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Pinching Pennies
There’s a trend on social media called the “Coinstar Challenge,” a test to see how many coins the self-service kiosks will accept in exchange for larger-denomination bills. In one video, a man hauled 120,000 pennies to a machine in a red wheelbarrow.
He’ll soon find it harder to replicate the stunt. In February, President Trump directed the U.S. Treasury to stop producing the penny due to its production costs — 3.69 cents in fiscal year 2024, per the U.S. Mint. The Wall Street Journal reported in May that officials expect production to stop early next year.
But some banks and retailers could be feeling the pinch of a diminishing supply as the Federal Reserve began suspending the distribution and acceptance of pennies from a growing list of locations.
“This policy is accelerating the slowdown of penny circulation drastically,” wrote the American Bankers Association in an Oct. 17 letter to Federal Reserve Chair Jerome Powell and Treasury Secretary Scott Bessent. The ABA urged the Treasury and the Fed to reopen the distribution points, come up with a plan and inform the public of the plan to manage the end of the penny. It also asked the agencies to coordinate with Congress and regulators on rules for bank transactions when the penny is not available.
For their part, retailers are rounding transactions and encouraging cashless payments, says Jay Zagorsky, associate professor of markets, public policy and law at Boston University’s Questrom School of Business. The convenience store Kwik Trip, for example, said this month that it would round down cash transactions as pennies run out, in the absence of a “permanent legislative solution,” according to media reports.
Cash accounted for 14% of payments in 2024, according to the Federal Reserve, and was especially common for small dollar purchases at restaurants, grocery and convenience stores, and gas stations. That’s not a reason to keep producing the costly penny. But its end could be more orderly with clearer rules from Congress, Zagorsky says.
In the meantime, he thinks banks could encourage customers to bring in their loose change. More than 60% of coins in circulation are found in Americans’ jars, per a Fed report. “There's more than enough pennies out there to handle the problem,” he says. “Coin counting machines are not particularly expensive to buy, and it's a way of bringing customers back into the bank.”
• Emily McCormick, vice president of editorial & research for Bank Director
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