A laundry operator imploring friends and family to trade their coin reserves for their dollar bills. A restaurant that offers customers free drinks instead of nickels. Supermarkets that issue pennies of credit in the store. A woman who fills her purse with coins so that she can pay the exact change.
The COVID-19 pandemic has caused a currency shortage and is affecting small business owners, large retailers, and everyday buyers, especially those without credit or debit cards, in large and small ways.
The main way that coins circulate throughout the economy is through store transactions and coin recyclers, according to the United States Mint. But as the coronavirus spread, stores closed and visits to essential retailers plummeted.
That means the coins are trapped inside people’s houses.
Coinstar felt the trend begin. The Bellevue, Washington currency exchange company operates more than 17,000 kiosks across the United States, the vast majority of which are located in supermarkets.
In April, transactions at Coinstar kiosks decreased “more than a small percentage” compared to their normal volumes, Chief Executive Jim Gaherity said in an interview this month. Over time, transaction fees began to rise slowly, although the demand for coins “is still a long way from what the supply exists,” he said.
When stores need coins, they turn to banks. If the request is more than the bank has on hand, you can relay that request down the supply chain to the Federal Reserve, the United States Treasury, and eventually the United States Mint. But when a part of the chain is interrupted, it slows down the whole process.
“He had a system failure due to the closing of stores and banks,” said Douglas Mudd, curator and museum director of the Edward C. Rochette Museum of Money of the American Numismatic Association in Colorado Springs, Colorado. “And when it started again, there was a little bit of over-demand.”
Part of the solution: make more coins. The Mint said it has been operating at full production capacity since mid-June and is on track to mint 1.65 billion coins per month for the remainder of the year. Last year, the Mint produced around a billion coins a month.
But the newly minted coins made up only about 17% of the coins in circulation last year, according to the Mint. The rest enters the supply chain of third-party coin processors and stores.
Businesses that rely heavily on coins, such as laundries and vending machines, face significant challenges.
(Lauren Raab / Los Angeles Times)
The Mint has urged people to start spending their coins, depositing them in banks, or taking them to a coin exchange kiosk. “The coin supply problem can be solved with each of us doing our part,” he said in a statement.
Meanwhile, several retailers have avoided accepting cash payments because they cannot make changes.
But card payments aren’t very much an option for the millions of people in the United States who don’t have bank accounts.
In 2017, the Federal Deposit Insurance Corp. discovered that 6.5% of American households did not have access to banking services. That means 8.4 million households in the US – home to 14.1 million adults and 6.4 million children – did not have a checking or savings account.
“Low-income consumers tend to do more cash transactions,” said Adrienne Harris, a professor of practice at the University of Michigan and a former special assistant to President Obama for economic policy. “It makes it more difficult for low-income consumers to get the basic things they need.”
Even before the coin shortage, some companies that were wary of handling cash during the coronavirus era asked customers to only use cards or contactless payment methods. That renewed debate about the merits and disadvantages of a society called cashless.
Businesses with a lot of cash in their facilities have higher insurance rates and must also make arrangements to deposit the money. But going cashless puts a slice of the population without bank accounts at an extreme disadvantage.
“If it becomes a strictly cashless operation, then you start marginalizing those people in the community because they just don’t have the same access to instruments that everyone else has access to,” said Shelle Santana, an assistant professor of marketing. at Bentley University in Massachusetts.
The implications of the current currency shortage are similar to those of a cashless business, but are exacerbated because the shortage affects many retailers.
“It is a grade difference, but dramatic,” said Harris.
Susie Shannon, CEO of Poverty Matters, a Los Angeles group that advocates for the homeless, said one of her clients has a lot of savings saved and is now trying to carry many of them in her wallet to pay for the exact change because she did not you have a credit or debit card Store credit is worthless if you don’t go back to that store to use it.
“Anything you need coins to buy groceries to wash your clothes is going to create a lot of stress among a population that is already dealing with a lot,” he said. “It has now become the norm for people to have debit or credit cards … An entire segment of our society is completely overlooked.”
During a recent shopping trip to a Smart & Final in the San Fernando Valley, Michael Knapp’s total bill came to $ 36.75. He paid $ 40 in cash, which he always uses because he doesn’t have a credit or debit card. He had hoped to get the change in rooms so he could use them to wash clothes, but store employees told him they couldn’t even give him one.
In the past, “rooms were always something you could find,” said Knapp, 64.
Knapp ended up receiving the change in store credit. He said he is not sure what he will do if the coin shortage continues. As for his clothes, he went on to do a lot of laundry just before the shortage, so that’s fine for now.
This is not the first shortage of US coins.
One notable one was during the Civil War, when Americans piled up coins out of fear, as well as concerns about the value of newly introduced paper money, according to the Coin World publication. Later, Congress passed a law allowing people to use postage stamps as currency, which later led to a career in post offices, said Rebecca Spang, a history professor at Indiana University, where she teaches courses in history. of money.
The stamps at the time had adhesive backs, making it more likely to stick on a wallet. Then, months later, the US government began printing what is known as a postal currency: a paper shaped like a banknote smaller than a business card that had a picture of a stamp, along with the denomination.
That coin shortage lingered for decades, largely ending in the 1890s, Spang said. Others followed from time to time, including one in the 1960s caused by sudden increases in demand.
The effect of the current shortage of currencies on companies has varied. At a McDonald’s in Pomona, wait times for transit have occasionally increased when employees have to take the time to inform each customer that the restaurant has run out of coins. Kroger-owned grocery stores, including Ralphs and Food 4 Less, now offer customers the option to load change onto loyalty cards if coins are not available. They also invite customers to round to the nearest dollar and donate the extra to charity.
The Covina Taco Nazo restaurant chain is offering a free drink or bag of chips instead of change. Restaurants generally sell those items for more than a dollar.
“I would rather the client leave with something positive than negative,” said Thelma García, president of Taco Nazo Corp.
Businesses that rely heavily on coins, such as laundries and vending machines, face significant challenges. In a recent poll by Coin Laundry Assn. In the business group, about 60% of laundry owners accept coins as the only form of payment.
The shortage has begun to cause “a little panic,” said Brian Wallace, president of the trade group. That sparked some creative solutions: One of the Iowa group members drove to Nebraska to buy a room in excess from a friend.
Dan Marrazzo, president of Laundry Depot, a network of five laundries in New Jersey and Pennsylvania, approached family and friends for help, asking them to bring additional rooms they had in exchange for paper money.
And they delivered it. The rooms literally rolled, sometimes in 5-gallon jugs of water that had to be transported in a wheelbarrow, or on benches 3-1 / 2 feet tall shaped like bottles of Molson beer. In the past two weeks, he has accumulated more than $ 4,000 in quarters.
“If we can’t make changes, we can’t make money,” said Wallace. “And neighborhood residents can’t get clean clothes.”
A “good portion” of the laundries’ customer base are unbanked or unbanked households in the United States, he said. “It’s easy to say, ‘Just use a credit card or just use a debit card.’ … Some people don’t have as many options when it comes to how to pay for things beyond cash that other of us might have. “
Some laundries are also trying to fend off neighboring business owners who come in and use the exchange machines to obtain coins for their own businesses.
Brad Steinberg, co-president of PWS-the Laundry Co., which operates three laundries and distributes laundry equipment, told workers to keep an eye on change machines and make sure they are only used by customers. Recently, his company South Gate has seen increased demand by laundries for the installation of mobile payment or credit card options along with traditional slots.
Vending machine operators have also been hit hard by the shortage.
Most vending machines rely on cash transactions. If a machine doesn’t have enough change for an invoice and the customer doesn’t have the correct currencies, they’ll leave, said Eric Dell, senior vice president of external affairs for the National Association for Automatic Marketing. trade group
A lost sale becomes even more crucial, considering the cost the pandemic has charged for the use of vending machines. Many are in workplaces that have become ghost towns as more people stay home.
A failed transaction “really has the potential to really impact future sales,” Dell said. If you go to a vending machine and it’s not an “easy-to-use experience, you probably won’t come back.”
