Big Change Up North, No More Pennies

Discussion
Feb 01, 2013

Canada isn’t going to mint pennies any longer. It costs the Canadian government 1.6 cents for every penny made. Beginning next week (Feb. 4), the country will begin phasing out the currency.

According to a survey conducted by the Retail Council of Canada, roughly 53 percent of Canadian merchants will be ready next week when the change starts to take place. Twenty-four percent are not ready and the rest are unsure as to whether they are prepared for the phase out or not.

"In the short term, there is going to be a bit of confusion," Karen Proud, a vice president at the Retail Council of Canada, told the Ottawa Citizen.

As to what retailers will do when they run out of pennies to make change, 56.4 percent plan to follow the Canadian federal government’s guidelines for cash transactions. Nineteen percent will round down transactions to the nearest five or 10 cents.

The vast majority of stores (66.8 percent) plan to handle rounding manually at the point of sale while 24.2 percent have programmed their POS systems to automate the process.

The relative value of pennies is also a topic that has been broached in the U.S. over the years. While estimates vary depending on the current market cost of the metals used in the production of a penny, in 2012 it cost the U.S. Treasury 2.4 cents to make a cent. Nickels cost 11.2 cents to produce.

Should the U.S. government phase out the penny? If yes, how should the process to be handled to cause the least amount of confusion and cost to retailers?

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24 Comments on "Big Change Up North, No More Pennies"


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David Livingston
Guest
9 years 3 months ago

Round to the nearest nickel. Problem solved. Also get rid of the $1 bill. Australia got rid of pennies and it’s not a problem. Canada ditched the $1 and $2 bills for coins. I’m hearing the $5 bill is the next to go. Many of the older pennies before 1982 have been taken out of circulation for the copper value.

Ian Percy
Guest
9 years 3 months ago
Is the question “should” or “will?” There are SO many things that the US ‘should’ do because it’s right, true and good. Removing pork from legislation. Having controls on weapons of mass destruction. Minimizing the role of lobbyists (I just learned that there are 4 times as many health care lobbyists as there are members of Congress) And on and on. We like to think we’re the most advanced nation on the planet but truthfully change on any kind of scale is almost impossible no matter how much sense it makes. I’m sure the cost of pennies is about the same or greater here in the US. But isn’t the right to have pennies in the Constitution? Canada changed its flag. It made the dollar into a coin that lasts forever. Did the same thing with the $2 bill—in the US most people still think the $2 bill is counterfeit. Now it’s dropping pennies. No matter what national change, leaders had the courage to do it because it made sense. And yes with every change… Read more »
David Biernbaum
Guest
9 years 3 months ago

I can’t think of too many good reasons anymore why the U.S. needs the penny. However, I would love to hear the thoughts from an economist on this topic.

Adrian Weidmann
Guest
9 years 3 months ago

The penny should have been phased out a long time ago. I’m 99.99% sure. This denomination simply doesn’t make ‘cents’ anymore. With all the technology available today, it should be fairly straight forward for POS systems to handle this.

I’m certain that brands and retailers alike will take commercial advantage of the transition and the majority will round up from any decimal point. Any business that sells something for 1 cent that costs 2.4 cents to manufacture would be out of business very quickly. Perhaps our government should once again pay attention!

Gene Hoffman
Guest
Gene Hoffman
9 years 3 months ago

Coins are cute and costly.
Nickels too fit that bill.
But to lose the penny icon
Somehow goes against my will.

Conditions change what once was
And we must go with the flow.
So round up to the higher digit
And I’ll just live with that blow.

Steve Montgomery
Guest
9 years 3 months ago

Is a penny saved, a penny earned? At one time yes, but today no so much. The rounding issue gets interesting for both the retailer and the consumer. Do you price in $.05 increments or do you simply round of the total of the transactions?

How about the taxing authorities? Are they going to be willing to accept that the amount of taxes collected and paid may not match up to what was recorded as a taxable sale? The problem may be solved with POS devices that automatically round, but for those that employ a manual system, this gets interesting.

Can it be done? Yes. Will it be done? Likely. Will it be interesting? Certainly!

Mel Kleiman
Guest
9 years 3 months ago

It is not the retailer who should have problems with the pennies, it is the government, based on the sales taxes. That is the what would keep sales from being an even amount. It’s easy to go to prices that end in even numbers.

If I want to look at this as a conspiracy, I would see it as a way for the government to raise taxes.

Max Goldberg
Guest
9 years 3 months ago

Let’s see how things go in Canada and then make a decision. In an ideal world, the penny should be phased out, but the world is rarely ideal.

Throughout the EU, a 1 euro coin is used in place of paper currency. The US has debated this for years, but the public does not want to carry coins.

The government can save money by eliminating the penny and the paper dollar. Sometimes change is good and sometimes the public won’t accept it.

Robert DiPietro
Guest
9 years 3 months ago

Maybe the penny is the government’s loss leader? Purely an emotional response, but KILL THE PENNY!

Warren Thayer
Guest
9 years 3 months ago

We stopped making the half cent in 1857, and prices have gone up considerably since then. I think that dropping the low-end coin every 150 years or so certainly seems reasonable. I’d even get daring and suggest we do away with the nickel also. Electronic transactions, mortgages, etc., can still be multiplied and divided using pennies if we like. Keeping the penny (and the nickel) just makes no sense anymore.

Tony Orlando
Guest
9 years 3 months ago

I like my 99 cent sales to go against the $1.00 sales next door to me at Dollar General. People love the 99 cent stuff, and I know it sounds crazy, but the 99 cents is and has been an effective tool for promotions.

Just my IMO, and either way, if it changes, they won’t consult me on it anyway.

Doug Fleener
Guest
9 years 3 months ago

Absolutely. Spending 1.6 cents to make a 1 cent coin doesn’t make sense. Sounds like something the post office would do.

I recently did a two week speaking tour in Australia, and they do fine without pennies. They phased them out years ago. If I remember right, the POS did all of the rounding, and it worked great.

Ben Ball
Guest
9 years 3 months ago

Convenience drives our willingness to throw the penny overboard. But it might be worth a moment to consider the source of our discontent as demonstrated by those countries that have already ditched the copper.

The reason we don’t (and they didn’t) need pennies any more is because we have so debased our currency that the increment is not longer meaningful. Yesterday’s penny is today’s nickel and tomorrow’s dime.

Do I carry pennies or yearn for their retention? No, not really. Do I wish a penny was still worth saving? Oh hell yes!

David Zahn
Guest
9 years 3 months ago

I am all for phasing out the penny. In fact, as a practice run (going on 40 plus years now—I need a lot of practice), I stopped using the one dollar bills when playing Monopoly for much of the same reasons—they tend to slow down the game/transactions, don’t add any significant value, and are more a nuisance than anything else.

Cathy Hotka
Guest
9 years 3 months ago

One of the obvious effects on retailers would be the elimination of prices that end with “.99” and “.98.” In an era of electronic payments, pennies don’t make sense, but Sam Walton will be rolling in his grave.

Lee Kent
Guest
9 years 3 months ago

I’m all for the exit of the penny. They really are silly and take up so much room in the wallet. I get ‘cha Tony, but maybe they could just change that to 95 cents instead!

Ralph Jacobson
Guest
9 years 3 months ago

The U.S. Government should set the global trend and eliminate ALL currency! We are killing our economy not only because of the high cost of producing the currency, but also because of the high labor costs at retail, and the high cost of international counterfeiting.

All consumers, even low income people can utilize mobile technology and smart card to make literally every transaction electronic. The time has come to stop printing money! Long Live ePayments! (LOL)

Tina Lahti
Guest
Tina Lahti
9 years 3 months ago

I do not see this happening in an era where state and local governments levy sales taxes in portions of a percent. If we want to save money on minting currency, we should start by eliminating the dollar bill. Now that businesses can charge fees for accepting credit cards, I would expect a resurgence of the use of cash for small purchases. Broader acceptance of $1 coins would help make this easier.

Craig Sundstrom
Guest
9 years 3 months ago

First they came for the pennies,
then they came for the nickels,
then they came….

OK, depennyization is probably not that serious an issue, but the arguments in favor of it I don’t find very compelling either. The actual cost of minting a 1 cent piece is somewhat irrelevant, since it’s used thousands of times in its lifetime (it’s NOT like we’re spending 2.4 cents for every transaction). But the bigger question I have in all this is, why are—or were—our 1 cent pieces so much more expensive to make than Canada’s?

Sid Raisch
Guest
Sid Raisch
9 years 3 months ago

99 cents does not go away for those who didn’t read carefully. The actual pennies at the end of the transaction are rounded so there are only nickels and greater used to make change when paid by cash. The pennies remain on electronic transactions.

Yes, pennies should have gone back when they started to cost more to make than to take. DUH! Actually, long before that. Even if it cost a tenth of a penny to make a penny the math is bad. Oh well, it’s only been tax money that paid for them, not mine.

Ed Rosenbaum
Guest
9 years 3 months ago

Round off to the nearest $0.05. What’s the big deal? It seems simple enough. Maybe that’s why there is confusion.

Mark Burr
Guest
9 years 3 months ago
Hmmm…Does that mean everything goes to a pricing level of .00, .05., or you get the idea? Years ago, the retailer I grew up with had an affection for the number seven. I remember a very heated discussion where I questioned why they used seven as the ending digit in every price versus nine. After all, would the two cents make that much different to the customer? Honestly, they considered their seven pricing method as a point of differentiation. Nevertheless, unlike any employer since, they agreed to relent and try moving to nine as an ending digit. Back then, the average item sold was around $1.85 in a volume of $400K weekly. Doing some simple math and rounding it amounted to around 200,000 items per week sold. Taking that a step further, it is around $4K per week difference. In a penny business, $4K versus an affection for sevens won in the end. Small victory? Maybe. The point is, most retail is a penny business. I’m not sure it has been totally thought through of… Read more »
Vahe Katros
Guest
Vahe Katros
9 years 3 months ago

The answer is yes and the government might want to solicit ideas regarding how to solve this—I bet there could be some amazing win-win ideas.

Alexander Rink
Guest
9 years 3 months ago

Many countries have successfully phased out the penny without falling apart or experiencing unusual levels of inflation. The Netherlands and Finland are just 2 examples of European countries who have stopped manufacturing both the 1 and 2 cent euro coins.
Australia eliminated their 1 and 2 cent coins more than 20 years ago, and Singapore followed suit and eliminated pennies in 2002. If it is costing the government more to produce than it is worth, it definitely makes sense to halt the production of the penny.

Handling the situation as the Canadian guidelines suggest makes the most sense. Round up OR down to the nearest nickel, and don’t round on electronic transactions. Since only about 20% of POS transactions are actually cash transactions, handling the situation this way should not cost either the consumer or the retailer a significant amount.

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