My post, Should the Penny Be Eliminated, remains one of the most popular of all time here on Richer by the Day.  With that in mind, I thought I’d cover whether the Dollar bill should be replaced by a Dollar coin.  Speculation is growing that the Dollar bill’s days may be numbered.  Previous efforts with Dollar coins, including the current Presidential series, are not likely to thrive as long as the paper currency remains.

Unlike the penny, which costs more than face value to manufacture, the production cost of a Dollar bill is only about 4¢.  Though Dollar coins cost about three times that amount (actual cost varies with spot metal prices) the much longer lifetime of coins makes them a more cost effective option.  The generally touted statistic is that Dollar bills wear out in an average of 18 months, versus 30 years for coins.  The estimates of cost savings from using coins vary, but a 2002 Government Accountability Office report put the number at $500 million a year in production costs.

Typically cited reasons for not changing include the weight and bulk of carrying coins, the costs to retrofit automated coin readers and vending machines, startup costs to transition to high volume coin minting, and the difficulty of discriminating the Dollar from other coins.  This last fact was a big problem with the Susan B. Anthony Dollar which looked very much like a quarter.  Tactile differences are also important, so that the visually impaired and people digging through their pockets can find the desired coin.

Most other developed countries, including the entire Eurozone, Japan, Australia, Canada, New Zealand, and Britain have already transitioned to coins for at least their Dollar equivalent currency.  When I lived in Germany, the one, two, and five Deutschmark denominations (then equivalent to 50¢, $1.00, and $2.50 respectively) were all in coin form.  There was a 5DM bill as well, but it was very rare to see those.

I didn’t really see much downside to using those coins and I suspect that the same would be true of the Dollar coin.  I will say that I carried around a lot more change then I do here though.  Everyone, girls and guys, had very large change purses as part of, or in addition to, traditional wallets.  The Germans were much more of a cashed based society than the US was.  Since that time (late 90s) the US has become even more of a cashless society.

My conclusion on the Dollar coin is that it would have very little effect on most Americans, since few of us deal with cash as often as we once did.  Obviously, if prices rose as in my penny elimination analysis, I fear we could all be worse off with a Dollar coin.  I hardly suspect that would happen in this case however, since rounding to the nearest 5¢ is a marginal increase, whereas rounding to the nearest $5 could add significantly to many transactions.

If history is any indication, the one fact that remains clear is that a Dollar coin will only thrive if the paper bill is completely removed from circulation.  Those in favor of the Dollar coin should ensure this stipulation is a part of their efforts if they hope to have any success.

Would you prefer a Dollar coin or are you happy with the current bill?