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Replacing Dollar Bills With Dollar Coins

This article was written by in Coin Collecting, Consumer. 45 comments.


While politicians, political commentators, and opinion-yellers are knocking heads and locking horns in Washington, D.C. in an attempt to determine how to spur the economy while cutting the budget deficit, there is an old debate about currency that refuses to die. For the most part, the public isn’t excited about the idea of eliminating paper currency and replacing it with coins. In the long run, however, it would save the government, and in theory the taxpayers, significant money. The Government Accountability Office estimates replacing dollar bills with dollar coins would save $5.5 billion over the course of the next thirty years.

The United States Mint already produces dollar coins. You don’t see them too often. People generally prefer holding money in a wallet rather than carrying a pocket of loose change, and the coin never caught on. The Mint markets the dollar coins as collectible items rather than tools for spending. Other countries, such as the United Kingdom and Canada, have been successful in implementing the replacement of coins for bills of the lowest denomination, but only because those governments stopped circulating paper money. The GAO report takes a look at what effect that might have in the United States.

While over the cost of the next several decades, the cost savings are substantial, there are problems with the first few years of implementation. It would cost more for the government to increase production of dollar coins. The first four years of this period would see a loss rather than a benefit. Some of the costs during this transition time include increasing production of dollar coins in current minting facilities, adding support for dollar coins to other existing facilities, public outreach informing consumers and citizens of the pending change, and adapting the Bureau of Engraving and Printing to print more high-denomination bills. That may not be a welcome message in today’s economic environment, but long-term benefits should always outweigh the short-term setbacks. In practice, those making decisions like these are politicians up for re-election during that four year period.

The government’s assumptions and values used in this study are fascinating. Here are a few:

  • Because coins circulate more slowly than bills, 1.5 coins will be needed for every 1 bill (note).
  • Dollar bills have a lifespan of 40 months while coins have a lifespan of 34 years.
  • A dollar bill costs 2.7 cents to produce while a dollar coin costs 15 cents each.
  • There are 9.5 billion dollar bills in circulation today.
  • There are 3 billion dollar coins in circulation today, with an additional billion in Federal Reserve vaults (not quite a collectible item).

My first question when reading about the study was whether the government considered the increasing trend of turning away for cash payments altogether, in favor of card-based, mobile, and Internet transactions. This was taken to account in an “alternative assumptions” case, and results in a net savings of $4.5 billion over thirty years rather than the $5.5 billion potentially saved in the base case.

Attached to the GAO’s report are comments in response from the Federal Reserve Board of Governors and the Department of the Treasury. Both comments take a critical look at the GAO’s report. The Federal Reserve notes that the cost savings is exclusively from seigniorage, the profit the government makes between the cost of producing currency and the additive value of that currency to the money supply. The Treasury Department notes that new procedures soon to be implemented for producing dollar bills, to be implemented soon, would drastically increase the life of circulating paper, so the savings benefit would be significantly reduced. Also noted in response is the need to consider environmental and societal impact.

Many private businesses will have problems implementing coin-only acceptance of the dollar. Even items as basic as cashier’s drawers and vending machines need to be adapted. The production of coins and bills has changed significantly over the course of this country, but not much in the twentieth century except for the occasionally disappearance and reappearance of the dollar coin, in addition to changes in the metallic composition of coins. I would like to see the dollar bill disappear, but I don’t think it’s going to happen any time soon.

Government Accountability Office [pdf]
Photo: lrargerich

Published or updated March 4, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 45 comments… read them below or add one }

avatar Ceecee ♦53 (Newbie)

Being as I hate carrying coins and throw them in a jar at day’s end, I guess this would save me a lot of money. Maybe debit card is the way to go but there is something about a cash/coin stash that a debit card can’t match.

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avatar nimrodel ♦42 (Newbie)

Paper or coin, it wouldn’t really matter to me much. I rarely use cash anymore. The only time I can think of that I even use cash is when occasionally ordering some take-out over the phone, or when splitting a restaurant bill with some friends. I’ve gone whole months without needing cash.

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avatar tbork84 ♦1,867 (Half-Dollar)

I for one wouldn’t mind dollar coins. There are already a few places that return them instead of dollar bills. At this point it is a little harder to use them everywhere, but I imagine that over time a lot more places would be able to take them.

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avatar cubiclegeoff ♦896 (Dime)

I rarely use cash anymore and will avoid some “cash-only” establishments because they don’t take credit. So this change wouldn’t bother me. When I do have cash, I rarely have dollar bills, so again, not a big deal. But if I had to deal in cash, I’d be annoyed by the extra weight of dollar coins.

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avatar Candide

I would get rid of the dollar. But the real issue is actually the penny and nickel: both of them are costing the government money to make right now. Why not cut off everything below a dime?

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avatar OrchidGirl ♦16 (Newbie)

Cutting out pennies and nickles financially makes sense, but then you also would have to get rid of quarters too. Quarters in a world without nickles wouldn’t be much good since you have the possibility to make change for 75 cents but not for 65 cents. Although we could switch half dollars in for quarters. In short, it would be a pretty major overhaul of US currency.

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avatar NingTheMerciless

I have suggested that we shift the decimal place by one digit for our entire currency. This would make it necessary to redesign all of our paper money to the “New Dollar” but we could leave the coins as they are. They would just be worth 10 times what they are now. It’s kind of a free gift from the government for anyone who has a jar of coins, but so what, it’s only the small change we are talking about.

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avatar Steve

A lot of vending machines already take dollar coins. They have been working on this for years already.

@Candide – what they need to do is make a cheaper penny and nickel.

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avatar Steve

Also, couldn’t businesses just put the dollar coins in the space freed up where dollar bills used to go?

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avatar Jim

@Steve–no we DON’T need a cheaper penny and nickel! We need to GET RID OF THEM. A pack of gum, which is one of the cheapest items that can be made and sold in an industrialized economy, costs at least a dollar now. Why do we need coins that are worth less than a hundredth or a twentieth of the price of that product? Into what infinitesimally tiny amounts must we have our coins and currency divided, just to allay the dubious fears people have of being “ripped off” by rounding at the cash register? How far are we going to let this go?

As for the vending industry, from what I hear most of them favor the switch to dollar coins. And, much to my surprise, so does the Brinks armored transportation company. I’d thought they were among the main resistors to the idea, but it turns out they are among the member organizations of the Dollar Coin Alliance.

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avatar N

That makes great sense, actually, that Brinks would be in favor of the dollar coin. Especially if they charge by weight for securely hauling currency. :)

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avatar shellye ♦107 (Cent)

Did I miss something? If it costs 15 cents to produce a dollar coin, and we need 1.5 coins for every paper dollar, where is the savings? I realize the lifespan of a dollar bill is much less than that of a coin, but producing a coin that costs 6 times more than producing a paper dollar doesn’t make any sense. We can save $5.5 billion just by getting out of Afghanistan.

I dislike using coins – I put them in a jar and take them to Coinstar every once in a while. The financial industry doesn’t like them either. I’m curious to know who came up with the idea to create dollar coins? Consumers have a hard enough time using 50-cent pieces.

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avatar Wade

The Dollar Coin has been minted by the United States Mint since 1794.

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avatar Jim

I don’t know why they would need three dollar coins to replace every paper dollar; shouldn’t it be one to one? In any event, remember that the coins don’t have to be replaced as often–that’s where the savings comes from. It’s certainly true that coins hold up better. I still occasionally get nickels from the 1950s and Bicentennial quarters from the 1970s*.

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avatar Liam

The reason for the 3:1 ratio instead of a 1:1 ratio is that right off the bat, people would collect an estimated 2 of the coins, based on various polls done in the past, and hold onto them for a while. This would then leave the remaining coin to fill a 1:1 ratio for daily use.

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avatar wihenao

Shellye. The article clearly says that a coin has a lifespan of 34 years as opposed to a bill’s lifespan of less than 4. Yes, it is 5 times more expensive to produce a coin, but the coin lasts more than 8 times longer.

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avatar SteveDH

“The Mint markets the dollar coins as collectible items rather than tools for spending.” Not quite accurate. In fact the US Mint will pay shipping on $250 worth of dollar coins if they go to an address (not a bank account) as they try to encourage the use of the coins. I puchased $250 worth from the Mint and have been using them for quite a while. Although I originally bought them to use in the Grandkids stockings we’ve used the remaining coins for tipping and other small purchases and, of course, the Grandkids had NO trouble at all spending them!

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avatar Luke Landes ♦127,435 (Platinum)

It’s true they do have free shipping for those boxes of dollar coins, but the program is not effective in getting those coins into circulation. Not enough people are using the program the way you are. When that program first started, people purchased the coins with cash-back credit cards and returned them to banks, essentially earning cash back for a cash advance. *Most* people who purchase the boxes of $250, however, are probably collectors — existing customers of the Mint, who found out about the program. The general public doesn’t know about this, and even if they did, there’s little incentive for an average citizen to help the Mint by putting the coins into circulation.

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avatar Steve

I know of at least myself and one friend of mine who have been buying coins through this program and putting them into circulation, as intended. For me, response has ranged from wonder (a couple times the person behind me in line at the store has bought the coins out of the register) to disgust/frustration (perhaps my fault for trying to pay with $30 in coins.) We have both annoyed our mutual friends, with whom we frequently exchange amounts seemingly perfect for this ($2 to $5).

So, I don’t know if the experiment/program is working. I don’t think acceptance and understanding is out there for dollar coins. Removing paper dollars from circulation would force acceptance, but it seems would also cause lots of grumbling and confusion at this point.

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avatar Luke Landes ♦127,435 (Platinum)

And from what I’ve heard from businesses, when they get dollar coins from customers like you, SteveDH, and me who actually try to use them, the businesses don’t hand them out in change to customers. They feel customers will not recognize them, so they don’t circulate. Even some cashiers don’t know what they are. So they go back to the bank — out of circulation. The only way the $250 direct ship program would work is with businesses on board.

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avatar Josh

The change machines at the subway stations here in Los Angeles dispense dollar coins as change. At least one major business is using them!

avatar JP

Just an update. Now that the program is being drastically scaled back and basically only available to collectors as of 2012 there is a $12.50 shipping premium per box of $250. Best bet is to go to your local bank and ask for the smaller rolls of $25.

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avatar Josh

I use $250 in dollar coins about every two months on average. Here are the primary places I use them:

-Parking lot at the beach (we live in Los Angeles)
-My wife loves to go shopping at garage sales. There are perfect for them!
-Any restaurant/store where I would normally charge less than $5 on my credit card
-And of course, anywhere that credit cards are not accepted!

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avatar Steve

I use them at yard sales too. Most of them seem to end up in the seller’s children’s piggy banks. One old lady almost didn’t accept them. I think in the end she decided to “give” us the stuff for free and if the money was real money, it was just gravy.

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avatar Josh

If the vegas casinos were on board, and used them instead of $1 dollar chips, that would be a great way to get them out into circulation! I’m sure they probably thought of this and there is a reason why that isn’t used.

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avatar Bobka ♦13 (Newbie)

I have two Susan B. Anthony dollars sitting in a dish on my desk gathering dust. Every once in awhile I look at them and wonder why I have some quarters in that dish. The US Post Office used to promote the circulation of the coins by giving them out as change in their stamp vending machines. The vending machines are pretty much a thing of the past, and, thankfully, so are the Susan B. Anthony dollars.
If you like staring at the coins in your hand and spending time with every cash transaction picking through them, I suggest a trip to Europe where the coin based Euro is in circulation. As for me, I’m more than happy with the US Dollar in bill form.

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avatar 4hendricks ♦248 (Cent)

I have mixed feelings about this – trees would be saved, but aren’t coins heavier? I think we can clean up our money, eliminate the penny for sure. I don’t use a lot of cash as it disappears a lot faster.

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avatar Liam

Actually, no trees would be saved. The dollar bill is made out of a combination of cotton and linen, about a 3:1 ratio.

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avatar Sharon V

Hi from Canada
Here, the $1 coin, aka ‘loonie’ was accepted quite quickly. Little inserts quickly became available to convert cashiers drawers. The $2 coin, aka ‘twonie’, that followed was a bit more problematic since it is made from two pieces of metal, and the centre piece was prone to falling out at first. Of course, I was young at the time, so there may have been naysayers that I am not aware of.

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avatar Caleb

Good point though, the treasury should be looking more at other countries for the most effecient way to regulate our money

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avatar skylog ♦368 (Nickel)

i have been waiting for this to happen for what seems like forever. i have been using less and less cash, but i have been hoping for this to happen, as well as the introduction of, perhaps, 2 dollar and 5 dollar coins. it just seems to make so much sense to me.

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avatar Pete R

More coins for my metal detector!

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avatar tigernicole86 ♦55 (Newbie)

It seems like it would be cheaper to make the coins. Granted, they would weigh heavier in my pocket but vending machines would be much easier instead of playing the “take the dollar” game.

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avatar gotr31 ♦224 (Cent)

Seems like it would make more sense to get rid of pennies.

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avatar Steve

I think we still need pennies. Many other countries in which the currency is worth less than ours, still have pennies. We just need to make them smaller and cheaper. I have seen some pretty small and/or cheap (aluminum?) pennies in my travels.

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avatar Steve

If you travel, you might think that pennies have been eliminated in some countries. Restaurants, souvenier shops, etc will price their wares such that with tax it ends in a multiple of .05 or even whole units. However if you go off the beaten path to a grocery store or whatnot, you will see the pennies are still in use.

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avatar Hal (GT)

I’m not against yet another dollar coin, nor am I against the idea of saving money, but I find this a bit… well weird. Don’t we lose money on the creation of all our fiat currency? Not only that but what impact will this make upon business that will have to upgrade their machines to accept the new currency? And what about counterfeiting?

I’d hate to think about how much change I would have to carry in my pockets and the hold ups as the TSA makes me empty my pockets.

Of course the savings is predicated upon the metals markets not increasing I would imagine.

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avatar John

I live in the Virgin Islands and wanted to see if using the Direct Ship $1 Program would increase the circulation of the coins here. For years all I used was plastic for my purchases so it took getting used to spending cash again. So far I’ve had a lot of different responses from merchants. Only one place did not except the coins but the person behind me quickly offered to give up his paper bills in exchange. The most common response is, “what’s this, is it foreign ”?

I have a feeling that most of the coins I’ve used are being collected because the majority of people ask me if I have more that they can “buy”. I’m sure the rest are going back to the bank. I’m not sure how much paper currency is ordered though the banking system here or how much is brought here by tourist but the only way I see the program being successful is by removing the paper dollar. Our neighboring islands know this, so does every other country.

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avatar Kevin @ Thousandaire.com

It’s amazing to me that we haven’t already moved to the dollar coin. Who cares what people “want”? As soon as we make the transition, people will accept it and nobody will remember the days of the dollar bill. It is clearly the best direction for the country, so we should do it.

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avatar Miss T @ Prairie Eco-Thrifter

They have done this in Canada and it sucks. Yes I know it is better for preventing counter fitting but your pockets get so heavy. I hope your country doesn’t go down the same route.

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avatar Jim

Do you live in Canada? If so, you can lighten your pockets by spending down your loonies and twonies. Just stop breaking a note every time you need to buy something, like we have to do south of the border, and your problem will go away.

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avatar wylerassociate ♦162 (Cent)

i’d be in favor of replacing dollar bills with coins but I just don’t see it happening or a priority for this fractured US government.

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avatar Ryan North

I worked at a McDonalds as a GM and I have to say that last year I made a switch over to handing out Dollar Coins, but with the use of the $2 bill to help. The reason the use of the $2 bill helped was so you really only got 1 Dollar Coin back as change, instead of getting back 4 Dollar coins at one time. Majority of the time people loved it, with about 5-10% of customers questioning/complaining. I held steady through it and had many customers out right tell me that they would stop at my store because I would give out “neat change”. It’s a good tool to use for advertising. Taking the Dollar Bill out and replacing it with the Dollar Coin and $2 bill will make the transition easier and it pleases almost everyone: Paper and Metal industries.

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avatar debby

i think it would be great to take out the dollar bill. i wonder when i will recieve my first dollar coin as change at a store

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avatar GWY

Many years ago, people lobbied hard to rid themselves of the large one dollar coins in favor of paper. It was question of would one rather carry a pocket full of coins or some neatly folded paper. Now idiots want to bring back coins to save a few billion dollars over thirty years. It is odd the government can waste that much money every day and there isn’t one person to stand up and say they need to stop.

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