HOW TO TRADE YOUR PENNIES FOR CASH--OR A TAX DEDUCTION
By ELIF SINANOGLU

(MONEY Magazine) – SAY WHAT YOU WILL ABOUT THE WORTH OF THE PENNY, BUT THE plucky little copper-coated coin is doing its bit to reduce the federal budget deficit. Because of an arcane concept called seigniorage (dating to feudal days, when local lords, or seigniors, charged for minting coins), the U.S. Government actually makes money by producing them. The profit: three-tenths of a cent on every penny, or roughly $390 million on the 13 billion pennies the Treasury will mint this year. Those 13 billion join the 170 billion already in circulation--which, in the case of pennies, often means the opposite, as countless coins languish in drawers or coffee cans.

If your personal pile of pennies is beginning to weigh on you, here are some ways to lighten the load.

Exchange them for paper money at the bank. Banks vary in their enthusiasm for taking pennies, and most won't accept them at all unless you're a regular customer. Some require that your coins be rolled in 50-penny wrappers, while others prefer them loose. So call before you show up with your coffee can.

Donate them to charity. Penny drives run by a range of charities will gladly take those pennies off your hands. For example, the Los Angeles-based A Penny for AIDS effort (800-847-3669), which has raised more than $600,000 for AIDS research, collects pennies donated at retailers across the country, including Tower Records on the East and West coasts. The Kindness Foundation in Dallas (214-223-5463) began a "Pennies from Heaven" drive last May to help victims of the Oklahoma City bombing and has so far collected 1.4 million pennies ($14,000). Local Salvation Army stores also accept jars of pennies and will give you a receipt for tax purposes.

Organize your own penny drive. To learn how to start a penny drive for a worthy cause, call Common Cents New York, a nonprofit group in New York City (212-736-6437) that helps other nonprofits transform "idle pennies into useful dollars."

Look for machines that still take them. Since 1994, the U.S. Postal Service has installed more than 4,500 stamp vending machines that accept pennies along with other coins and bills. Also, supermarkets in California and three other states have installed self-service machines that will redeem your pennies and other pocket change for either dollars or vouchers good at that store. What's in it for the machine? It gets to keep 5¢ out of every dollar.

--Elif Sinanoglu