A single US mint can produce as many as 13.5 billion coins annually. Keep in mind that there are four such mints in the United States. That means the government could create as many as 54 billion new coins in only 365 days.
It seems like we can afford to destroy a few of them!
Every American has had the itch to burn, cut, or deface a piece of US currency at one time or another. Whether you couldn’t resist the call of the drill press in your high school woodshop or needed to follow a craft tutorial online, you’ve probably damaged some of your cash. The question is: is destroying money legal, or did you commit a tiny crime?
We’ve created this guide for anyone who feels guilty about drawing a mustache on George Washington or putting a few pennies in a coin stretcher at Disneyland. Read on to explore the history of burning money and whether it’s legal to destroy federal money today.
A Brief History of Currency in America
Before the eighteenth century, teenage vandals and political activists would have had difficulty finding money to destroy. In the early colonial days, colonists and traders sometimes used the coins from other countries to stand in for currency. In some areas, tobacco farmers used a warehouse-based receipt system.
The earliest paper money wasn’t backed by gold and silver but by land. The land was like collateral. The local land office controlled paper money’s value.
Early paper money funded government offices, so colonists couldn’t get away with not paying their debts. Failure to pay would mean foreclosure, with land sold to support the government. At the time, taxes were essentially unnecessary, especially in the North.
Things changed during the Revolutionary War when the Continental Congress began issuing paper notes backed by anticipated tax revenue. They were too easy to counterfeit, losing all value by the war’s end.
The Mint took over after the war, beginning with silver coins and moving on to gold coins. These coins contained metal that was approximately worth its stated value.
Gold and bullion-backed paper money would appear by 1865. These were gold and silver certificates and look like our paper money today. They became obsolete in 1933 when we switched away from the gold standard.
Federal Reserve Bank Notes appeared around 1913 and received financial backing from one of the twelve Federal Reserve Banks. We shifted to Federal Reserve Notes over time. In contrast, these notes utilize the nation’s central banking system and represent 99% of paper currency in America today.
Why Would Anyone Destroy Money?
Coins minted before 1933 usually contained about 90% silver or gold. Compare that to today, when a quarter contains 75% copper and 25% nickel. Melting a contemporary coin might be fun, but it won’t be a lucrative endeavor.
After the Civil War, melting coins for gold and silver was common, especially in the South. The war took a massive financial toll on the nation. This practice is why Civil War-era coins are such valuable collector’s items.
We also saw coin melting during The Great Depression. Banks were failing, and Americans got scared. They knew their precious coins would be worth something even if the economy collapsed, so they began hoarding and melting them.
Ultimately, President Roosevelt made gold coin ownership illegal in America. Citizens had to turn in their coins, and the government melted them down.
On the other hand, paper money didn’t have any inherent value. In some cases, it made more sense for Americans to burn their paper notes for warmth rather than spend them.
When the US left the gold standard, destroying money for its financial value became rare. Still, people found other reasons to deface their cash.
Burning Money as Political Protest
Although uncommon, some Americans have burned or defaced money as a political protest. It is a way to make a statement without impacting the world’s overall wealth. It shrinks the monetary supply and emphasizes the intrinsic worthlessness of the currency itself.
Artists have burned money as a statement, too. For example, “Burn Your Money” was an interactive exhibit at the Burning Man festival. Participants ripped, defaced, and ultimately burned the paper money in a performance on the playa.
Burning Money for Behavioral Health
Money burning is sometimes used as a tactic in behavioral health to help individuals break negative habits. For example, when patients bite their nails or engage in hair plucking, they must burn a dollar bill. This immediate negative consequence is often enough to rewire the brain, helping patients break their lifelong habits.
You can learn more about the efficacy of this approach in Tic Disorders, Trichotillomania, and Other Repetitive Behavior Disorders by Douglas W. Woods and Raymond G. Miltenberger.
Is Destroying Money Illegal?
Burning money is illegal in the United States under 18 U.S. Code § 333, mutilation of national bank obligations. It covers bank bills, drafts, notes, or other evidence of debt issued by the government. The consequence is a fine or imprisonment of up to six months.
The bill must be “unfit to be reissued,” which means the funny glasses you drew on Alexander Hamilton are probably okay. The government does lose some money each time you destroy a bill of any value. The cost to print a new one is approximately five cents.
There is little evidence that anyone has received a fine or arrest warrant for defacing government currency, even in a public forum.
Money is not technically considered personal property. Think of it as being on loan from the government. Unfortunately for the dramatic folks among us, you can’t order someone to burn your remaining cash upon your death.
What about coins? Technically, their destruction isn’t illegal unless you’re doing it to commit a crime. In other words, if you’re melting down a penny as part of a counterfeiting operation, you can still go to jail.
It’s also no longer legal to melt down coins for their metal. The raw materials in metal currency aren’t worth very much. It would probably cost you more to melt them than they’re worth!
All that to say, feel free to enjoy your collection of souvenir stretched pennies! They are perfectly legal in the United States—and lots of fun!
Is It Ever Legal to Destroy Money?
Three organizations can legally destroy currency in the United States. They are the Bureau of Engraving and Printing, The Federal Reserve, and The United States Mint. The government legally destroyed 2.6 billion dollar bills in 2010!
A bill or coin that is “mutilated” gets sent to one of these institutions, usually by a bank. Banks turn in about 25,000 paper notes annually. The government shreds and recycles them before printing more.
The Federal Reserve destroys money when it’s time to remove it from circulation. Often, this is because it’s old. Older bills are hard to use in electronic readers, ATMs, and vending machines.
By destroying old bills and issuing new ones, the Federal Reserve makes it easier for consumers to spend and use their cash. $1, $5, and $10 bills have an average life of under four years. $20 notes can last up to five years before retirement.
Over six billion paper notes get retired and replaced annually. The majority are $1 and $20 bills.
Legal Ways to “Destroy” Your Money
Do you “have money to burn?” If you want to get rid of cash quickly, we suggest donating it to charity and reaping the tax benefits! We won’t stop you if you’re feeling destructive and want to mess with your money for entertainment purposes, however.
Even though you probably won’t get a fine, it’s still best if you stay on the right side of the law. Here are a few ways to toy with your cash without any chance of getting sent to jail.
Dollar Bill Origami
If you’re giving cash as a gift, turn it into a piece of art first! Research instructions online for paper folding techniques that will elevate your humble paper notes into sculptural masterpieces. If the recipient loves their dollar bill crane enough, they’ll keep it on their dresser, which has the same effect as removing it from circulation.
Loose Change Drink Coasters
Resin is a popular crafting material. Grab some molds, arrange your loose change, and pour clear resin to create some fancy coasters!
You can do anything you want to US coins if you aren’t breaking any laws! You can drill holes, wrap them in wire, or use a jeweler’s saw to cut out the silhouettes. If you have a nickel allergy, you might want to coat the coins in clear nail polish first!
Stop! Don’t Destroy That Dollar!
The meaning and value of coins and paper money have shifted over the years. Where we once had valuable coins one could melt down for profit, we now have invisible currency stored on debit cards. Whether you shop with cash or a card, resist the urge to destroy your paper money, or the US Government just might come after you!
If you’re looking for more posts about the history and role of handling money in America, you’ll find a lot more information on the blog. Start with this post about how to withdraw funds early from your 401(k).