How Rational Are We? The Dollar Coin vs. Dollar Bill Debate

A lot of big news coming out now about thew new Presidential $1 Dollar Coins, set to launch Thursday with the first coin in the series, George Washington. I’ve written this post about the program here. It’s one of the top posts for the entire blog.

I saw this article today on Yahoo News, and I thought it fit right in with the topic of this blog – namely how people can be predictably irrational.

Yahoo News/AP: No Plans to Replace Bill with Dollar Coin

The failure of previous iterations of the dollar coin are common knowledge. Every time it’s the same. Big fanfare, big launch, and then the US Mint produces a huge number of coins that sit in vaults forever because there is no demand for the coins.

An AP-Ipsos poll found that three-fourths of people surveyed oppose replacing the dollar bill, featuring George Washington, with a dollar coin. People are split evenly on the idea of having both a dollar bill and a dollar coin.

Fantastic. This would be a really interesting data point… if the costs of the dollar bill and the dollar coin were the same. It’s nice to know that if everything were equal, people prefer the bill to the coin. This isn’t surprising – I personally also prefer the bill to the coin, assuming both are freely accessible.

Here’s the problem, though.  Dollar bills wear out in 18 months.  Coins last approximately 30 years.  If you do the math on $1 units in circulation, you realize that we spend hundreds of millions of dollars, per year, extra, just to support the dollar bill.

Now granted, in a US budget of over $2 Trillion dollars, maybe the idea of worrying about a few hundred million is quaint.  But I guarantee you, the question would have come out differently if you had asked:

“Do you support a federal tax increase of several hundred million dollars to have a dollar bill instead of a dollar coin?”

Rephrase it how you’d like.  I know the “tax increase” word is dirty (it’s certainly a way to lose my vote).  Try, “how much would you pay extra to have a dollar bill instead of a dollar coin?”

That’s the real issue – we all know people prefer the bill.  That is obvious given the failures to launch a coin historically.  The question really is, how much is that preference worth?   In a world where both “cost the same” to the user, that preference will dominate.  But would people really pay extra for the convenience of the dollar, if that cost were visible?

I used to be a big dollar bill fan, but I’ve flipped around now that I’ve seen how successful the coin has been in Europe and Canada.  The path is easy:

  • Retire the $1 Bill
  • Create a $1 Coin
  • Create a $2 Coin

The third step is key, since it helps solve the issue of having too many coins as change for a $5 bill.

My only question now is whether or not we’ll ever really complete the conversion to a coin.  Right now, the race is between the coin and electronic payment.  At some point, cash just won’t matter enough to care.

44 thoughts on “How Rational Are We? The Dollar Coin vs. Dollar Bill Debate

  1. The problem with the $2 Bill would be the same as the $1 Bill – too expensive. Bills only last about 18 months in circulation. Coins last 30 years. That is a 20x factor.


  2. Here is my idea. Every pay check I get I plan to take $50 and immediately buy $1 coin. I will give change with them but will not use @1 bills. All the bills I get will go right back to the bank to be exchanged for more coins.

  3. I think a $1 and $2 coin is a great idea. Why not make a $5 coin as well? Phase out the 1,2 & 5 bills. People will carry around a few coins, and then the bigger bills.

  4. No matter how practical this may seem it will not fly with the public. First the dollar coin is to close in size to a quarter and second nobody I know like to carry change in their pocket. The treasury department can not even faze out the One Cent piece without a political up roar. According to Treasury it cost more than a cent given the current cost of copper and zinc to produce a One Cent coin. These changes will not occur unless forced on the public.

    • Not true… In Canada their dollar coin is the same size and color as the US dollar coin and no one mistakes them for quarters

  5. No matter how practical this may seem, this will not fly with the public. First the dollar coin is to close in size to a quarter and second nobody I know likes to carry change in their pocket. The Treasury Department can not even faze out the One Cent piece without a political up roar. According to Treasury, it costs more than a cent given the current cost of copper and zinc to produce a One Cent coin. These changes will not occur unless forced on the public.

  6. Well, then the public should be forced to pay for it. Or rather, the relatively small number of people who have to have a dollar bill should pay extra for them. Then we’d see how many people really want it.

    Of course, everyone is going to want the more expensive item “for free” – Given the number of countries that have moved away from a $1 bill recently, it’s obvious we could make this move.

  7. The coins are a great idea. And as far as the size of the coin being too close to a quarter…a dime and a penny are extreemly close but how often do you mix them up, also all of you bills are the same size and for many years looked very much alike. But guess what, you looked at them and got used to them. This is the same thing. I worked in retail for years and I’m am already used to them and really like them.

    If there were also $2 coins the most coins you would have in you pocket for change of a $5 is three coins.

  8. What we really need to do, is either scrap or redesign the $1 bill, and redesign the $2 bill and use the new $2 bills for a while after the $1 bill is eliminated, along side the $1 coin. Eliminate the penny as well. Redesign the half dollar coin to be a size between the quarter and nickel, and to be copper colored with a reeded edge, so as not to confuse the new halves with pennies, and really dark tarnished $1 coins. And a circulating half would save money on minting less quarters, and it would be less quarters to carry, and maybe vending machines can be reprogramed to take new half dollars without replacing their coin slots, which the current half is too large to fit in most coin slots.

    What we need worry about, as much as worrying about $1 coins replacing $1 bills though is, new $200, $500, and $1,000 bills. Inflation has made a $500 bill worth, about what a $100 bill was worth in 1969, when the $500, $1,000, $5,000 and $10,000 bills were discontinued. Though the U.S. has never had a $200 bill, I suggest this denomination, as well as new $500 bills to also compete with the Euro. There are 200 and 500 Euro notes, and since the 500 Euro note sometimes exceeds $500 USD, I believe that the $1,000 bill should be reissued to further compete with the Euro, since the U.S. benefits from other countries using and storing U.S. currency over the Euro, and people in the Euro contries are starting to store 200 and 500 Euro notes over U.S. $100 bills because these larger denominations are more conveinient, so I think the U.S. government should forget about the drug war that they’re never going to win, and issue new $200, $500, and $1,000 bills by 2010.

  9. The treasury didn’t ask when they retired the two dollar bill or eliminated the half dollar from wide distribution and minting. They should just terminate the dollar bill. Make the dollar coin the currency of the day.

    Let those that want to use the dollar bill keep all they want and use till their heart content and when they find they are all gone and the rest of the world is using dollar coins then they can join the world and use the dollar coin or just pay with credit card.

    Cost is king and we can not afford to subsidize those personal non cost efficient desires. Think pork barrel spending!

    Enough is enough for those that think every little thing they want in life will be presented to them . Welcome to the world of real life where you pay for life. Unless of course you are a politician, celebrity or other fortunate that does not have to work for a living.

    Sorry, no half cent pieces either……….they are gone as well.

    • I agree! The US should just stop making the dollar bill all together. Then all they have to do is let people use the remainder of the bills until they are all worn out. Then those people will have nothing else to spend along the lines of the dollar bill and then they will just have to use the dollar coin. Simple as that!

  10. No one has mentioned how much it costs to to produce a $1 coin. Certainly much much more than the cost to produce a $1 bill… but is it 20 times as expensive to produce, because that’s the break even point? Plus there’s probably and enormous start up cost associated with producing the first generation of coins. I agree that moving to the coin would most likely save money in the long run.

    For you guys out there, if we switch over to the $1 and $2 coins get ready to start carrying around a man-purse and a men’s european carry like they have do here in France. Those coins are heavy and you’ll be carrying them around with you everywhere. Plus, the $1 coins is really going to foul up strip club dynamics? Will we have to drop a $5 bill minimum for a stage dance or will we start throwing coinage at the dancers? All the sudden the cost of “making it rain” went up dramatically.

  11. You are correct that it costs quite a bit more to produce the coin. However, the coin lasts an average of 30 years, while the bill has to be replaced every 18 months on average. When you add all the production expense for retooling & redesign, most conservative estimates have the coin saving us up to $500M per year. There are no startup costs because we are already producing tens of millions of dollar coins per year.

    The change argument is fairly bogus. The change for a $2.95 Starbucks would be 2 coins – a $2 and a nickel. You don’t need a purse to carry that, although you are more than welcome to use one.

    I think it’s obvious that few people would support a tax increase to cover the cost of producing bills. However, maybe we can arrange a system where $1 Bills are still available for a surcharge at the bank, for people like yourself who need them.

  12. Yeah, I realize the change example I was giving was a little farfetched but I feel calling it bogus is not a fair assessment. There is at least a little truth there. All I’m saying is, take a look in your wallet and see how many $1 bills you have and imagine that they are comprised of $1 coins (slightly larger than a quarter) and a $2 coin (which will inevitably be larger and heavier); and add this to the pile of coins you already have – they have no $2 coins btw and tens of millions of $1 coins pales in comparison to the billions of US dollars in circulation. With all this weight getting rid of the coins by spending will become commonplace and guess what? you’ll need to carry it all with you. You’ll be ok if you stick to places that charge $X.99 but when the stars don’t align like this you’ll be carrying a heavier load. Perhaps some vendors will adjust their prices accordingly to avoid this.

    People might think twice about getting a receptacle for there change too when they begin losing dollars into the cracks of their sofas and car seats instead of just “loose change” as before. I really don’t think it’s that far off.

    Listen, I agree that we should switch, but it’s not all roses. The government has tried to push this a few times and failed miserably. Why? Because we Americans don’t like spending and carrying around coins. We’d much rather toss a $5 bill for a coffee then have to think, root around in a pile of change and give the vendor the correct change. Plus it takes time. We all know that old timer who clogs up the supermarket line when all you want is to pay for your six-pack and get the hell out of there. Maybe it’s more efficient to focus on reducing the number of bills by pushing swipe cards.

    It’s interesting b/c I really feel like the $1 coin is the tipping point from a bill based system to a coin based system. I myself don’t mind it but others just don’t go for it.

  13. I know what you are saying, Brooks, and I appreciate the moderated comments here. Honestly, though, I don’t doubt that people prefer bills. I personally prefer bills as well. But if you asked me to accept a tax increase to pay for bills vs. coins, I’d just as soon live with the coins.

    Given that the other major currencies have already bit this bullet, I think the real reason we haven’t moved is because of the mental accounting of the issue.

    If they removed bills, and then proposed a bill that would cost $500M per year to re-instate bills, I doubt it would get full support.

    Why not go with the proposal I suggested – we keep bills, but charge more than $1 dollar for them at the bank? High end services and individuals could decide to pay the “tax”, and keep their bills. We get a revenue-neutral solution, and we place the cost burden on those who really, really love bills.

    Who knows, we can even introduce a “half-dollar” bill to really cater to bill lovers!


  14. Okay guys,

    I read a lot on the new money, because it interests me, and I, too, support eliminating the U.S. $1, $2, and even $5 bills for coins, but I’m really getting tired of seeing this retarded “stripper issue” everywhere there is talk about getting rid of the $1 bill. That is NO reason to keep the $1 bills around. If you’re that perverted, give the strippers $2 bills until they are gone, then give them $5 bills until they are gone, and after that, either toss them a few coins of your choice of denomination, or don’t be a cheapskate, and start tossing them $10 bills, as I suspect that $10 bills will be around for a long time to come, even after a $5 coin is introduced.

    Also, as I said, its time to bring back the U.S. $500 and $1,000 bills, and add a $200 bill. And redesign, and push to circulate a new, smaller, copper colored reeded edge (like the quarter) half dollar coin, and possibly thicker than all other U.S. other coins.

    With inflation, we could use new $200, $500, and $1,000 bills and it would also save the government money on printing les $100 bills, of which the demand of $100 bills is steadily rising, and also $1,000 bills to help cut back on printing $500 and $200 bills. And my mom and dad both went through credit card fraud/identity theft, and a person I talked to, told me to argue with congress that, the government spends about $500 million dollars on combating credit card fraud, every year, and could cut down on the problem, if some people decide to start using these new larger denomination bills, over credit cards, like they did in the past. This could also speed up the time you take in a line at a store. I can’t tell you how many times I’ve been in a store, in a long line, then I finally get to one last person being ahead of me, who whips out their credit card, and the damn machine goes haywire on them, and I’m stuck for an additional 20 minutes-half hour, when this guy could have just pulled out his $200, $500, $1,000 bill, whatever he needed. And my mom also said that, grocery stores are raise prices, 50 cents to $1, at a time, so I know there would be use for up to a $1,000 denomination in the retail sector these days, not to mention gas prices as well.

    And the new half dollar, if redesigned to be smaller, and circulated widely, will also save the government more money, in two ways: 1: Less metal to use on the smaller coin. And, 2: The government can mint less quarters.

    And on the odd side of things, if the $1 and $2 bills were eliminated, and they had no intention to replace the $5 bill with a coin any time soon, and with an empty bill slot available in cash registers, what would you think of them resurrecting the plan that the Treasury orginally had, to print a $3 bill? Yep, thats right, folks. When the U.S. Treasury first started issuing its currency, there were plans to print a $3 bill, an actual $3 Federal Reserve note (or United States note, or whatever they had back when the Treasury first issued our official currency) that somehow got dropped. I wish they would have followed through with that idea, because I’d love to be spending a mix of halves, $1 coins, $2 bills and $3 bills, and confusing people. LoL Anyway, at least if they issued a $3 bill, and if they replaced the $1 and $2 bills with coins, you’d still only have to carry a minimum of one $1 coin, or one $2 coin.They could just keep the $3 bill around for a lot of years, along with the $5 bill and up, seeing as, $3s might last about as long as $5s.

  15. I really do not believe that people are not seeing the real reason for keeping the dollar bill. Counterfeiting is easier to regulate with the bill than it is with the dollar coin. With the many changes that are available with either new technologies in ink, watermarks and paper, in the long run, will save the US government alot of money. It is alot easier to counterfeit a coin than it is a bill. The recent changes in the bills with the color shifting inks has really deterred criminals from copying bills.

  16. Albert,

    I’d agree with you except for one small thing:

    We are not applying ANY of the anti-counterfeiting technology to the one dollar bill.

    We are not because, of course, it would be extremely prohibitive to try and launder a sufficient number of $1 bills to make it worth anyone’s while.

    So, while I agree that a $100 coin would be foolish, this argument holds no water with the $1 bill.


  17. A smaller copper half dollar wouldn’t work. It would look like a large penny and no one would equate it in their minds with being more valuable then a Quarter (See Susan B. Anthony Dollar Coin). The current half dollar should be a silver (91.67% Cu 8.33% Ni) version of the Current Dollar Coin with Kennedy in profile on the front like the current half dollar, and with the current presidential seal eagle on the back or the eagle landing on the moon from the bicentenial half dollar.

    With the Penny eliminated Lincoln would go on the new $2 coin (CuNi (silver)ring with Mn (Gold)center). Whatever on the back.

    The $5 bill could then be replaced with a $5 (half eagle) coin (Mn ring, CuNi center) with Reagan on it. An Eagle in profile in flight of the sun showing only half of the Eagle on the back.

    That means the coins would go:

    $0.05 Jefferson
    $0.10 Roosevelt
    $0.25 Washington
    $0.50 Kennedy
    $1.00 Sacagewea? (maybe another image/pres by then)
    $2.00 Lincoln
    $5.00 Reagan

    3 “claimed” Democrats, 2 Republicans and Washington being for everyone.

    If an Eagle ($10) or Double Eagle ($20) are needed eventually then the Eagle can be CuNi with raised features in Mn and the reverse for the Double Eagle, those 2 being in the size range of the current half dollar. The Eagle would have an eagle in flight shown, with 2 eagles on the Double Eagle.

  18. Yeah, I agree to making cirulating half dollar, $1, $2, and $5 coins. With inflation, not even a $5 bill lasts long these days, and I have heard that there are certain cash drawers that would have enough slots for eight or more denominations of coins. So no need to even get rid of the penny, if it still has a space in the cash registers, even though I am all for eliminating the penny, but I would tolerate pennies a bit more if they were made out of steel, to same money. I say, as long as it costs less than one cent to produce, and people don’t want to give them up, keep minting them. When even steel becomes too expensive, scrap the one cent denomination. Also, lets scrap the nickel and quater eventually, as well, and issue a 20 cent coin, and round to the nearest dime.

    But what about reissued $500 bills keeping President William McKinley on the front, and the old oval with large numeral 500 on the back, and new $1,000 bills keeping President Grover Cleveland on the front, and the text “The United States of America” and “One Thousand Dollars” on the back, but a modernized version of the obverse and reverse of these images.

    And how about a President Theodore Roosevelt $200 bill, with Mount Rushmore on the reverse? After all, Teddy is the only president on Mount Rushmore, who is not on a coin or currency denomination. (Washington has the $1 bill, and quarter, Jefferson has the $2 bill and nickel, and Lincoln has the $5 bill and penny) And hey, if people still want pennies, even if they’re not worth it, since some Euro countries have 2 cent coins, lets reissue our 2 cent coin and give Teddy that denomination as well. Even though I doubt a 2 cent coin would circulate well.

  19. Consider this…I get $4 change from a store. If I have $4 in coins in my pocket and pull out my keys, phone, wallet, etc, their weight will keep them in my pocket. If i have dollar bills, there’s a much better chance of losing my money on the ground. Even if I did drop coins, I’m more likely to notice because I’d hear them hitting the ground.

  20. If we got rid of the $1 bill then what would we use at Strip Club’s? I don’t think things would work the same with a $1 coin. If replacing a bill with a coin worked so well in Europe then how did they tackle this problem over there?

  21. I really like the idea of having a $1 coin. I also think that the United States should have a $2 coin as well. I think that having a denomination of $2 would make shopping and paying a whole lot easier. Hey, if people don’t want to be carring around too many coins then create the $2 coin. That would be that many less $1 coins that they would have to carry around, but I still wouldn’t mind the dollar coins. I think they are great! Look at how well Canada and the European Union is doing with those coins. It just makes life easier. Also, how many times do you have to stand infront of a vending machine trying to flatten out your dollar bills so that the machine will take it? Well if you have the dollar coin then the machine will take it 99.9% of the time. Everytime you go up to a vending machine you have a 50/50 chance of the machine taking your bill. Now look at that difference, what do you see? I vote, yes, on America trading the dollar bill for the coin. As well as creating the $2 dollar coin too. I think that America should put those 2 coins into circulation and leave the $5 bill and up alone. I also think that America should also make a 200 and 500 dollar bill like the European Union has. It makes paying high amounts a whole lot easier. If not that, then I think the US should bring back the $1,000 bill. I don’t enjoy carring around 10 $100 dollar bills. Its too risky, but when you have 1 bill to 10, I would much rather take the one bill compared to 10 of them. Its a lot safer carring around 1 bill in your pocket.

  22. People are overlooking the weight and bulk of the coins. Bills are thin and take up little space. Coins are thick and heavy and are not easily stacked. Think logistics. Think of a bank teller and the cash drawer. Imagine a couple thousand coins in the drawer. Think of the retailer…Think logistics.

    • This argument could just as easily apply to quarters… why not have a quarter dollar bill? There is no reason to believe that a $1 coin with a $2 Bill as the low denomination would lead to significantly more change, or any issue for change drawers. The fact that cashiers and shoppers in Canada & Europe do just fine proves this.


  23. In all honesty, we should copy the Euro in terms of denominations. But keep quater instead of €0.20

    Coins: .01 .05 .10 .25 $1 $2
    Bills: 2 5 10 20 50 100 200 500

    • No,

      We SHOULD get rid of the quarter, and replace it with a 20 cent coin, so that we can also get rid of pennies and nickels, and round up and down to the nearest dime. You have the chance of losing or gaining up to 4 cents in every transaction you make. And REMEMBER NOT all items are rounded off. Items in stores would STILL be priced to the cent, but you FINAL TOTAL will be rounded to the nearest dime. Nickels and pennies BOTH cost TOO MUCH money to make anymore. And NO, stores will NOT always round “up”. They would be mandated by law to round to the nearest, highest or lowest percentage to the dime.

      Then maybe we could set our coin slots in our cash drawers 10c, 20c, 50c, $1, and $2. And maybe even thinking of a space for a $5 coin could be worked out in newer, modified till drawers. And as I said, bills should be $10, $20, $50, $100, $200/$500, and since $1,000 bills would be the highest denomination, and thus, no reason to hand them back out into circulation, put them under the till, or in a safe. You could still give out $50, $100, $200, and $500 bills as change for $1,000 bills, and $50, $100, and $200 bills out as change for $500 bills, and so on. There should also be a policy put in place at stores that would be dealing with large denomination FRNs. “WE GIVE OUT NO MORE CHANGE THAN $200 FOR ANY PURCHASE MADE WITH A $500 OR $1,000 BILL. STORE POLICY” But some stores such as lumber yards, electronics and appliance stores, jewelry stores in the like, should still be able to make chane for $1,000 bills with a $500 bill and more smaller bills as needed.

  24. i already made the switch.
    i use the following only (unless i need large bills.

    pennies (FTW)
    no dimes or nickles ever.
    quarters (rarely)
    half dollars
    $1 coins
    $2 bills (by the dozen)
    rarely $5 bills
    $10 bills .
    yes, my bank hates me for bulk ordering pennies $.5’s and $2 s

    i agree with a $200 bill BUT NO LARGER

    i dont mind coins at all.

  25. One only has to visit Canada for a few days to be convinced that coins are the way to go. At first I thought it was a terrible idea, but once I got use to it (took about a day) I was liking it. Most of our purchases are small: cup of coffee here, gallon of milk at the store; simple stuff. Canada’s coins are unique and easily distiguisable. But as any Canadian will tell you, they only work because they got rid of the dollar (and saved millions a year!). The biggest obstacle in this country are the lobbyists (soft drink, vending, etc) who don’t want to go to the expense of changing all their machines. So we just keep printing bills and wasting money.

  26. there also has to be considering how inconvenient $1 bills are.

    i work cash register at my job. (i have no life)

    $1 bills have many problems.

    1.) they dont last long and when worn they are just painful to handle in large quanities.
    2.) they tend to stick to each other. this makes it way much tougher to count. coins are easy.
    3.) to me, handing a small stack of coins is much easier than having to unfold a stack of bills.
    4.) bills can be very tough to distinguish from each other without sight. coins all have distinct textures and masses and sizes.
    5.) people i ask actually find the coin much more compact and durable than a bill. (bills tend to really take up space when jammed somewhere than a coin will

    Yes the $1 coin is very distinguishable from a quarter in your pocket.

  27. the one dollar bill runs Thur the washer it weakens it and that’s not good. now if you had a dollar in a coin that would last a lot longer and it would not tear up.there for i would go with the coin one dollar bill.
    p.s. at least you can clean it wash it shine it up.

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  36. Quit printing one dollar bills, mass circulate one dollar coins, and print more two dollar bills to make up the difference from ones being moved out of circulation. Problem solved . One dollar coins make more sense easier for vending machines and self check out. If you need change for a five use two two dollar bills and a one dollar coin, and there you have it.

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