Pandemic fuels coin shortage

Los Angeles Times
Published: 8/7/2020 9:03:09 AM
Modified: 8/7/2020 9:02:58 AM

A laundromat operator imploring friends and relatives to trade their stashes of quarters for his dollar bills. A restaurant offering customers free drinks instead of nickels and dimes. Supermarkets issuing pennies’ worth of store credit. A woman filling her purse with coins so she can pay in exact change.

The COVID-19 pandemic has caused a coin shortage, and it’s hitting small-business owners, big retailers and everyday shoppers – especially those who don’t have credit or debit cards – in ways big and small.

The main way coins circulate through the economy is via store transactions and coin recyclers, according to the U.S. Mint. But as the coronavirus spread, stores closed and visits to essential retailers plunged.

That means coins are stuck inside people’s homes.

Coinstar felt the trend begin. The Bellevue, Wash., coin-cashing company operates more than 17,000 kiosks throughout the U.S., the vast majority of which are in grocery stores.

In April, transactions at Coinstar kiosks decreased “more than a few percent” compared with their normal volumes, Chief Executive Jim Gaherity said in an interview this month. Over time, the transaction rates started to slowly climb back, though the demand for coins “is still far and away beyond what the supply is out there,” he said.

When stores need coins, they turn to banks. If the request is more than what the bank has on hand, it can relay that order up the supply chain to the Federal Reserve, the U.S. Treasury and, finally, the U.S. Mint. But when one part of the chain is disrupted, it slows the entire process.

“You had a breakdown in the system because of the closing of the stores and banks,” said Douglas Mudd, curator and museum director of the American Numismatic Assn.’s Edward C. Rochette Money Museum in Colorado Springs, Colo. “And when it started up again, there was a bit of an overdemand.”

One part of the solution: making 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 a month for the rest of the year. Last year, the Mint produced about 1 billion coins a month.

But newly minted coins made up only about 17% of the coins in circulation last year, according to the Mint. The rest comes into the supply chain from third-party coin processors and stores.

The Mint has urged people to start spending their coins, deposit them at banks or take them to a coin redemption kiosk. “The coin supply problem can be solved with each of us doing our part,” it said in a statement.

Meanwhile, a number of retailers have shied away from accepting cash payments because they can’t make change.

But card payments are largely not an option for the millions of people in the U.S. who don’t have bank accounts.

In 2017, the Federal Deposit Insurance Corp. found that 6.5% of U.S. households were unbanked. That means 8.4 million U.S. households – home to 14.1 million adults and 6.4 million children – didn’t have a checking or savings account.

“Lower-income consumers tend to transact more in cash,” said Adrienne Harris, professor of the practice at the University of Michigan and former special assistant to President Obama for economic policy. “It makes things harder for low-income consumers to get the very basic things they need.”

Even before the coin shortage, some businesses wary of handling cash during the coronavirus era were asking customers to use only card or contactless payment methods. That renewed debate over the merits and disadvantages of a so-called cashless society.

Businesses with a lot of cash on their premises have higher insurance rates and must also make arrangements to deposit the money. But going cashless puts a swath of the population without bank accounts at an extreme disadvantage.

“If you strictly become a no-cash operation, then you begin to marginalize those people in the community because they just don’t have the same access to the instruments that everyone else has access to,” said Shelle Santana, assistant professor of marketing at Bentley University in Massachusetts.

The implications of the current coin shortage are similar to those of a cashless business but exacerbated because the shortage affects so many retailers.

“It’s a difference of degree, but a dramatic one,” Harris said.

Susie Shannon, executive director of Poverty Matters, a Los Angeles group that advocates for homeless people, said one of her clients has a lot of change saved up and now tries to carry a lot of it in her purse to pay in exact change because she doesn’t have a credit or debit card. Store credit is worthless if you don’t go back to that store to use it.

“Anything where you need coins in order to buy groceries, in order to do your laundry, it’s going to create a lot of stress among a population that’s already dealing with a lot,” she said. “It’s now become the norm that people have debit cards or credit cards ... . A whole segment of our society is completely overlooked.”


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