How Long Do Bills Stay in Circulation?
Learn the lifespan of US paper currency, the factors that influence its durability, and how it cycles through the financial system.
United States paper currency, or “bills,” undergoes a continuous cycle of circulation, experiencing natural wear from daily use. This process of issuance, handling, and retirement is overseen by the nation’s central bank and its partners. Each bill has a finite lifespan, influenced by how frequently it changes hands and the conditions it encounters. This cycle maintains the integrity and availability of physical cash.
Average Lifespan of Denominations
The longevity of U.S. dollar denominations varies considerably, depending on their usage patterns. The Federal Reserve tracks these average lifespans. Lower denominations, such as the $1 and $5 bills, circulate more frequently in daily transactions, leading to shorter durations in use. For example, a $1 bill typically lasts about 7.2 years, while a $5 bill has an average lifespan of approximately 5.8 years.
Conversely, higher denominations tend to remain in circulation for extended periods. A $10 bill averages 5.7 years, a $20 bill lasts around 11.1 years, and a $50 bill sees about 14.9 years of use. The $100 bill boasts the longest average lifespan at approximately 24.0 years, largely because these notes are often held as a store of value rather than being exchanged in routine purchases.
Factors Influencing Lifespan
Several factors contribute to the varying lifespans of U.S. currency. The most significant element is the frequency of physical handling and transaction volume. Bills used in everyday commerce, like $1 and $5 notes, endure constant folding, crumpling, and friction, accelerating their deterioration. This frequent exchange causes them to wear out faster than denominations typically used for larger transactions or held for savings.
The material composition of the currency also plays a role in its durability. U.S. bills are made from a blend of 75% cotton and 25% linen, a fabric more resilient than wood-pulp paper. This unique blend provides strength and resistance to tearing. Environmental conditions like exposure to moisture, dirt, or extreme heat can accelerate wear. The intricate design and security features embedded within modern notes, while crucial for deterring counterfeiting, can also influence their structural integrity over time.
Processing Worn-Out Currency
When U.S. currency becomes too worn or damaged for continued circulation, it is systematically removed from the financial system. Federal Reserve Banks across the country play a central role in this process. Depository institutions, such as commercial banks, deposit unfit currency with the Federal Reserve, where sophisticated processing equipment evaluates the quality of each note. Bills that do not meet the strict quality criteria, often due to tears, excessive soil, or structural compromise, are identified and taken out of circulation.
These unfit notes are then destroyed, typically by shredding. The Federal Reserve shreds thousands of tons of worn-out currency annually. This shredded material is often recycled or repurposed, sometimes used in compost, insulation, or even burned for energy. This destruction ensures that only fit currency remains in public hands, maintaining the integrity and appearance of the nation’s money supply.
Distributing New Currency
To replace currency removed from circulation and meet public demand, new bills are continuously introduced into the financial system. The Bureau of Engraving and Printing (BEP), an agency within the U.S. Department of the Treasury, produces all U.S. paper currency. The BEP prints billions of notes each year at its facilities in Washington, D.C., and Fort Worth, Texas, based on Federal Reserve Board orders.
Once printed, new Federal Reserve Notes are transported to Federal Reserve Bank cash offices across the United States. From these offices, new currency is distributed to commercial banks, credit unions, and other depository institutions. These financial institutions then make the new bills available to the public through withdrawals and other banking services, completing the cycle of currency circulation and ensuring a steady supply of fresh, fit notes.