As the U.S. officially winds down penny production, both banks and retailers are facing increasing difficulties. While the penny’s demise has been long anticipated, the consequences for daily business operations have proven to be more complicated than expected. The shortage of pennies is causing issues in making exact change for customers, particularly in retail transactions, and banks are struggling to supply coins for those who need them.
While many agree that discontinuing penny production is a step toward reducing costs, particularly for the U.S. Mint, the impact on businesses—both big and small—has created new challenges that still need addressing.
The Cost of the Penny and the Shift to Eliminate It
In May 2024, President Donald Trump announced that the U.S. would cease minting new pennies. The move was based on the fact that it costs 3.7 cents to produce a single penny, which exceeds its face value. Halting penny production will save the U.S. Mint an estimated $56 billion.
The last penny minting took place in June 2024, and the final pennies were distributed by August 2024, marking the official end of penny circulation. This decision was largely driven by efforts to reduce government spending and address inefficiencies in coin production. However, the transition away from pennies has not been without complications.
Banks Struggle to Meet Demand for Pennies
With penny production halted, banks are encountering difficulties in providing pennies to customers. Those who cash checks or rely on pennies for daily business operations are feeling the pinch. For example, small businesses, which often deal with cash transactions, find themselves unable to make the correct change for customers.
The difficulty in obtaining pennies has created a bottleneck, especially in communities or businesses that traditionally relied on these small coins for making exact change. Without an easy way to replenish their supply of pennies, many financial institutions are finding it harder to meet customer needs.
Retailers Face Legal and Financial Risks Due to Penny Shortage
For retailers, the absence of pennies has introduced both legal and financial risks. Some states have laws that require retailers to offer customers the same price, whether they pay with cash or a credit card, meaning it’s illegal to round up prices for cash-paying customers.
To avoid legal repercussions, some retailers have opted to round down prices in cash transactions, which has resulted in significant financial losses. One retailer reported that this strategy has cost it millions of dollars, a heavy toll as businesses try to remain compliant with price laws.
In response to these challenges, legislation such as the Common Cents Act is being considered. This bill, introduced in both the House and Senate, proposes a solution to the shortage by allowing cash transactions to be rounded up or down to the nearest nickel. This change would make it easier for retailers to manage pricing without risking legal issues related to the penny shortage. The bill has gained bipartisan support, reflecting the broader need to address the operational challenges businesses are facing.
The Fate of Pennies: A Larger Context
According to a May 2024 report, Americans throw away up to $68 million worth of coins every year, leaving them behind at airport security checkpoints or using them for art projects. An additional $14 billion in coins is sitting unused in people’s change jars. These figures underscore the inefficiency and wasted potential of maintaining the penny, which continues to accumulate in drawers and rarely sees active use in commerce.
Despite the penny’s decline, the global trend toward digital payments and cashless transactions may further diminish the role of physical coins in the near future. As businesses and consumers adopt contactless and digital payment methods, the importance of small coins, including the penny, is expected to decline even further.
The Legislative Path: Common Cents Act and What’s Next
The Common Cents Act, designed to round cash transactions to the nearest nickel, could offer a straightforward solution to the operational issues posed by the penny shortage. However, its future remains uncertain as it awaits further discussion and potential passage through Congress. If enacted, the bill could help ease the transition from physical coins to digital payments, providing businesses with more flexibility in pricing while minimizing the risk of legal complications.
The next 12 to 18 months will be pivotal in determining whether the U.S. can successfully transition away from the penny and create a more streamlined payment system that reflects the evolving needs of businesses and consumers.
Frequently Asked Questions
Why is the U.S. stopping the minting of pennies?
The U.S. stopped minting pennies in May 2024 due to the high production cost—it costs 3.7 cents to make a penny, exceeding its face value. This decision aims to save the U.S. Mint an estimated $56 billion over time.
How does the penny shortage affect businesses?
The penny shortage makes it challenging for banks and retailers to provide customers with exact change, particularly for cash transactions, leading to financial losses for some businesses and creating legal risks in regions where price consistency is required across payment methods.
What is the Common Cents Act?
The Common Cents Act is proposed legislation that would allow cash transactions to be rounded up or down to the nearest nickel, helping retailers and consumers manage the lack of pennies in cash transactions.
How will the penny shortage affect the future of cash payments?
The penny shortage could further accelerate the move toward digital payments and cashless transactions, reducing the need for small coins like the penny in everyday commerce.
What happens to the coins that Americans throw away?
Americans discard up to $68 million in coins every year, leaving them behind at places like airport security checkpoints or using them for art projects. An additional $14 billion in coins is sitting unused in change jars across the country