The Heavy Economics of Cashing In Your Loose Change

Or: Why Coinstar machines are basically everywhere now

Coins are kind of a hassle, aren’t they? Aside from arcade games, the occasional soda or snack machine, maybe the jukebox at your favorite dive bar, they’re more like leftover detritus, as we become an increasingly cashless society. But Americans lose nearly $62 million in loose change each year, which can make counting coins a big business! At least for the few companies involved in it — like those big, green Coinstar machines you see in every supermarket that change your coins into lighter, more convenient money… for a fee, of course. But how do they work? What happens to all those coins in the machine? And why do some banks not cash in your coins anymore, but private companies do? We scraped our change together to buy some answers. 

So, Coinstar: big business in small coins, huh?

Yep. It’s got 20,000 of those machines across the world and processes 43 billion coins annually. Stores like to have them because, according to Coinstar, most customers spend at least half the cash they just converted within the same store.

What’s the fee again?

It’s a lot! Coinstar takes an 11.9 percent cut — sorry, “service fee.” For every dollar of heavy metal you put in, you get 88 cents back in a voucher. Every $20 gets you $17.60. You can also turn your money into a gift card, and for that there’s no fee (Coinstar sorts that out between the restaurant/store). Gift cards can be had for most Middle America chain restaurants and retail stores, from Applebee’s to Starbucks to Home Depot. Or you can donate your coin total to one of a few large charities — the Red Cross, UNICEF, WWF, etc. — for no fee there either. You can even buy Bitcoin if you want to.

How much does Coinstar earn?

It’s currently a private company, so it’s hard to say. The company was once merged with Redbox, the DVD company, but that company was bought by the massive private equity firm Apollo Global Management in 2016, and it split Coinstar and Redbox apart. This site estimates the company’s annual revenue at $336 million.

Yowzer.

Yeah, it was lucrative, at least at one point. In 2012, Coinstar was reported to have a quite healthy operating margin of 25 percent on the coin machines. That is all to say that Coinstar is further enriching, one tarnished coin at a time, Apollo’s founder: a formidable figure in mergers-and-acquisitions circles named Leon Black (not this one). He’s the kind of guy who does stuff like buying The Scream — like, the actual painting — for $119 million. That’s a lot of coins!

What’s the most money someone’s thrown into a Coinstar machine?

Some guy in Alabama brought in $13,000 in pennies at one time! Do the math: That’s over a million pennies. 

What the hell does Coinstar do with all that change?

Well, first they have to sort out the good coins from everything else: that means paper clips, pocket lint, gum, foreign coins (like Canadian pennies) and slugs that people try to slip into the machines. (The latter are filtered out by a special sensor that reads each coin — or each coin-shaped thing, rather.) Once the bins in the machine fill up (they hold up to 500 pounds), a technician is automatically called to swap it out. The full one gets loaded onto a truck and sent to a regional Brinks warehouse. 

What happens at the Brinks warehouse?

See for yourself. The coins get filtered once again (thousands per minute), then go up a conveyor belt and down individual tubes, sorted into each denomination. Then they’re weighed and sleeved into plastic rolls of pennies, quarters, etc. by a machine. Next, humans take the rolls and box them. Those get shipped off to customers — banks, stores, supermarkets, etc. — to be doled out as change, as the process starts all over again for the coins to eventually languish underneath car seats or behind sofa cushions.

Brinks also puts coins into canvas sacks (like the type that cartoon bank robbers run off with), and those sacks go to the Federal Reserve, to be put back into general circulation. The average lifespan of a coin, according to the U.S. Mint, is 30 years, so most of these coins probably have a long way to go still.

Do banks take loose change anymore?

Most banks used to have coin counting machines, but they take up space, plus maintenance is costly — as is transporting the change — and they don’t want their tellers wasting time with this stuff, apparently. (This was often contracted out anyway.) Your best bets are regional banks and credit unions, which tend to have better customer service than large banks. However, even regional banks might charge a fee to count change if you don’t have an account there.

If you’re willing to roll your coins yourself, most banks will give you the paper rolls for free. If you have kids, just ask them to count them and roll them (if you have to bribe them, they’ll still probably do it for less than Coinstar’s 11.9 percent take). And most every bank still takes rolled coins — though, again, some will charge you if you don’t have an account there.

How is it legal for banks to not take my jar of change? What the hell are banks even for?

Because the U.S. Treasury says it’s legal. This FAQ points out that while the law says that coins and dolla billz are “legal tender for all debts, public charges, taxes and dues,” there’s no law saying a private business or a person must accept currency. This is how some businesses can get away with being completely cashless now, and also why, say, liquor stores are allowed to not accept bills larger than $20. 

What’s out there besides Coinstar?

Not much. Publix have coin counting machines, but those charge a fee, too. A smaller one, though: nine percent. Outside of banks, Coinstar really does own the market for change counting, although, like its old sister company Redbox, it’s seen as a declining industry, since, just as fewer people are watching DVDs, change is slowly being used less. 

So, I can pay Coinstar to count my change — or I can go to the bank, get some paper rolls, go back home, sort my money and bring it back to my bank?

That’s right. An economist would call this “opportunity cost.” Although Benny Franklin famously said it even better when he said “time is money.” You can enjoy the tedious process of doing it all yourself — or you can further enrich a billionaire titan of private equity to essentially do it for you.