The penny may be history at the U.S. Mint, but the debate over small change is far from over. In November 2025, the United States stopped producing pennies for general circulation after more than 230 years. As we discussed in The End of the U.S. Penny and What It Means for You, one of the biggest reasons was simple economics: A penny cost significantly more than one cent to manufacture. Now the same question is being asked about the nickel.

When Five Cents Costs More than Five Cents

The nickel has been part of U.S. currency since 1866. The coin is made of 75 percent copper and 25 percent nickel, materials that have become increasingly expensive. Rising metal prices, along with labor and other production expenses, have made the coin costly for the U.S. Mint to manufacture. In fiscal year 2025, producing and distributing one nickel cost 13.31 cents. In other words, the government spent more than two-and-a-half times the coin’s face value to put a nickel into circulation.

Ordinarily, a government can earn revenue when the face value of money exceeds the cost of producing it. However, when the government loses money because a coin costs more to produce than its face value, economists call it negative seigniorage.

Negative seigniorage is not new. Historically, the United States has responded to this type of problem in two ways. It can stop producing a denomination, as it did with the half-cent in 1857 and the penny in 2025, or it can change the materials used to manufacture a coin. The government removed silver from many coins in 1965, for example, and changed the penny to a mostly zinc composition in 1982. 

Could the Nickel Get a Makeover?

For now, lawmakers appear more interested in reducing the nickel’s production cost than eliminating the coin. The Common Cents Act has gained bipartisan support in Congress. In addition to establishing consistent rules for rounding cash transactions after the penny’s demise, versions of the legislation would give the Treasury greater flexibility to change the nickel’s composition.

One possibility would be a nickel with an inner zinc layer and an outer nickel layer. Any redesigned coin would need to cost less to produce while continuing to work in vending machines, coin-counting equipment, and other systems that depend on a coin’s size, weight, and other characteristics. That makes changing a coin more complicated than simply choosing a cheaper metal. Businesses have equipment and processes built around existing currency. A redesigned nickel that created problems for vending machines or payment equipment could move costs from the government to private businesses.

Another proposal called for suspending production of pennies and nickels for 10 years while studying how rounding cash purchases to the nearest dime would affect consumers. That proposal has not advanced as far as the Common Cents Act.

Why Losing the Nickel Would Be Different

Eliminating the penny means cash purchases can be rounded to the nearest five cents. Eliminating the nickel would mean the dime becomes the smallest regularly available coin, potentially requiring cash totals to be rounded to the nearest 10 cents. An analysis cited by Newsweek estimated that if cash purchases were rounded to the nearest dime, consumers could face nearly $56 million in annual net rounding costs.

The effect would also not be distributed equally. Digital purchases would continue to be calculated to the exact cent, while a cash-paying customer might have to pay a rounded amount. That distinction matters because consumers do not use payment methods equally. Federal Reserve data show that cash accounts for 14 percent of consumer payments. Older adults, rural consumers, and households with lower incomes tend to make more cash payments than other groups.

For businesses and policymakers, that creates a trade-off. Eliminating an expensive coin could make the currency system more efficient, but a less precise cash system could create greater inconvenience or expense for consumers who depend on cash most.

Is the Nickel Next?

The nickel faces many of the same pressures that doomed the penny. It costs more than its face value to produce, inflation has sharply reduced its purchasing power, and consumers increasingly use digital payments. But there are important differences between the penny and the nickel. Nickels appear to circulate more effectively than pennies (that is, consumers are more likely to spend them rather than leave them sitting in jars or drawers). The disappearance of newly produced pennies may also make nickels more useful because they become essential for making change when cash totals are rounded to the nearest five cents.

Public opinion is another consideration. A YouGov survey conducted in November 2025 found that only 24 percent of U.S. adults supported eliminating both pennies and nickels so that the dime would become the smallest coin. Fifty-eight percent opposed the idea.

Other countries have shown that cash can function without a five-cent coin. New Zealand stopped issuing its five-cent coin in 2006, leaving 10 cents as its smallest coin. The country also redesigned other coins using less expensive materials. The United States could eventually follow a similar path, but the current debate suggests the nickel may get a redesign before it gets a retirement party.

In the Classroom

This article can be used to discuss money in the financial system (Chapter 15: Money and the Financial System), as well as how businesses and governments make decisions when efficiency, costs, technology, and consumer needs conflict.

Discussion Questions

  1. Why does producing the nickel create negative seigniorage for the U.S. government?

  2. What two approaches has the United States historically used when coins become too expensive to produce? 

  3. What challenges could businesses face if the government changes the materials used to manufacture nickels?

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.