Banks are quietly pulling pennies out of everyday use, but not because they want them

Banks are not taking pennies in the sense of confiscating them from you. What is actually happening is that pennies are moving out of active circulation because they cost more to handle than they are worth, and both banks and the Federal Reserve are reducing how many they process and distribute. A penny costs about 1.7 cents to produce and distribute. Banks lose money on every penny that moves through their systems—sorting, rolling, transporting, and storing them all add up. The result is that pennies sit in bank vaults longer, get ordered less frequently, and move through the payment system more slowly than any other coin.

This shift has been accelerating since 2020. During the pandemic, coin shortages forced the Federal Reserve to ration coin distribution to banks. When supply chains reopened, banks discovered they could operate with fewer pennies in circulation. Retailers report that customers increasingly pay with cards, and when cash is used, many people leave pennies behind rather than carry them. Banks responded by reducing penny orders and letting their existing stock age in storage.

Key Takeaways

  • Pennies cost more to produce and move through the banking system than their face value, so banks have reduced how many they order and distribute.
  • The Federal Reserve still mints pennies, but in smaller quantities than before 2020, and banks can request them if needed.
  • Pennies remain legal tender and you can deposit or exchange them at any bank, but you may wait longer for a teller to process a large quantity.
  • Retailers are rounding cash totals to the nearest nickel in some places, though this is not yet standard practice across the United States.
  • The penny shortage is a circulation problem, not a legal or policy change—pennies have not been discontinued.

How the Federal Reserve controls penny supply

The Federal Reserve does not force banks to order pennies, and banks do not have to order them. Instead, banks forecast their coin needs and place orders with the Fed's coin distribution centers. Before 2020, banks ordered pennies routinely because customers expected them in change and retailers needed them. The Fed produced roughly 7 to 8 billion pennies per year to meet that demand.

After the 2020 coin shortage, the Fed began rationing distribution. Banks that wanted pennies had to justify the order, and the Fed prioritized banks serving high-volume retail areas. By 2021 and 2022, penny production dropped to around 2 to 3 billion per year. Banks learned they could function with lower penny reserves, so even when rationing ended, many did not return to their previous order levels. The Fed still produces pennies—roughly 2 to 4 billion annually depending on the year—but only because banks continue to request them. If every bank stopped ordering, the Fed would stop minting them.

What happens to pennies already in circulation

Pennies do not disappear. They accumulate in jars, piggy banks, cash registers, and under couch cushions. Some people collect them and deposit them at banks. Others leave them in "take a penny, leave a penny" trays at checkout counters. A small percentage get damaged, lost, or thrown away. The total number of pennies in existence has not shrunk—the U.S. Mint estimates there are roughly 140 billion pennies in circulation, a number that has stayed relatively stable for decades.

What has changed is the velocity of pennies—how fast they move through the banking system. When fewer banks order pennies and fewer customers use cash, pennies sit still longer. A penny that would have cycled through a bank, a retailer, and back to a customer in a week might now take months. This creates the appearance of a shortage even though the total supply has not changed.

Rounding and what it means for your change

Some retailers, particularly in Canada where the penny was discontinued in 2013, have adopted rounding rules: if your total is $5.02, you pay $5.00; if it is $5.03, you pay $5.05. A few U.S. retailers have experimented with rounding, but it is not standard practice and is not required by law. Most U.S. retailers still give exact change in pennies because they are legally required to accept them as payment.

If a retailer rounds your total, they must round down as often as they round up over time—they cannot systematically round up to increase revenue. Some states have considered legislation to allow rounding, but as of now, no state has formally adopted it. Pennies remain the standard unit of change in the United States.

Depositing and exchanging pennies at your bank

You can deposit pennies at any bank where you have an account. Bring them in a bag, a jar, or a coin wrapper—banks have coin-counting machines that process them quickly. If you do not have an account, some banks will exchange pennies for bills as a courtesy, though they may ask you to roll them first or charge a small fee. Credit unions often have more flexible policies and may count loose coins for members at no charge.

If you have a large quantity of pennies—say, several pounds—call ahead. Some branches have limited coin-counting capacity and may ask you to come back at a slower time or to roll the coins yourself. Coin-counting machines at grocery stores and pharmacies charge a percentage fee (usually 8 to 10 percent) to count coins, so a bank is always the cheaper option if you have an account.

Why pennies cost more than they are worth

The U.S. Mint produces pennies from zinc with a copper coating. The raw materials alone cost roughly 0.8 cents per penny. Add labor, equipment, facility costs, and distribution, and the total cost reaches about 1.7 cents per penny. The Mint loses money on every penny it produces, and has done so since 2007. Nickels, dimes, and quarters all cost less than their face value to produce, so they are profitable by comparison.

Banks face similar economics. Sorting pennies by hand or machine takes time. Transporting them to branches costs money. Storing them in vaults uses space. A bank that processes 10,000 pennies per day spends more on handling than the pennies are worth. This is why banks have reduced penny orders—the math no longer works.

The debate over discontinuing the penny

Economists and business groups have proposed discontinuing the penny entirely, as Canada did in 2013. The argument is straightforward: eliminate the cost, eliminate the problem. Opponents worry about rounding effects on low-income consumers and the symbolic value of the penny. Congress has not moved to discontinue it, and there is no current legislation to do so. The penny remains legal tender and will continue to be produced as long as banks order them.

Some countries have already made the shift. Canada stopped minting pennies in 2013 and withdrew them from circulation by 2014. The European Union phased out 1-cent and 2-cent coins in some countries. The United States has not taken this step, partly because the penny carries historical weight and partly because there is no consensus that the cost savings justify the disruption.

Frequently Asked Questions

Can I still use pennies to pay for things?

Yes. Pennies are legal tender and retailers must accept them. You can use pennies to pay for any purchase. Some retailers may ask you to use a card if you are paying entirely in pennies, but they cannot refuse pennies outright.

Will the penny be discontinued?

There is no current plan to discontinue the penny. Congress would have to pass legislation to stop minting them, and that has not happened. The penny remains in production, though in smaller quantities than before 2020.

Why can't I find pennies in my change anymore?

Retailers are receiving fewer pennies from banks because banks are ordering fewer from the Federal Reserve. This creates a temporary shortage in circulation, even though the total number of pennies in existence has not changed. The shortage is most noticeable in areas with high cash use.

What should I do with my jar of pennies?

Deposit them at your bank. If you have an account, most banks will count them for free using a coin machine. If you do not have an account, call ahead to ask about their policy on exchanging coins for customers without accounts.

Do banks charge a fee to count pennies?

Banks typically do not charge account holders to deposit coins, including pennies. Coin-counting machines at grocery stores and pharmacies do charge a fee, usually 8 to 10 percent of the total value. Always use your bank if you have an account.