How will the penny phaseout plan affect you?
The rumors are true – The U.S. government is expected to stop producing new pennies for circulation by early 2026. This means big changes for businesses and consumers. With the removal of the penny, cash transactions will likely be rounded to the nearest nickel. A common rounding rule is as follows: If the final digit of a purchase ends in 3, 4, 8 or 9 cents, the total will be rounded up; if it ends in 1, 2, 6 or 7 cents, it will be rounded down. Transactions ending in 0 or 5 cents are not rounded. At first, rounding might seem fair overall. You’d think that sometimes prices round up and other times they round down, so it would even out. But if most prices end up rounding up, customers actually pay a little more over time. This extra cost is often called a “rounding tax.”
Why are they getting rid of the penny?
The main reason this issue matters is cost. According to the U.S. Mint’s 2024 Annual Report, it costs about 3.7 cents to make and distribute a single penny, almost four times what it’s worth. Because of that, the Treasury lost about $85 million last year just from producing more than 3 billion new pennies. These growing losses have led many people to question whether pennies still make sense in today’s mostly digital economy.
Still, some argue that pennies provide benefits that go beyond their cost. For example, they allow for more precise pricing. Without them, stores would have to round cash prices to the nearest five cents, which could cause shoppers to pay slightly more overall.
Phasing out the penny is both a symbolic and practical change. It shows how production costs are rising, fewer people use cash, and electronic payments are becoming the norm. Understanding what this means, especially how rounding might affect what consumers pay, is an important issue right now.
If the U.S. ends the penny, it would be joining many other countries that have already done so:
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Australia stopped making 1-cent and 2-cent coins in 1992.
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New Zealand got rid of its 1-cent and 2-cent coins in 1990, and its 5-cent coin in 2006.
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Canada stopped producing pennies in 2012.
Can I still use the pennies I have?
Even after the U.S. stops making pennies, they’ll still be legal to use. People can keep spending them, but over time there will be fewer in circulation as they wear out or get lost. When that happens, businesses will start rounding cash transactions to the nearest five cents, just like in other countries that no longer use small coins.
The extra costs from rounding will happen slowly as pennies disappear. However, electronic payments like credit and debit cards won’t be affected; they’ll still charge the exact amount. As more people use digital payments and fewer pay with cash, the impact of rounding will become smaller over time.
still have questions?
There are many helpful resources to help consumers understand how the penny phaseout plan will work. Visit the sites below to gain additional insights or give us a call with your questions and concerns.