Coin Use Decline Could Cost Fed a Pretty Penny

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Americans are going to be using fewer coins and dollar bills in the coming years as they increasingly pay online or with their phones, and it could either cut the Federal Reserve's costs or cost the Fed a pretty penny.

Managing the distribution of coins is massive and complicated job. By the end of 2013, there was $42.6 billion worth of coins in circulation and in 2013 the Fed ordered another 10.7 billion coins from the U.S. Mint.

An office called the Cash Product Office keeps tabs of how many coins are in circulation, how many new ones are needed and whether its reserves needed to be shifted from one part of the country to another to compensate for shortages. For instance, coins are shifted seasonally to popular vacation spots or to a location with a huge public event, such as the Super Bowl.

The country will be using fewer quarters, nickels and dimes over the next decade, according to a recent study by the Government Accountability Office.

The GAO cited the Fed's own study that said it has begun "to develop a long term strategic framework to consider changes to currency demand over the next five to 10 years and how this could affect operations."

The conclusion was that "the effect on currency demand is likely a gradual decline."

A gradual decline the Fed could handle, the GAO found, but hinted any rapid change could pose a problem.

"If the demand for coins were to decrease suddenly leaving too many coins in circulation" the agency would have to "focus on storing the excess inventory. … Additional storage could be needed to accommodate and store the coins," the report said.

It did not put a cost on that extra storage.

Lorelei St. James, who conducted the GAO study, said fewer coins could ease the Fed's expenses.

"It should be a lower cost to them. The less coins they touch, the lower cost will be," she said.

The Fed said that it has consulted with Australia, Austria and Canada, which are carrying out similar studies to anticipate the future use of coins.

The GAO's findings were in a report that said the cost of tracking America's coins had become more expensive in recent years, rising 69 percent from 2008 to 2012, peaking at $62 million that year.