The economic turmoil of the Civil War drove most small-denomination coinage out of circulation. Even one cent coins were hoarded, perhaps because they were the only remaining federal coin that had not been totally driven out of circulation. Various substitute forms of currency served in everyday commerce, including small-denomination paper currency notes and privately-issued bronze tokens. In 1864, in an effort to get the cent to circulate once more, Congress changed its composition from a copper-nickel alloy to bronze, which was easier to strike into coinage, and reduced its weight, making it less valuable.
At this time, Philadelphia industrialist Joseph Wharton controlled most of the country’s nickel production from a large mine in Pennsylvania. He was eminently displeased with the elimination of nickel from the coinage and sought the introduction of new copper-nickel coins. Wharton argued that a new three-cent coin could replace the unpopular three-cent paper notes which had been previously issued. There were already one-cent and two-cent coins in circulation, and a three-cent coin was not without precedent – the three-cent silver piece had been produced from 1851. Congress passed authorizing legislation for a three-cent coin comprised of 25% nickel on the final day of the Congressional session in March 1865, and President Abraham Lincoln signed the bill into law just minutes before his second inauguration. Wharton successfully used a similar argument to get a five-cent coin of the same composition authorized the following year. The five-cent coin became known as the “nickel” and retains this same composition up to the present day.
The Mint’s Chief Engraver James B. Longacre essentially repurposed pieces of his previous designs for the three-cent nickel. The westward-facing representation of the goddess Liberty is essentially the same figure depicted on the Liberty Head Cent (1859) and the three-dollar gold piece (1854), but with different headwear. The reverse of the three-cent nickel bears the roman numerals “III” representing the coin’s value, a design essentially copied from the reverse of the silver three-cent piece. These numerals are combined with the same wreath from the reverse of the Liberty Head Cent.
The new three-cent piece was very popular in the years immediately following its release. Millions were exchanged for ragged three-cent paper notes. However, it declined in circulation from the mid-1870s. New silver mines out west brought more supply of that metal onto the market, and silver coinage which had been hoarded for years began to circulate once more. In 1883, the cost of a postage stamp was lowered from three cents to two cents, thus eliminating one of the primary uses of the three-cent nickel. The five-cent nickel eventually overtook the three-cent nickel in popularity (today, it is still referred to as “the nickel” in popular discourse). The three-cent nickel was finally discontinued by an Act of Congress in 1890, though 1889 was the final year of production. Many 1888 and 1889 three cent nickels were never released and melted – many became Liberty Head nickels, which were produced in large quantities in the years leading up to the Panic of 1893.
Proposals for the revival of a three-cent piece surfaced periodically over the next few decades, most recently during the material shortages of World War II, but the coin was never produced again. It was never a particularly popular issue among collectors; there were no major design changes during its production run and there are few varieties to collect.