The Penny Shortage: A Challenge for Banks and Retailers
When the Trump administration called for the end of penny production earlier this year, experts were confident that the decision would have little short-term impact. Now banks and retailers say a penny shortage has already arrived.
The supply problem is twofold: For new pennies, industry groups say production of the coins stopped months ago. And for pennies already in circulation, banks say a new policy from the Federal Reserve has snarled the coins’ distribution.
“I knew that there would be some chaos coming, but I didn’t think that it would come this fast,” said Bill Maurer, director of the Institute for Money, Technology and Financial Inclusion at the University of California, Irvine.
The State of Pennies
In February this year, President Donald Trump called for the U.S. Treasury to end its “wasteful” production of pennies, each of which costs 3.7 cents to make. In May, the U.S. Treasury put in its last order for blank pennies, which the U.S. Mint prints into usable coins.
At the time, currency experts expected that supply to last through early 2026. And even without new pennies, 114 billion existing ones were already circulating through the U.S. economy.
But those blank coins appear to have run out much sooner than expected. According to banking and retail industry groups, the U.S. Mint stopped printing new pennies some time between June and August.
Challenges Faced
Meanwhile, the circulation of existing pennies has hit a roadblock. The Federal Reserve normally provides coins to banks and credit unions, distributing them at 165 terminals across the country. At those same terminals, banks with excess coins can deposit what they don’t need.
But as the supply of pennies has tightened, the Fed has adopted a new policy: If a distribution terminal runs out of pennies, it will no longer distribute them — or accept deposits.
As of Oct. 6, 41 distribution terminals — including in New York, Chicago, Cleveland, Houston, San Francisco and other cities — have suspended penny service. As a result, many banks now have trouble both gathering pennies for clients and unloading their excess supply.
Call for Action
As lenders struggle to offload their pennies, retailers are straining to replenish their supplies. And without clear guidance from the government for how to handle the shortage, many businesses are scrambling to come up with their own solutions.
The solution, both banks and retailers say, is for Congress to pass legislation setting a nationwide policy. In fact, one such bill already exists: the Common Cents Act, which calls for the end of penny production and establishes clear rules for price rounding. The bill was introduced in both houses of Congress earlier this year, but has not yet passed.
In their letter to Congress, retail trade groups including the Retail Industry Leaders Association, called for certain revisions to the Common Cents Act. But above all, they said they wanted it to pass.
As for the Fed’s policy of blocking penny deposits at certain terminals, the American Bankers Association is unequivocal: It wants that rule scrapped.
Conclusion
In conclusion, the penny shortage has caused significant challenges for both banks and retailers. The unexpected depletion of new pennies and the distribution issues with existing coins have created a complex situation that requires urgent attention from policymakers. It is crucial for Congress to address this issue promptly by passing legislation such as the Common Cents Act to provide clarity and guidance for businesses affected by the shortage.
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