What Does the Government Do with Old Money?
Money wears out from constant handling, and is sometimes damaged or destroyed accidentally. The average life of a $1 bill, for example is about 18 months. Larger denominations usually last longer, since they don’t circulate as often as the $1 bill.
The United States Treasury asks the banks to return old, worn or torn money to be exchanged for new. When worn-out bills arrive at a Federal Reserve Bank, the old currency is destroyed in a machine called a macerator, which shreds the bills into tiny confetti-sized pieces of paper.
However, the Bureau of Engraving and Printing sells small quantities of them as souvenirs. Larger quantities may be available to artists and manufacturers, with the consent of the Treasury Department, Federal Reserve Bank and Environmental Protection Agency.
Damaged and worn coins are sent to the mints for melting and making new coins.