ALEXANDRIA, Va.—Due to COVID-19 lockdowns, fewer coins are circulating than normal and businesses are pleading with banks to find more. The Federal Reserve is working with the U.S. Mint to ramp up production and is managing existing Fed inventories to help ease the shortage.
NACS is hearing from convenience retailers who are struggling to find enough currency to make sure they have needed change on hand for cash-paying customers. There are more than 150,000 convenience stores across the country, and the industry handles about 160 million transactions per day—one out of every $30 spent in the U.S. economy goes through a c-store. It’s a cash-heavy business.
Currently, US consumers use cash as their form of payment in more than one-third of all in-person transactions. That number rises to nearly half of all funds for transactions under $10. Low income Americans rely more on cash with cash representing 43 percent of payments made by people with annual incomes under $25,000 and 35 percent of payments made by people with annual incomes between $25,000 and $50,000.
The coin shortage is resulting from the COVID-19 pandemic and its impact on government operations and consumer spending habits. Production of coins has been down at the U.S. Mint because of stay-at-home measures meant to protect employees from contracting COVID-19. At the same time, fewer coins in circulation means that the Federal Reserve’s coin inventory has dropped below normal levels.
With overall transactions down and more consumers opting to use mobile apps and other contactless payments, that means retailers’ cash deposits to banks aren’t as robust as normal, crimping the coins banks have on hand to recirculate back into communities.
At a House Financial Services Committee hearing last week, Federal Chairman Jerome Powell said that “with the partial closure of the economy, the flow of coins through the economy has gotten all—it’s 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.”
Powell said the Fed is working with Federal Reserve Banks and the U.S. Mint to ease the supply shortage, which he feels is temporary. “As the economy reopens we’re seeing coins begin to move around again,” Powell said.
The Federal Reserve issued a notice about the coin shortage on June 11. The Fed in the notice said it is confident that the inventory issues “will resolve once the economy opens more broadly and the coin supply chain returns to normal circulation patterns” but is taking additional measures 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 Federal Reserve also called banks to “help replenish inventories by removing barriers to consumer deposits of loose and rolled coins.”
In response to this emergency, the NACS Government Relations team is advocating that more coins be produced by the U.S. Mint and that the current coin inventory be fully distributed by the Federal Reserve.
Coins are essential to the operations of a convenience stores. Without them, retailers cannot serve their cash paying customers.