The penny is going away. How do you feel about that?

The U.S. recently stopped minting pennies, largely because they cost more to produce than they are worth. And a reader wrote in to ask if we could have a penny-based discussion, because she has some concerns.

I hadn’t looked into this a whole lot, but after reading the opinions of people who know more about this than me…I am not particularly worried.

Prices can be rounded both up and down

From what I’ve read, companies will employ typical math rounding rules; a $9.98 purchase will round up to $10, whereas a $9.96 purchase will round down to $9.95.

Some companies are also choosing to round in the customer’s favor. 

This economics professor says that the rounding up and rounding down should balance out and will not have a noticeable effect on consumers.

And this economics professor says the same thing.

This Richmond Fed article says things will err slightly more on the side of rounding up, but if my math is correct, this comes out to an increase of $42.60/year per person, which is not terribly significant. EDIT: Reader MB astutely pointed out I did my math backwards!! It’s actually less than $.03/person/year. Ha.

(Related: one study said that since so many prices end in 9, there would be a lot of rounding up. But this study didn’t consider sales tax; in states with a retail sales tax, a $9.99 price always ends up as some other number after tax. Also, people are often buying more than one item, which means that a transaction total will often not end in a 9.)

This only applies to cash transactions

If you are using electronic payments, you shouldn’t experience rounding at all. So, if you are concerned about the prices, you can stick with electronic payment methods. 

Inflation has caused this before

You know how we used to have half-pennies? Those made sense at one time, but if we still had half-pennies now, we could all agree that would be rather silly.

Half-pennies got phased out back in 1857, and we just rounded numbers to make prices work with the whole penny.

In the same way, modern pennies are not very useful; prices of everything are just too high for the penny to make sense.

Other countries have already done this

Canada stopped making their penny back in 2013, and other countries have also discontinued their lower-denomination coins before. I am not an expert in the details of the effects of this change, but I am assuming that if there had been major consequences, we would have heard about it. 

I tried doing some googling, especially about Canada, and could not find any cause for concern.

To sum up, I’m not personally worried because:

• rounding may cost us very little
• there’s a pretty good precedent for this type of thing
• most of us can just choose electronic payments

Concerns for others

The cessation of penny production will be fine for me personally. But what about concerns for others?

If it does turn out that price rounding will err on the side of going up, it will have a disproportionate effect on people who rely on cash for payments, which includes populations such as those who are unhoused and/or don’t have bank accounts. It’s a lot harder to use electronic payment methods when you don’t have a bank account. 

I have also seen concerns that people will give less to charities because they won’t have random coins in their bags to toss in donation buckets. Still, given how few people actually carry cash and coins these days (me included!), I am a little skeptical that this will be significant. 

Many people, especially those younger than me, don’t even carry credit cards with them; they have everything loaded on their phones.

For these people, the demise of the penny has no effect on their cash-carrying habits; they were living the cashless life before!

(To wit, the Salvation Army already added cashless options because most modern shoppers weren’t carrying coins to donate to the red buckets. And this was before the penny got canceled.)

Also, people who do carry coins will still have nickels, dimes, and quarters with them, and those can be tossed into charity coin buckets.

All that said, since penny production is already over, it’s not as though we can change this.

So, if the penny issue is weighing on us, the best thing we can do is to make a point of helping those around us. 

A penny for your thoughts?*

(I couldn’t resist!)

What do you think about the cessation of penny production? And Canadians, I’d love to hear how it’s gone for you!

P.S. It’s funny to think about this and all the other phrases in our language that will be outdated…things like:

• penny-pincher
• counting your pennies
• giving your two cents’ worth 
• “a penny saved is a penny earned”
• an item “costing a pretty penny”
• “worth every penny”