Consumers have been spending considerably less in most stores over the past four months, but that hasn’t prevented a shortage of coins from developing. But in one sign of a nascent revival of cash usage, the number ATM cash withdrawals by credit union members has finally broken a 15-week streak of 20% or greater year-over-year declines.
Even though many stores and restaurants still haven’t resumed normal operations because of the Covid-19 pandemic, some retailers over the past couple of months have reported difficulty in getting the coins they need to transact normal point-of-sale purchases. The origins of the coin shortage trace to March, about the time when stay-at-home orders and business shutdowns took place in many states to control the pandemic.
“Since March, financial institutions have not been depositing as much coin with the Federal Reserve, which is responsible for coin distribution,” Claire Greene, a payments risk expert at the Federal Reserve Bank of Atlanta’s Retail Payments Risk Forum, said Monday in a blog post. “In addition, to assure the safety of its workforce, the U.S. Mint has slowed coin production. Those two factors mean that the Fed’s coin inventory is below normal.”
Lower inventories do not mean there are too few coins in existence to meet demand. Greene says the U.S. Treasury Department estimates the total value of coins in circulation at $47.8 billion, up slightly from $47.4 billion as of April 2019. But with in-store spending taking a huge hit because of the pandemic, apparently too many of those coins are sitting idle on dresser tops.
Some retailers have called on the Fed to address the situation. On June 28, the Fed’s cash offices changed the way they distribute coins among financial institutions. “The allocations are based on past order volume and the Mint’s current production,” Greene said. “Order limits vary by denomination.” The Fed also established its U.S. Coin Task Force, a group that includes representatives of the Mint, retailers, banks, armored carriers, and coin aggregators. “The focus of the task force is to quickly identify ways to increase coin circulation,” Greene said.
One way of doing that is to persuade consumers to take coins to stores or banks. “One bank is sponsoring a raffle for coin depositors; another is paying a premium to account holders who bring in lots of coin (#getcoinmoving),” Greene wrote.
In related news, credit union service organization PSCU reported Monday that ATM cash withdrawals by holders of cards issued by its member credit unions were down 17.8% in the week ending July 5 versus the comparable year-earlier week. While not an enviable number, last week’s performance broke a 15-week streak in which cash-withdrawal transactions had been down by 20% or more on a year-over-year basis. In the week ending June 28 they were off by 24.4%, according to PSCU data.