Aug 12, 2020

No Change? How Small Businesses Can Beat the Coin Shortage

The coin shortage is real, and it’s affecting small businesses nationwide—particularly those that do business primarily in cash. On top of all the other economic calamities coming from COVID-19, banks and retail businesses across the country are dealing with a shortage of quarters, nickels, and dimes. And it’s changing how they operate.

It’s not that there are suddenly fewer coins out there—it’s just that buyers are hoarding the existing stock of US coin currency. But this isn’t like the curious toilet paper hoarding we saw in the early days of the pandemic. Americans are not hoarding their coins on purpose. In fact, most probably don’t even realize that they’re doing it.

Consumer spending is down overall, even at essential businesses that have been allowed to remain open, so everyone has less cash coming in. Simultaneously, many shoppers prefer to use credit and debit cards during this public health crisis because of the (correct) assumption that cash carries more germs. This has led to fewer coins out in economic circulation, with most of the coin supply just sitting in peoples’ homes.

“People have absolutely changed their spending habits during the pandemic,” says Federal Reserve US Coin Task Force member Sherri Reagin, in an interview with Marketplace. “There’s a lot of shuttered businesses, mass transit isn’t running, laundromats have been closed. Oftentimes, you know, our bank customers have been saving coin and bring it into cash in to go on vacations or trips, and people aren’t traveling right now. So they’re not taking their coin into Coinstar machines and things like that.”

The Federal Reserve allocated more coins into circulation in June, in their words, “to mitigate the effects of low coin inventories caused by the COVID-19 pandemic.” But it will still take a while for those coins to make their way to coin-starved businesses, so here’s what small businesses need to know for the coin shortage of 2020.   

Businesses Hit by the Coin Shortage

Businesses that deal primarily in cash will be most affected by the coin shortage. The hardest-hit operators will obviously be laundromats and coin-op car washes. Any business that utilizes vending machines may see that revenue drop as buyers save coins for more critical uses.

Many of these businesses rely on banks to stock their coin inventories, but banks are hard up for change these days too. Some stores are just not doing cash transactions because they’re having too much trouble maintaining coin inventory.

The Consumers Most Affected 

Some buyers just can’t comply with cashless transactions because they don’t have debit or credit cards. An estimated 6.5% of American adults do not have a bank account, which sounds like a small percentage, but it represents more than 14 million American buyers.

If your business cuts off cash transactions, this may have the consequence of marginalizing or even driving away a subset of your customers. And let’s face it, we’ve all had the experience of losing our cards and waiting on a replacement. 

But there are some alternatives to cash, even without credit or debit cards.

Alternatives to Making Change With Coins

You can always substitute change with store credit, loading change onto gift cards or loyalty cards. Some customers may be amenable to making a charitable donation with their unpaid change amount, which can help your coin inventory last longer.

You can also offer the option of items that cost less than a dollar in lieu of change, like chips at a restaurant or convenience store. Heck, a miniature bottle of hand sanitizer might sweeten the deal to decline change for a lot of customers these days.

Do anticipate there could be increased wait times and confusion, though, if you have to explain new policies to customers.

Are Cash and Coins Dirty?

Some retailers are not accepting cash, preferring to keep payments as contactless as possible. It is true that cash carries a degree of germ transmission risk, but health authorities see no COVID-19 risk with cash that doesn’t already exist with the surfaces of credit cards and smartphones. As with everything, doctors encourage you to wash your hands after touching any surface.  

The United States has survived coin shortages before. We had a silver coin shortage at the onset of the Gold Rush because the influx of gold had the unintended consequences of driving up the price of silver. And as this 1964 New York Times article describes, we also had a coin shortage during the golden age of cigarette and sandwich vending machines because attendants couldn’t empty them quickly enough. 

Small business owners obviously have much bigger concerns than a coin shortage right now. But coronavirus has started the conversation on cashless businesses, while also showing how the overall economy is not ready for that transition yet.

About the author

Joe Kukura
Joe Kukura
Joe Kukura is a San Francisco freelance writer whose work also appears in SF Weekly and SFist. He’s written financial advice for NerdWallet, tech industry analysis for the Daily Dot, sports content for NBC Bay Area, and good, old-fashioned clickbait for Thrillist.

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