The End of the Penny?

The humble penny has been a part of American currency since 1793, but in recent years, debates about its usefulness (rising production costs coupled with declining purchasing power) have intensified. According to the Federal Reserve, there are 114 billion pennies in circulation, or $1.14 billion, or 0.006% of the money in circulation. Members of Congress and past presidents have brought up eliminating the penny, dating back to at least the 1980s. "Only tradition explains our stubborn attachment to the penny. But sometimes traditions get ridiculous," the Farmers' Almanac said in its 1989 edition. The most recent person to call for the end of the penny is President Trump, who on Sunday instructed the secretary of the United States Treasury to stop producing new pennies - a practice he called "wasteful." What would this decision mean for consumers, businesses, and the economy as a whole?

One of the biggest arguments against the penny is that it costs more to produce than what it's worth. In 2024, the United States Mint (a bureau of the United States Treasury) reported that it cost 3.69 cents to make one penny. According to the report, the United States lost $85.3 million on the nearly 3.2 billion pennies it produced in fiscal year 2024. Consequently, eliminating new penny production could save the government millions of dollars annually. In addition, the production of pennies requires mining zinc and copper, which has environmental consequences. Reducing or eliminating penny production would decrease the demand for these metals and the energy-intensive processes used to manufacture them.

For the consumer, pennies slow down cash transactions. Many businesses already round totals to the nearest nickel when pennies are unavailable, and some countries, including Estonia, Australia, New Zealand, and Canada, have successfully transitioned to rounding systems without major issues. Eliminating the penny could speed up everyday purchases and reduce the burden of handling small change.

On the other hand, opponents worry that eliminating the penny would lead to "rounding inflation," where businesses round prices up instead of down, ultimately costing consumers more money. However, studies from countries that phased out their smallest coins suggest that price rounding has minimal impact on overall spending. In an increasingly cashless society, would eliminating the penny affect all of those card payments? Dr. Ajay Patel, a professor of finance at Wake Forest University School of Business, points out that eliminating the penny would only eliminate the penny itself, not necessarily something that costs $5.16. "Anyone writing a check or using a debit card or credit card could have the correct amount paid since no actual cash changes hands, and pennies would not have to be paid by the buyer or returned by the seller," he said.

Some critics of eliminating the penny also worry it will spell the end of penny drives - a fundraising method employed by some charities and schools. While pennies are often seen as a nuisance in daily transactions, they add up in fundraising efforts. Without pennies, charities may need to find new strategies to collect small donations. As one example, one way that some organizations have found to collect spare change in an increasingly cashless society - an estimated 86.9% of all transactions in the United States were cashless in 2024, according to CapitalOne Shopping Research - is "round up donations" at the grocery store checkout.

Because Congress oversees the Mint's operations and authorizes the manufacturing of coins, President Trump probably does not have the authority to issue the order by himself. According to Northeastern University professor Dr. Robert Triest, "The process of discontinuing the penny in the U.S. is a little unclear. It would likely require an act of Congress, but the Secretary of the Treasury might be able to simply stop the minting of new pennies."

What would happen if the Treasury quit making new pennies? Pennies would remain legal tender but would gradually phase out of circulation as they become lost or worn. Cash transactions would likely be rounded to the nearest nickel, similar to what happened in Canada. Digital payments could be unaffected, and banks might offer rounding policies to ease the transition. Retailers might initially face challenges in adjusting their pricing strategies, but over time, consumers would likely adapt. As pennies become more scarce, they could even gain value among some collectors.

Eliminating the penny would have both benefits and drawbacks, but with rising costs and reduced usefulness, the case for discontinuing it is growing stronger. Whether or not the United States Treasury takes action, the conversation about the future of the penny is unlikely to disappear anytime soon.