Why is a Canadian dollar a coin?

Answer 1

Because it's cheaper and more efficient than using paper dollars.

Most countries normally use coins for low-denomination amounts and bills for higher amounts. The reasoning is that low-denomination money gets a lot of use and should be made of something that puts up with wear, while higher-denomination money isn't used as much and is difficult to carry as large coins.

Because of inflation the meaning of "low denomination" has changed. For example in the 1950s a candy bar might have cost 5 or 10 cents, a loaf of bread was a quarter, and so on. That meant you could use a few coins for ordinary purchases. But today, with many prices well over a dollar for similar items it takes a lot of bills to pay for the same things. That means paper money is being used more and more.

The problem is that increased use means increased wear and tear. In the U.S. almost half of the bills in circulation are $1 bills and they only last about 18 months before they wear out. Many other countries found themselves in the same situation and determined it made sense to replace their lowest-value paper money with coins. Even though coins cost more to make, they stay in circulation for 30 to 50 years so the long-term cost is actually much less. That's why there are no longer $1 bills in Canada, Australia, or New Zealand, no £1 notes in England, etc.

The transition from bills to coins in those countries was fairly straightforward because the national mint and/or treasury department made the decision. However in the U.S. coins and currency are subject to Congressional approval. That's caused all sorts of problems because there are industries whose profits depend on the continued production of paper money. For ex. Crane Paper manufactures the paper itself, other companies make bill-readers and sorters, etc. These firms have lobbied heavily for continued production of $1 bills even though numerous studies have shown that it would save the government nearly $1 billion a year if we switched to $1 coins exclusively.

Bottom line, Canada isn't the country that's the "odd man out" in using $1 coins.