How did the coin shortage happen?
The problem is twofold: The US Mint significantly cut its coin production after implementing security measures to protect its employees from the coronavirus. Consumers are also depositing fewer currencies at US financial institutions, according to the Federal Reserve.
Due to fears of the coronavirus, many people have chosen to use credit cards and mobile payments to avoid managing money. Meanwhile, the shutdown also forced some companies to close that would normally help keep currencies moving.
“With establishments like retail stores, bank branches, transit authorities and laundries closed, the typical places where the currency enters our society have decreased or even stopped the normal circulation of the currency,” said Michael White, spokesman for the House of the US currency statement.
On June 15, the Federal Reserve said it would begin limiting the amount of currencies it allocates to banks and financial institutions. The measure is expected to be temporary and based on historical requests from the institutions.
When will the coin shortage end?
The Federal Reserve and the United States Mint along with other financial groups are working to fix the problem. But it is not clear when the shortage will end.
“We feel like we are making progress,” Jerome Powell, chairman of the Federal Reserve, said in a June hearing at the House Financial Services Committee. “It has been something we’ve been working on.”
On June 30, the Fed announced that a working group would create a plan to address the problem. The task force, made up of leaders from big banks, associations, the Fed and the Treasury Department, had its first meeting on July 10 and is expected to share a list of recommendations in early August.
Some of the questions the group is reflecting on: “Did the pandemic throw a curved ball and do we need to rethink the way coins are stored or delivered? Are there ways to streamline the supply chain to get coins out now? How do we modify the supply chain to get the coin out? said Whaley of ICBA, which is in the task force.
Meanwhile, the United States Mint returned to full production in mid-June and expects to produce 19.8 billion coins by the end of the year, 7.4 billion more than last year.
What should consumers do in the meantime?
While the Fed is working to improve coin inventory and the United States Mint produces more coins, there is a large part of the problem that still needs to be addressed: consumers.
Whaley said consumers should consider depositing their coins at a bank or spending them at a local business to get the coins back in circulation. “If they have coins in a rainy day fund, I can’t think of a better rainy day than where we are now,” he said.
The challenge will be the biggest for companies, which are running out of coins and may not be able to get their full coin order from banks. But some companies are finding ways to fix the problem. Kroger, for example, is giving customers a digital change on a customer loyalty card, which can be redeemed on their next trip to the store.
