AMERICAN consumers will be forced to shell out an extra $6 million on goods and services annually following a landmark coin phase out.
As the US government presses the brakes on penny production, shoppers will see slightly higher bills at the grocery store and other retailers.
Americans will have to cough up an extra $6 million each year after a landmark coin phase out[/caption]
The US government will soon halt the production of new pennies[/caption]
Americans have used the one-cent coin featuring President Abraham Lincoln’s profile on the obverse since 1909, while the penny in general has been circulating since 1793, per the US Mint.
Lawmakers, however, are rethinking the role of the penny in the country’s currency system after over two centuries.
Shortly after his inauguration, President Donald Trump called on the secretary of the US Department of Treasury, Scott Bessent, to stop making new pennies.
Pushed by the penny’s high production cost, the directive aimed to slash unnecessary government spending.
In May, the Treasury placed its final order for penny blanks – the flat, round metal discs that the US Mint makes into coins.
The government estimates that the remaining blanks will run out by the start of next year, at which point new pennies will no longer be produced.
The coin will still remain in circulation as legal tender.
PRICEY PENNIES
The biggest factor pushing the cessation of production of the one-cent coin is the high cost of minting pennies.
It costs 3.69 cents to mint and distribute each penny – nearly four times its face value – per the US Mint’s 2024 annual report.
“For far too long the United States has minted pennies which literally cost us more than two cents. This is so wasteful!” Trump wrote in a post to Truth Social in February.
“Let’s rip the waste out of our great nation’s budget, even if it’s a penny at a time.”
As a result of the penny’s high production cost, the federal government lost roughly $85.3 million to mint over three billion new pennies last year, according to a report this month from the Federal Reserve Bank of Richmond.
The accumulating losses have pushed the government to rethink the penny’s role in our economy, a coin that is often given as change but rarely spent.
The decision to axe the penny from production comes as the US and countries around the globe increasingly rely on electronic payments and digital alternatives.
Facts about the US penny
- The “Union Shield” theme is the penny’s current design, which was first issued in 2010.
- The penny was one of the first coins made by the US Mint, established in 1792.
- The design on the first penny was of a woman with flowing hair symbolizing liberty.
- In 1857, the penny was made smaller and the metal composition changed to 88% copper and 12% nickel.
- Abraham Lincoln became the first president featured on a US coin in 1909 in honor of his 100th birthday.
- In honor of the Mint’s 225th anniversary in 2017, pennies made in Philadelphia had a “P” mint mark for the first time.
- In 2019, the West Point Mint made special collectible pennies with a “W” mint mark.
Source: US Mint
COUGH IT UP
Cash transactions are likely to be rounded to the nearest nickel as the penny is phased out, a move that will see consumers dishing out more money for their purchases.
Under a common rounding rule, transaction totals will be rounded up if the final digit of a purchase ends in three, four, eight, or nine cents, per the Federal Reserve Bank of Richmond‘s report.
If the final digit ends in one, two, six, or seven cents, it will be rounded down.
Transactions ending in zero or five cents are not rounded.
“At first glance, the net effect of rounding might appear neutral: Assuming that the final digits of transaction totals are uniformly distributed, the gains from rounding down and losses from rounding up should cancel out,” said the report.
“However, if transaction amounts are skewed toward values that round up, consumers end up consistently paying more, creating what’s referred to as a rounding tax.”
This rounding tax could cost shoppers roughly $6 million each year according to the report, based on data from the 2023 Diary of Consumer Payment Choice.
Although pennies typically have a meager face value of just one cent, some are worth thousands of dollars.
For example, one Lincoln penny worth $94,000 is still in circulation – but you must look for three letters on the back of your coin.
Plus, there are three Lincoln pennies worth over $138,000 still in circulation – but you must spot the “error” detail.
