Why coinage persists in a digital age
Electronic currency makes small gains, but US economy still runs on minted metal
Rummaging through his leather coin purse, Mirco Centellas plucks out a steady flow of nickels, dimes, and quarters, and pokes them into a hungry Washington parking meter.Skip to next paragraph
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At 5 cents for a meager three minutes, it takes a small mint to clock up enough time to run errands in the nation's capital.
But on this day, the D.C. resident considers himself lucky. "Usually I have to go buy a candy bar or something small to get some change," says Mr. Centellas, as he hurries to a lunch-hour appointment. "I'm always asking people if they have coins."
For many people, loose change is one of those ubiquitous commodities that seems to disappear when needed most or gathers in abundance on night stands. But for cash register operators and others who handle money in their jobs, coins represent a major chunk of the bottom line.
Despite advances in smart cards, debt cards, and other forms of digital money, experts note that coin circulation is increasing and more essential than ever to the functioning of the economy.
Last year, the US Mint stamped a record 27 billion individual coins - more than $135 million in pennies alone. That figure bests the previous record of 20.4 billion coins minted in 1999.
The increase stems in part from a strong retail economy that still relies heavily on coin transactions, says John Mitchell, deputy director of the Mint. The introduction last year of the golden dollar and the 1999 launch of the 50-state quarter program also contributed, he says.
"We've created demand for coinage that didn't exist," says Mr. Mitchell. Indeed, more than 700 million new Sacagawea dollar coins made their way into circulation last year, exceeding the Mint's original projection of 120 million in the first year.
Coins of all denominations, as of December, accounted for $29.8 billion of the $593 billion in total currency circulating throughout the economy, according to the Federal Reserve.
Some sectors of the economy simply wouldn't function without them. The nation's 35,000 coin-operated launderettes generated about $5 billion in sales last year, says Brian Wallace, executive director of the Coin Laundry Association in Grove, Ill. "That was almost exclusively in quarters," he said.
While profits were tidy, a quarter cash flow presents some obvious drawbacks, particularly the onerous task of collecting coins in buckets and counting the daily haul. "They weigh quite a bit, they're not easy to move," Mr. Wallace says.
In an attempt to lighten the load, about 1 to 2 percent of launderettes now use smart-card-operated machines, Wallace says, a trend that he expects to accelerate as old machines are replaced.
Electronic-cash alternatives, in fact, are making inroads throughout the economy, but still not to a great extent, notes Mark Webster, a partner in the financial services practice of PricewaterhouseCoopers, in Cleveland.
"Smart cards are largely a solution looking for a problem," says Mr. Webster. "Consumers have not yet widely accepted stored-value cards. There is no compelling need for it."
That doesn't mean there never will be widespread demand for such cards, he says. Public telephones, for instance, accept a wide range of alternative payments. "You rarely see people putting coins in pay phones anymore," he says. Likewise, on many college campuses, students purchase their cafeteria food, books, and even midnight grub at nearby pizza parlors using smart cards.