Business across the country are accustomed to using the latest currency and check processing solutions to effectively handle purchases, but could they soon see more coin volume?
Can purchasers be convinced to part with paper dollars?
Consumers across America are familiar with one-dollar bills and use them commonly, especially for small purchases. However, there is a small but growing movement calling for the government to replace these bills with one-dollar coins for efficiency and cost reasons.
The government has minted one-dollar coins in the past, but these have failed to catch on with consumers. According to The Economist, about $1.4 billion in these coins are currently sitting in the vaults of the Federal Reserve, and they are so unpopular among consumers the Treasury stopped producing them in 2011.
Other world governments have taken the opposite approach and made higher value coins mandatory. In the past several decades, both Britain and Canada have phased in higher denomination coins while phasing out low-value bills. The most valuable coin in the United Kingdom is now £2, while the least valuable bill is worth £5. Similarly, the Canadian government introduced a $2 coin, while changing its lowest bill to $5.
Could a dollar coin be more cost effective?
There is speculation that a dollar coin could be more cost-effective for both companies and the government. In 2012, the United States Government Accountability Office (GAO) revealed that replacing one-dollar bills with coins would provide the government with a net benefit of about $4.4 million over the next 30 years, or about $146 million annually. Coins need to be minted less frequently than bills need to be manufactured, meaning production costs would be lowered, but the government would also see a huge benefit from the increased seigniorage - the difference between how much currency costs to produce and its face value.
However, government cost savings aren't the only benefit, as business owners could also see an advantage if these coins replace paper dollars. The Economist noted that the time and energy entrepreneurs spend stacking, counting and storing paper bills could be greatly reduced if low-denomination cash was taken out of circulation. Business owners would merely need to invest in the most efficient commercial coin sorter to quickly count dollar coins along with the rest of their cash drawers.
April 15, 2013