Are Pennies Going Away? The Debate Over Elimination
Understand the debate over the US penny's future, its economic impact, and the practical changes if it were eliminated.
The penny’s presence in daily transactions often raises questions about its future. Many wonder if the one-cent coin, a symbol in American currency, is nearing its end. This debate stems from economic considerations and shifts in consumer habits, helping to understand the penny’s evolving financial role.
The Penny’s Current Status in the United States
The U.S. penny remains a circulating coin and legal tender. However, the U.S. Treasury Department announced plans to halt penny production starting in 2026, with the final order for penny blanks placed in May 2025. This decision signifies a shift, but existing pennies will not immediately become worthless or be recalled. The vast number of pennies in use suggests they will gradually disappear as they are lost or damaged, rather than through immediate removal.
Arguments for and Against Penny Elimination
Arguments for elimination focus on the cost of production, which exceeds the coin’s face value. In 2024, it cost 3.69 cents to produce a single penny, leading to substantial financial losses for the U.S. Mint, estimated at $85.3 million. The penny’s diminished purchasing power due to inflation means it buys very little, and handling these low-value coins in transactions is inefficient. Ending production is expected to result in an annual savings of approximately $56 million.
Arguments for retaining the penny include sentimental attachment and its historical significance as one of the first U.S. coins minted after 1792. Concerns also arise regarding the potential impact of rounding cash prices if the penny were removed, which could disproportionately affect lower-income individuals or lead to price increases. Charities often rely on penny donations, and its elimination could affect their collection efforts.
International Precedents for Coin Elimination
Many countries have already eliminated low-denomination coins, demonstrating similar transitions. Canada phased out its penny in 2012, leading to cash transactions rounding to the nearest five cents. Australia removed its one- and two-cent coins in 1992. New Zealand eliminated its one- and two-cent coins in 1990, later discontinuing the five-cent coin in 2006.
Several Eurozone countries, including Finland, Ireland, and the Netherlands, have also ceased minting one- and two-cent euro coins, opting for rounding rules in cash transactions. Sweden introduced “öre rounding” in 1972 when it withdrew its lowest-value coins. These international examples cited cost, efficiency, and low utility as reasons for their decisions, showing various approaches to managing the transition, especially regarding cash rounding.
Practical Implications of Penny Elimination
If the penny were fully phased out, the most noticeable change for consumers would occur in cash transactions. A system known as “Swedish rounding” or “banker’s rounding” would likely be implemented, where the total cash payment is rounded to the nearest five cents. For instance, a cash total ending in one, two, six, or seven cents would round down to the nearest nickel. Totals ending in three, four, eight, or nine cents would round up.
Electronic transactions, such as those with credit or debit cards, would remain unaffected by these rounding rules, as they process exact amounts. Businesses would need to adjust their point-of-sale systems for cash payments, and consumers would adapt to the new practice. This shift aims to streamline cash transactions and reduce the handling of low-value coins.