemic?
For retail business owners, not having enough coins to make change is a real problem. Unfortunately, that exact scenario has been taking place around the country. Where are all the coins? The Federal Reserve is still minting them. In fact, they increased their output by 24% last year, putting out 14.8 billion coins in assorted denominations.
Folks who use debit and credit cards for most purchases aren’t overly concerned with this, but some families are more likely to pay cash are in a tough situation, especially those pinching every penny trying to pay off debt on a low income. The stores aren’t going to round prices down if they can’t produce silver and bronze—they’ll simply stop taking cash. That would not be healthy for the economy. Like it or not, cash is necessary.
Before this article dives into the reasons for the coin shortage, a quick note about individuals who tend to store coins in a change drawer or water bottle. They’re contributing to a cashless society by doing that. Saving for grandkids is great, but hoarding coins may make them worthless at some point. It’s better to cash them in now and invest in a nice savings bond or CD. The kids will appreciate it.
How the Pandemic Caused a Coin Shortage
During the pandemic, there were fewer opportunities to use cash. Most transactions were done online using credit and debit cards. For the very first time since it was invented, “plastic money” spending exceeded cash money spending. Circumstances dictated that it had to be that way.
Now fast-forward into 2021. COVID-19 vaccines have been developed. Lockdowns are over (mostly). Retail stores are opening their doors. Time for people to break out the cash again, right? Wrong. Consumers, particularly American consumers, are now hooked on plastic. Why change what’s been the go-to for the past year? Consumer behavior doesn’t work like that.
The Federal Reserve is being proactive about this. They’ve formed a “Coin Task Force” to figure out ways to get coins moving through the economy again. The alternative would be to simply go to a cashless system. No one is quite ready to take that step yet, though many are in favor of the move. Retail stores would prefer to continue taking cash if possible.
What You Can Do to Help and Why
This is not a government-sponsored appeal to “spend the coins,” but it would be in the best interests of many to do so. Credit card transactions are expensive. The merchant must pay fees on them, and the consumer pays interest (that’s how so much debt accumulates). Even debit cards cost the consumer money because they need to pay account fees to have them.
According to CNET, 29% of Americans who make less than $30,000 a year reported that they pay cash for almost all purchases. Taking that away from them forces the neediest members of society to take on the greater financial burden that comes with managing plastic. It also eliminates any chances of discounts for paying cash. Who would want that?
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