BY JASON PRINT, CFP®
CO-CEO
With all the cost-cutting in our federal budget, something that’s starting to gain more attention of late is the elimination of the penny and perhaps the nickel. These two coins cost more to make than they are actually worth!
Whether your coins are getting tossed into a tip jar, jingling in your pocket, or piling up in a piggy bank at home, every one of them carries a hidden cost – literally. Many Americans don’t realize that producing some of the coins in circulation today costs more than their face value. This discrepancy raises important questions about fiscal efficiency, coin composition, and the economic sense of some denominations.
The rising cost of coin production
Every year, the U.S. Mint releases a detailed report on the costs of producing and distributing coins. These costs include the raw materials (known as “metallic content”), manufacturing expenses, and distribution logistics. In recent years, inflation, global metal prices, and supply chain challenges have driven production costs higher, especially for low-denomination coins.
Here are the most recent per-unit costs as reported by Mint for fiscal year 2023:
Penny (1-cent coin): 2.72 cents
Nickel (5-cent coin): 10.41 cents
Dime (10-cent coin): 5.03 cents
Quarter (25-cent coin): 11.82 cents
These costs have been climbing up over time, and the subject of possibly eliminating the penny and the nickel has been discussed for years. The Wall Street Journal published an article in 2018 raising this debate. At that time, a nickel cost 6.6 cents to produce.
A closer look at the penny
The penny has long been the subject of debate among economists, policymakers, and the public. In 2024, the U.S. Mint reported that it now cost more than 3 cents – three times its face value – to produce a single penny. Much of the cost stems from the primary material, zinc, which makes up 97.5% of the content (the rest is copper plating).
Given that the Mint produced over 7.5 billion pennies in 2023 alone, that translates into a loss of more than $130 million from penny production alone in one year. Critics argue that the penny is inefficient, rarely used in transactions, and often discarded.
Despite ongoing debates, the penny remains in circulation. However, other countries have eliminated low-denomination coins with minimal issues. For example, Canada, Australia, and New Zealand have already removed their lowest-denomination coins from circulation, rounding cash transactions to the nearest 5 cents. U.S. studies have shown that such rounding would have a negligible inflationary impact on consumers.
The nickel’s mounting burden
The penny has long been the subject of debate among economists, policymakers, and the public. In 2024, the U.S. Mint reported that it now cost more than 3 cents – three times its face value – to produce a single penny. Much of the cost stems from the primary material, zinc, which makes up 97.5% of the content (the rest is copper plating).
Even more expensive than the penny—both in total cost and in termsof inefficiency—is the nickel. It cost 10.41 cents per unit in 2023, and that jumped to 13.78 cents in 2024! In the next few years, its cost is likely to be triple its face value. The primary materials—75% copper and 25% nickel—have seen significant price increases over the last decade.
In fiscal year 2023, the Mint produced approximately 1.6 billion nickels, leading to nearly $90 million in losses. As in the case of the penny, the nickel’s continued production is being increasingly questioned given that the government essentially pays more than $2 to mint every $1 in nickels. If eliminating the nickel isn’t politically palatable, one possible solution would be to change the coin composition. The Mint has actively researched alternative metal compositions to reduce costs. For instance, using steel or aluminum instead of copper and nickel could make coinage cheaper. However, such changes require Congressional approval and could disrupt coin-operated machines nationwide.
The dime and the quarter: Economically sound (for now)
In contrast to the penny and the nickel, the dime and the quarter are still cost-effective to produce: 5.03 cents and 11.82 cents, respectively, in 2023. These coins are made primarily from copper (91.67%) and nickel (8.33%), but their higher face values make their production cost-efficient.
Still, even these coins are not immune to the forces of inflation and metal price fluctuations. If material or operational costs continue to rise, dimes and quarters could eventually become unprofitable to produce as well.
Why does this matter?
At first glance, the idea of losing a few cents per coin may not seem like a big deal, but when multiplied by billions of units, the losses add up quickly. In fiscal year 2023, the total net loss from producing pennies and nickels approached $220 million—a burden ultimately borne by taxpayers. In 2024, that loss decreased as the Mint did not produce as many pennies and nickels.
With cash usage declining and digital payment options growing in number, the need for physical coins is diminishing. Remember when we used to put coins in parking meters and vending machines? It seems most of this has all moved to digital/credit card transactions. This long-term trend could eventually reduce the demand for coins altogether, further tipping the scale toward eliminating unprofitable denominations.
While coins may be small change, the cost of producing them is anything but insignificant. At a time when government spending is under intense scrutiny, continuing to produce coins at a loss –
especially the penny and the nickel – raises practical and economic concerns. Whether through material adjustments, denomination elimination, or a broader shift to digital transactions, some kind of reform is inevitable if fiscal responsibility is the goal.
