Penny for Your Thoughts: Penny Phase-Out Parallels Treasury Checks
- Fed reverses course, again accepting penny deposits at all commercial coin distribution centers
- Limited penny deposits stranded banks with surplus coins, storage issues, and higher handling costs
- The penny situation largely follows the same trajectory as paper checks
Back in February 2025, The Trump administration announced plans to end penny production with the Treasury Department placing a final order for blank pennies in May. The Mint’s final production runs of circulation pennies took place in November 2025, ending a more than 230‑year run of one‑cent coin production.
Well, it appears that the Federal Reserve is reversing a its decision and will once again accept penny deposits from banks and credit unions at all of its commercial distribution centers. This move eases a growing problem for financial institutions of all sizes, according to a report by American Banker. The reversal comes after some Fed locations stopped accepting excess penny deposits, leaving banks with more pennies than they could easily use or store.
While Federal Reserve Financial Services said it continues to support penny deposits, it blames local inventory constraints and limited activity at some coin distribution locations.
"Our monitoring of the flow of penny deposits from financial institutions as these changes take effect will determine whether some subsequent expansion of ordering options for pennies is feasible, given that penny production has ended,'' the agency said.
Industry and Congressional Response
The change sparked an outcry from the banking industry, which argued that limiting where excess pennies could be returned effectively jammed up the normal flow of coins. The American Bankers Association (ABA) warned that refusing these deposits blocked circulation and urged the Fed to fully reopen its coin terminals so institutions could manage their inventories efficiently. For community banks and credit unions in particular, the inability to offload surplus pennies translated into operational burdens, from vault capacity issues to higher handling and transportation costs.
Lawmakers also stepped in. Several Congressional Democrats, including Sen. Elizabeth Warren and Rep. Maxine Waters, raised concerns about how the policy had been communicated and what it meant for the broader penny supply. They pressed federal regulators for clearer guidance, noting that disruptions in coin circulation—even at the least valuable denomination—can ripple through cash-heavy businesses like retailers, restaurants, and small service providers.
Eliminating Pennies Follows Same Path as Eliminating Checks
When looking at the FED eliminating pennies and the Treasury eliminating checks, we see that both decisions appear to be following the same path. The current administration made two decisions to eliminate familiar parts of the financial system, citing efficiency as a primary reason. However, after industry and/or public outcry, they quietly stepped back.
It appears that the current administration has continued to underestimate the importance of payment instruments. When examining paper checks, there were clear reasons laid out as to why elimination would be a problem, which were initially downplayed before deciding to not fully eliminate disbursements via check.
Luckily, financial institutions have the processes -- and AI technologies -- for paper Treasury checks, and are able to continue accepting both the payment instruments, so no changes are needed from the industry.
So, penny for your thoughts? Leave them in the comments section or email marketing@orbograph.com.