The Penny, R.I.P.
The decision to stop producing the U.S. penny marks a notable shift in how Americans will handle small transactions. The move raises questions about the future of this coin and its place in daily commerce. What does this mean for everyday customers? Will people stop accepting pennies, or will they continue to be used for a long time? Understanding the reasons behind this decision helps shed light on its potential impact.
The U.S. penny, a coin that has been a part of American currency for centuries, is facing its obsolescence due to a mix of economic and practical considerations. The primary reason is the cost. It simply costs more to make a penny than the penny is worth. In 2022, it cost 2.6 cents to produce a single penny, meaning the U.S. Mint was losing money on every coin it produced. This has been a consistent issue for years, with the production cost often exceeding the face value of the coin. This financial drain on the U.S. Treasury became unsustainable.
Another factor in the decision is the declining usefulness of the penny. With rising prices, the purchasing power of a single cent has significantly diminished over time. Many people find pennies cumbersome, often accumulating them in jars or discarding them, rather than using them. This leads to a vast number of pennies being taken out of circulation, further adding to the inefficiency of their production. The idea of "penny-shaming," where people are often encouraged not to use pennies or are given odd looks for doing so, illustrates this point.
For American customers, the end of penny production will bring changes to how transactions are rounded. Retailers and businesses will likely round prices to the nearest nickel. This practice is already common in countries like Canada, which phased out its penny in 2012. For cash transactions, if a purchase totals $1.98, it might be rounded up to $2.00, or if it's $1.97, it might be rounded down to $1.95. Electronic transactions, like credit card payments, will remain unaffected as they can process exact amounts.
Some wonder if people will continue to accept pennies. For a period of time, it's highly probable that pennies will still be accepted. Existing pennies will remain legal tender, meaning they can still be used to buy goods and services. Businesses might gradually phase them out. But it won't be an immediate disappearance. Over time, as fewer new pennies enter circulation, their presence in daily transactions will naturally decrease. This transition will likely be gradual, allowing customers and businesses to adjust. The psychological attachment to the penny, a coin with a long history, may also play a role in its lingering acceptance.
Sources The Wall Street Journal. U.S. Penny to Be Phased Out, Trump Administration Says. AP News. The Penny's Demise: What It Means for Your Wallet. Reuters. Why the U.S. Penny's Time Is Up. National Bureau of Economic Research. The Costs and Benefits of Eliminating the Penny. The New York Times. Penny Wise, Pound Foolish? The Debate Over Coin Production. Council on Foreign Relations. The Future of U.S. Currency: Lessons from Canada's Penny Phase-Out.
