Coin Currency Vs Paper Money
Until recently, coins were the most common form of currency used to pay for goods and services. However, paper money has taken the place of coins for most purchases. There are pros and cons to using both types of currency, and a person’s personal preference usually dictates which one they use.
Coin currency first appeared in ancient Lydia (modern-day Turkey) around 600 BC, and they quickly gained worldwide popularity because of their standardized weight and value. Gold and silver became the standard materials for coins, though base metals such as copper or bronze also served their purpose in many currencies.
In modern times, the United States has six types of coins: penny (1 cent), nickel (5 cents), dime (10 cents), quarter (25 cents) and half dollar and dollar ($1.00). Each coin is unique in size, color, design, edge, and security features. A coin collector can learn about each of these characteristics and collect only the types of coins that appeal to him or her.
The most important difference between coin and paper money is that coins have intrinsic value — they are made of precious metals or, rarely, other materials with a high value. Paper money, on the other hand, has extrinsic value, which means it is backed by a government or bank and has legal tender status.
A coin has an obverse side (or “heads”) and a reverse side that displays the year, mint mark and main design. A coin is typically wrapped in a paper roll, which makes it easy to transport and store. A coin can also be loose, but in this case it’s often placed into a bag or box to keep it safe from other coins and prevent damage.
When a person or business has a need for coins, he or she can request them from the Federal Reserve Bank. The Reserve Bank will then supply the institution with a mix of new and recirculated currency.
Many credit unions, banks and some retailers accept rolled coins for exchange. Some banks and credit unions charge a fee for the service, while others do not. Some offer self-service coin-sorting machines, while others require that a person work with a teller.
It’s best to hold on to coins for a long time, as the value of a coin tends to increase over time. The longest-term investors in coins often see their investments double or triple over a 50-year period. However, it’s important to remember that coins are a terrible short-term investment and should only be considered as a long-term investment, not a quick way to make money. In addition, coins should never be used as a substitute for cash or checks. Instead, it’s a good idea to use cash-back options when possible and to transfer funds with friends or family members online. NerdWallet staff writer Chanelle Bessette covers banking and finances. To comment on this story, contact her at [email protected]. NerdWallet is an independent, for-profit news organization that earns revenue from its customers who buy products or services through links to third-party vendors.