With precious metal federal coinage hoarded during the economic turmoil of the American Civil War, Congress issued paper money in denominations as small as three cents to replace the hoarded coins in commerce. These small slips of paper became ragged and dirty, and the public came to hate "shinplasters". There were proposals for a three-cent piece in copper-nickel to replace the three-cent note. The advocates were led by Pennsylvania industrialist Joseph Wharton, who then controlled the domestic supply of nickel ore. On the last legislative day of the congressional session, March 3, 1865, a bill for a three-cent piece in copper-nickel alloy was introduced in Congress, passed both houses without debate, and was signed by President Abraham Lincoln.

The three-cent nickel piece initially circulated well, but became less popular when the five-cent nickel was introduced in 1866, a larger, more convenient coin, with a value of five cents better fitting the decimal system. After 1870, most years saw low annual mintages for the three-cent nickel, and in 1890 Congress abolished it.

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