The United States is facing a significant penny shortage, which is disrupting merchants and banks across the nation.
This issue began after President Donald Trump’s unexpected decision to halt the production of pennies earlier this year, citing high production costs.
With the holiday shopping season approaching, the consequences of this decision have become increasingly apparent, leaving many retailers scrambling for change and struggling to provide exact payments to customers.
Reports indicate that certain convenience store chains, such as Sheetz, have resorted to promotions to incentivize customers to bring in their own pennies.
In one instance, the chain offered a free soda to patrons who brought in 100 pennies, highlighting the desperation for these small coins.
As one store manager pointed out, the loss of pennies could lead to millions of dollars in additional costs due to the need to round transaction totals.
Dylan Jeon, senior director of government relations for the National Retail Federation, emphasized the financial burden that retailers are now facing due to insufficient penny availability.
The penny shortage began gaining traction in late summer and has continued to escalate, raising concerns among merchants as the holiday shopping period draws near.
Notably, no bank or retailer has advocated for the penny’s continued existence, as these coins are often heavy and primarily used for providing change.
However, the abrupt cancellation of penny production has left many stores and banks without clear directives from the federal government, prompting them to ask customers to pay with exact change whenever possible.
Jeff Lenard of the National Association of Convenience Stores expressed frustration, stating that while advocacy for eliminating the penny has existed for decades, they did not anticipate such an unorganized transition.
On February 9, President Trump announced the cessation of new penny minting, highlighting that both the penny and nickel have been more costly to produce than their face value for several years.
In fact, the U.S. Mint reported spending 3.7 cents to mint each penny just this year.
In contrast, making a nickel incurs a production cost of 13.8 cents.
In a post on Truth Social, Trump stated, ‘Let’s rip the waste out of our great nation’s budget, even if it’s a penny at a time.’
By May, the Treasury Department indicated it was placing its final order for the raw materials needed for minting pennies, and production ceased in June.
By the end of August, the last of the minted pennies were distributed among banks and armored vehicle services.
Troy Richards, president of Guaranty Bank & Trust Co. in Louisiana, shared his experience with the penny shortage, explaining that they were ill-prepared for the rapid depletion of their penny supply.
Following an announcement from the Federal Reserve about limited penny shipments, Richards learned that those shipments had already ended for his bank earlier than expected.
He noted that the $1,800 worth of pennies the bank stocked ran out in just two weeks, forcing the bank to reserve only a minimal amount for essential transactions.
Despite minting 3.23 billion pennies in 2024, more than any other coin produced that year, the reality is they are seldom recirculated back into the economy.
Americans predominantly hoard their pennies or use them for novelty purposes, which only necessitates further minting each year.
The Treasury Department estimates that discontinuing penny production could save the government $56 million in expenses.
Although the penny is unprofitable for the Mint, the overall operation remains lucrative for the U.S. government due to the profitable nature of other coins and collectible sets.
In 2024, the Mint achieved approximately $182 million in seigniorage, the profit made from coin production.
Adding to the complexity of this shortage is the logistical aspect of coin distribution, which is managed by the Federal Reserve.
Currently, about a third of the 170 coin terminals that allow banks to withdraw or deposit coins are no longer accepting pennies, worsening the situation.
This lack of available terminals means that banks in areas with plentiful pennies cannot share their stock with regions facing shortages, making the situation dire for many communities.
A spokesperson from the Federal Reserve confirmed that the fluctuation in penny inventory at different terminals will continue as the stock is depleted, creating ongoing challenges for banks and retailers.
Furthermore, the fallout from the penny shortage has triggered legal complications for many retailers.
In various states and municipalities, laws prevent rounding transactions up to the nearest nickel or dime, which complicates payment processes and could lead to lawsuits.
To avoid such issues, stores have resorted to rounding transaction totals down, potentially incurring additional financial burdens.
For instance, Kwik Trip, another Midwest chain, has begun rounding cash transactions down to the nearest nickel, which they estimate will cost the company around $3 million this year due to the penny crisis.
Several retailers are even encouraging customers to forgo change in their transactions, proposing donations to local charities instead of using pennies during purchases.
Currently, a proposed bill in Congress, known as the Common Cents Act, which seeks to establish rounding guidelines for cash transactions, is gaining traction among business circles.
This proposal suggests rounding to the nearest nickel, but critics warn it could increase costs for consumers, especially in cash transactions.
Despite the urgent need for guidance regarding the penny situation, the Treasury Department has remained silent on the challenges faced by retailers and banks in response to the shortage.
Compared to other nations that have transitioned away from small-denomination coins, the U.S. has adopted a notably abrupt approach.
Countries like Canada phased out their one-cent coin over several years while providing clear guidance and systems for handling the transition.
The U.S. decision to remove the penny from circulation has been sudden, devoid of any legislative procedure, resulting in disarray among retailers and banks seeking clarity.
As the consequences of the penny’s abrupt disappearance continue to unfold, stakeholders are urging the federal government to establish some form of direction to navigate the problems arising from this decision.
Lenard from the NACS summarized the situation, saying, ‘We don’t want the penny back. We just want some sort of clarity from the federal government on what to do, as this issue is only going to get worse.’
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