- Key Insight: Banks are struggling to supply retailers with pennies as circulation slows and federal agencies provide no guidance on how to cope.
- Supporting Data: Of the 165 coin distribution terminals used by the Federal Reserve, 102 are neither supplying pennies nor accepting deposits of them.
- Expert Quote: "The problem is just getting worse," said Steve Kenneally, a senior vice president at the American Bankers Association. "Banks can't get [pennies], and that means that they can't supply them to their customers, the retailers, and that puts the retailers in a jam."
The U.S. Mint may have celebrated the end of the one-cent coin last week, but experts say the penny crisis is just beginning.
Months after production of the coin ended in earnest, the Federal Reserve is increasingly refusing to redistribute old pennies at coin terminals, and the federal government has issued no new guidance on how banks and businesses should adapt.
"It's still a train wreck," said Bill Maurer, director of the Institute for Money, Technology and Financial Inclusion at the University of California, Irvine. "I think now it is becoming more apparent to people, because it's spreading around the country, and it's hitting more and more stores."
Banks and retailers say the bulk minting of one-cent coins ended some time between
Meanwhile, the Federal Reserve has cut off penny service at many coin distribution terminals, which typically supply the coins to banks. In early October, 41 of the 165 terminals had stopped handling pennies, neither providing them nor accepting them from banks that had too many. As of Nov. 20, that number has risen to
"The problem is just getting worse," said Steve Kenneally, a senior vice president at the American Bankers Association. "Banks can't get [pennies], and that means that they can't supply them to their customers, the retailers, and that puts the retailers in a jam."
The Fed did not provide a comment by the time of this story's publication, but a
"When inventory at a specific location is depleted, FedCash Services will cease fulfilling orders of pennies at that specific location," the page says. "To best meet the needs of commerce, a given endpoint may continue to accept deposits even if it ceases fulfilling orders, while others may cease both orders and deposits simultaneously."
As of late November, seven terminals had stopped supplying pennies but were still accepting deposits; 102 terminals had stopped doing both.
A penny saved. …
Back in February, President Donald Trump called for the U.S. Treasury to end its "wasteful" production of one-cent coins, each of which costs 3.7 cents to make. In May, the Treasury put in its last order for blank pennies, promising to save taxpayers about $56 million per year.
And at a ceremony on Nov. 12, U.S. Treasurer Brandon Beach pushed a button on a large machine at the U.S. Mint in Philadelphia, printing what he said was the last new penny in history.
"The Department of the Treasury and President Trump no longer believe the continued production of the penny is fiscally responsible or necessary to meet the demands of the American public," Beach said.
Meanwhile, "No Pennies" signs began popping up at stores across the country.
"It seems like everywhere is facing shortages, even out here," said Maurer, who just recently watched as a cafe cashier in Long Beach, California, apologetically told two customers she couldn't give them exact change.
In one sense, the lack of new pennies shouldn't have mattered. By the U.S. Mint's
"We understand that locations without pennies will be unable to fulfill orders for the coin," the trade group wrote, "but if they do not accept penny deposits, they preclude the opportunity to ever have enough pennies for distribution."
To rectify this, the ABA urged the federal government to fully reopen all coin terminals, provide clear guidance on rounding transactions and educate the public about the situation.
On that last front, Maurer said, the U.S. is an outlier among nations that have eliminated their one-cent coin.
"In other countries that have done this … they always roll out giant public education campaigns ahead of time," Maurer said. "The United States did not really do anything."
The costs add up
In the meantime, many banks have resorted to sending truckloads of pennies across great distances to reach the nearest terminal that will still accept them, Kenneally said. The shipping costs are borne by the bank.
As for cashing checks that come down to the cent, banks short on pennies have had to improvise. For customers, lenders sometimes provide cash up to the nearest nickel, and deposit the remaining 1 to 4 cents electronically. But when the check's owner doesn't have an account, that's where things get tricky.
"The challenge comes from when you have a non-customer cashing a check," Kenneally said. "You're not able to do an electronic debit there. So their banks are going to round, and it is our expectation that banks will be rounding in favor of the customer."
Meanwhile, retailers have been left to devise their own price rounding policies — even if it leaves them vulnerable to lawsuits. Both federal and state laws bar businesses from charging different prices for different customers, particularly for beneficiaries of the Supplemental Nutrition Assistance Program, or SNAP.
This has left retailers in a double bind: Round up, and customers paying with cash could claim discrimination. Round down, and SNAP recipients — who pay with an Electronic Benefits Transfer card — could complain they were charged more than the people with cash.
The one thing that could protect businesses from such litigation, retail groups say, is a clear set of instructions from the government.
"What's really been the biggest issue right now is the lack of federal guidance," said Dylan Jeon, senior director of government relations at the National Retail Federation. "The goal here is to get as consistent and uniform a standard as possible around how businesses should proceed with cash transactions."
Banks, which are increasingly eating the costs of the new penny-free economy, have expressed the same plea for clarity.
"No one that I've spoken to in the banking industry is in love with the penny and wants to die on that hill," Kenneally said. "We're just looking for a way to manage our way out of the situation."
