A penny for your thoughts
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Bridging the Divide
Chuck Bradley
The U.S. is ending penny production, and while pennies will remain legal tender, the impact on the economy will likely be minimal, with some minor changes to cash transactions. Prices may be rounded to the nearest nickel, potentially affecting consumers, particularly those who rely on cash transactions.
The U.S. Treasury has officially ended the production of pennies. The U.S. Mint has made its final order for penny blanks, and production will cease once those blanks are used. Although pennies are being discontinued, pennies already in circulation will remain legal tender and can still be used.
Without pennies, cash transactions may be rounded to the nearest nickel. Some prices, particularly those ending in 99 cents, may be rounded up.
Rounding would primarily affect cash transactions, as digital payments can handle exact amounts. Those who primarily use cash may be most affected by rounding.
The U.S. Mint will save money by not producing pennies, as they cost more to make than their face value. Some argue that eliminating pennies will streamline transactions and reduce the time spent handling small change. If pennies are eliminated, some suggest the nickel could be the next coin targeted for removal, which also cost more than their face value to produce, potentially offsetting some of the savings.
The decline in cash transactions, with most estimates of more than 80% occurring digitally, may lessen the impact of penny elimination. Other countries have successfully eliminated low-denomination coins with varying results, with some prices rounding up and others down.
While the U.S. Mint would save money on production, businesses might need to adjust pricing strategies and potentially update point-of-sale systems, while consumers could experience rounding up of prices, particularly in cash transactions.
The rounding of prices could complicate sales tax calculations, potentially leading to minor increases in sales tax revenue for state and local governments.
Businesses may need to update their point-of-sale (POS) systems to automatically handle rounding for cash transactions, according to a financial news site. Cashiers and other staff would need training on how the new rounding rules work and how to explain them to customers.
Businesses need to be mindful of how rounding impacts customer perception and ensure transparency in their pricing practices.
Rounding up prices could lead to a slight increase in the cost of some goods and services, particularly for those who frequently pay with cash. While some consumers might experience a slight increase in prices because of rounding, economists say the overall impact is expected to be modest.
It is estimated that ending penny production would immediately save taxpayers $56 million in reduced material costs, according to the Treasury.
The production of pennies uses zinc and copper, and the processes of mining and transporting these metals contribute to carbon emissions and other pollutants. Eliminating the penny would reduce the demand for these resources and lessen the associated environmental impact.
The debate surrounding the elimination of the penny from U.S. currency has strong arguments on both sides. However, the benefits of doing away with the penny are substantial, particularly concerning economics, efficiency and the environment.
Still, many argue that eliminating the penny could pave the way for a shift towards a more cashless society.
Until next week, please send your questions or comments to bradleychuck92@gmail.com.
