Change is Hard: Why You Should Switch to Using Dollar Coins

The new gold presidential dollar coins are not only enjoyable for coin collectors, but a great way to contribute in a small way to reducing the federal budget deficit. According to the Federal Reserve and the nonpartisan Government Accountability Office (GAO), dollar coins are less expensive than dollar bills to produce and maintain. While each dollar bill is cheaper to make (about 4 cents per bill), they last on average less than two years before needing to be replaced.

In contrast, the gold coins cost the federal government about 12 cents each to make, but last 30 to 50 years before needing to be replaced. Put another way, the Federal Reserve projects that maintaining 100 dollar bills in circulation costs $2.22 per year, whereas maintaining 100 dollar coins in circulation costs about $0.40 per year. The difference is $1.82 per 100 dollars, or nearly 2 cents per dollar bill.

Just My Two Cents

Therefore, if you or I were to consistently use just a single dollar coin regularly instead of a dollar bill, we would save the government two cents. That doesn't sound like much, but if multiplied by many dollar bills per person and more than 300 million Americans, GAO estimates savings of as much as $135 million per year.

The government saves even more when people take the coins out of circulation for a personal collection. Since the dollar coin costs $0.12 to make, taking a dollar coin out of circulation gives the government savings of $0.88. With 38 Presidential gold coins scheduled to be issued through 2016, collecting a full set would save the government about $33.

While $33 over 10 years, or $.02 per dollar coin that replaces a dollar bill, is not much compared to total federal spending per capita, I would much rather have a nice collection of Presidential coins and switch to dollar coins than face a similar tax increase or further debt on my children's futures. But that is just my two cents.

Change is Hard

The main resistance that the dollar coin has faced is the hesitance of many people to adapt to dollar coins rather than dollar bills. Some disparage the coins as "too heavy." But in most European countries, coins replace bills worth more than the U.S. dollar. The pound coin in the United Kingdom is widely used and worth about US $2. If people readily circulated the coins rather than hoarded them, then most people would be unlikely to have more than five or ten dollar coins at any time.

The dollar coins also can save money for many private industries. Public transit companies and vending machines can use dollar coins more easily and reliably than dollar bills. And cash registers would not need to be modified if the government would discontinue those pesky pennies concurrently with promoting the dollar coins! While some argue that prices would go up without pennies as companies raise prices to the nearest nickel or dime, I am not convinced.

Many people already leave the spare penny with the cashier, or the cashier rounds sales down a penny so as not to have to bother with the change. As another example, gas prices continue to traditionally be displayed at a tenth of a penny (such as $2.99 and 9/10) even though I have never seen a coin worth 9/10 of a cent. Similarly, companies could continue to price items at $2.99 but round after a total transaction even if pennies did not exist. But change is hard, so the dollar coin has not yet reached its potential in replacing the dollar bill or resulting in federal budget savings.