Testy Dollar Days at Change Machines

Times Staff Writer

Question: Maybe you can explain to me why Los Angeles is such an elephants' graveyard of worn-out dollar bills. I don't think that in any other part of the country have I ever collected so many dollar bills that are dogeared, torn and worn down to tissue-paper thinness--to the point where they're almost unreadable. At least half of the dollar bills that I try to use in change machines are spit back out as unacceptable.

I don't think this is my imagination, because my friends have been commenting on it too. Any explanation?--C.W.

Answer: A highly unscientific, random sampling of dollar bills among our better-heeled co-workers would suggest that this isn't a figment of your imagination: The quality of the bills examined ranged from "fair" (Washington looking a bit like Dustin Hoffman) to a couple that had apparently experienced a few bad hours in a grape press.

And you will be pleased to hear that Rose Pianalto, an analyst in the Federal Reserve Board's bank operations division in Washington, doesn't think that you're imagining it either.

"I doubt if it's unique to Los Angeles," she said. "I suspect that it's far more widespread than that."

Why? Pianalto said she suspects that the root cause has to do with the proliferation of automated teller machines (ATMs) across the country.

"These machines use fives, 10s and 20s, and they (the bills) have to be in prime condition or they won't work. So the banks are almost forced to send these denominations back for replacement a lot more frequently than before. And it costs money to send bills back to the Fed."

Faced with higher shipping costs because of all those fives, 10s and 20s (worn or not, they're still legal tender and can't be sent back to the nearest Federal Reserve Board regional bank in a shoe box, parcel post), "I suspect that (the banks are) trying to offset the higher shipping cost by cutting back on the number of one-dollar bills they return," Pianalto said. "It's cheaper to hold on to them and send them back out in circulation again. And, of course, we can't force them to send them back for replacement."

The life expectancy of a new dollar bill, she said, is about 15 months, and it used to be much longer for the higher denominations, because they didn't get as much handling. "But now, because of the higher-quality requirements of the ATMs, the gap has narrowed and the fives, 10s and 20s themselves have a life expectancy of only about 18 to 24 months."

Bills sent back for replacement "are fed into a high-speed machine that not only counts them for verification but also weeds out the ones that are worn, dogeared or otherwise due for shredding." About $6 billion a year (face value) in paper money is shredded and replaced, Pianalto said, about half of that in ones.

The Tellers Decide

A local banker concedes that Pianalto "may have a point. Unfortunately, it's a subjective decision by the individual tellers, and the criterion is whether or not the bills taken in are stackable and countable."

And into this category of stackable/countable, apparently some tellers would lump 2-day-old wet spinach leaves.

"Another inhibiting factor at the branch banks," he said, "is the individual policy of the branch stipulating that X number of bills have to be amassed before it will go to the expense of sending them back to the main office--it has to be done by courier service. After all, it's still money."

It's also human nature to take the easier way out when confronted with the need for making a decision--like doing nothing.

We can all take heart, Pianalto said, because a concerted effort is being undertaken by the Federal Reserve Board to upgrade all of the country's currency--from the printing process itself to more frequent recycling of bills in circulation.

So be patient and, in the meantime, try not to handle your dollar bills with wet hands.

Don G. Campbell cannot answer mail personally but will respond in this column to consumer questions of general interest. Write to Consumer VIEWS, You section, The Times, Times Mirror Square, Los Angeles 90053.

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