Are Pennies Discontinued in the United States?

The United States penny is not being discontinued, though its production is slated to halt due to economic considerations. The one-cent coin will remain a valid form of currency. This article clarifies the penny’s current status and the factors contributing to misconceptions about its future.

The Penny’s Current Status

The U.S. Treasury Department announced plans to cease manufacturing new pennies starting in 2026. Production will conclude once current supplies are exhausted, anticipated in early 2026. However, the penny will continue to be legal tender and remain in circulation. Only Congress holds the authority to formally eliminate a form of currency.

Reasons for Speculation

Speculation about the penny’s discontinuation arises from several factors. The rising cost of producing the coin is a primary reason. In fiscal year 2024, it cost approximately 3.69 cents to mint and distribute a single penny, nearly four times its face value. This discrepancy led to an $85 million loss for the U.S. Mint in 2024.

Another factor is the precedent set by other nations. Several countries have phased out their lowest-denomination coins due to similar economic inefficiencies. Canada, for example, ceased penny production in 2012 and distribution in 2013. Australia removed its 1- and 2-cent coins in 1992, and New Zealand eliminated its 1- and 2-cent coins in 1990, later discontinuing the 5-cent coin in 2006. Some European countries have also stopped minting their 1- and 2-cent euro coins, opting for rounding rules in cash transactions.

Legislative proposals and discussions within the U.S. Congress have also fueled public uncertainty. Bills to halt penny production have been introduced over the years, though none gained full approval. These debates, combined with increasing production costs and international trends, contributed to the perception that the penny was nearing removal from circulation.

Ongoing Considerations

The decision to halt penny production is influenced by economic principles such as seigniorage, which is the profit a government makes from issuing currency. Since the cost to produce a penny exceeds its face value, the government experiences negative seigniorage, meaning it loses money on each coin created. This financial inefficiency is a significant driver behind the Treasury’s move.

As pennies gradually become scarcer, cash transactions will likely be rounded to the nearest five cents, a practice common in countries that have eliminated their lowest-value coins. This rounding, known as Swedish rounding, typically applies only to cash payments, while non-cash transactions remain unaffected. However, ending penny production could increase the demand for nickels, which are also expensive to produce, costing approximately 13.78 cents per coin in fiscal year 2024.

Public sentiment and tradition also play a role in the penny’s continued status as legal tender. Many view the penny as having historical significance and believe its absence could lead to increased consumer prices due to rounding up. Additionally, various charitable organizations rely on penny drives for fundraising. While pennies remain legal tender, businesses are not legally compelled to accept them for payment, though they are valid for debts.