Have you ever considered how much it costs to make money? Well, the 1 cent piece costs just 1.4 cents to mint. Yup, you read that correctly: the penny coin costs more than it’s face value to produce! Along with the penny coin, the nickel is also a big fat loser. With a face value of 5 cents, it costs 7.4 cents to make!
The penny coin has not been a profitable venture for the last 10 years. In fact in 2011 it cost 2.41 cents to make! So why does the US Mint continue to produce it?
The Business of Minting Coins
Currently there are approximately $50 billion worth of coins in circulation across the US. In 2015 the US Mint produced over 16 billion coins with a total face value of $1.114 billion. The cost of producing these coins was $573.1 million and the breakdown is as follows:
- 1 cent coin
- 9155 million produced in 2015
- Total face value of $91.6m
- Cost $130.1m to mint (42% more than face value)
- 5 cent (nickel) coin
- 1477 million produced in 2015
- Total face value of $73.8m
- Cost $109.7m to mint (49% more than face value)
- 10 cent (dime) coin
- 2874 million produced in 2015
- Total face value of $287.3m
- Cost $101.6m to mint (35% of face value)
- 25 cent (quarter) coin
- 2645 million produced in 2015
- Total face value of $661.3m
- Cost $223.2m to mint (34% of face value)
What’s in a Penny Coin?
Until 1982 the penny coin was made from 95% copper and 5% zinc. At that time copper prices had begun to rise such that the value of copper in the coin rose above 1 cent. During 1982 the US Mint began producing some penny coins with a composition of 97.5% zinc and just 2.5% copper. From 1983 onward the penny coin was minted from 99.2% zinc with just 0.8% copper-plating.
Not-so-fun fact: In 2010 the little-known Coin Modernization, Oversight, and Continuity Act was passed with the express aim of researching and developing alternative metals to use in coinage, with the goal of reducing production costs.
The high cost of metals in recent years combined with the effects of inflation have been blamed for the loss-making penny production. Congress has tried to do something about it, passing an act in 2010 requiring the Secretary of the Treasury to conduct research and development into alternative metals and alloys. However the latest report from the Treasury states that, of 29 alloys investigated none were as durable or as cost-efficient as those already in use.
When Will the Penny Drop?
Back in 2011, at the peak of the commodities boom, the penny coin cost 2.41 cents to mint. After consecutive years of falling zinc and copper prices and low inflation, the 1 cent coin still costs significantly more than its value to manufacture. When will the Treasury figure out that the smart thing to do is drop the penny coin altogether?
In fact, let’s be more like Sweden, where 59% of transactions are cashless altogether. Electronic methods like credit cards and contactless payments have replaced the humble penny. Our Swedish friends can’t even buy a bus ticket with cash, and that is just the way they like it: 11% of Swede’s do not even carry cash anymore.
What do you think? Are you headed out to collect some pennies to sell for a profit? Leave your comments below!