Small Change: What Happened When Other Countries Got Rid of Their Pennies
Talk about a memorable coin toss. No, not the one at the Super Bowl. On Sunday night, President Trump announced on his Truth Social network his newest target for elimination: the penny.
“For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful!” he wrote on Sunday night. “I have instructed my Secretary of the US Treasury to stop producing new pennies. Let’s rip the waste out of our great nations budget, even if it’s a penny at a time.”
The Department of Government Efficiency helmed by Elon Musk posted a similar sentiment last month on X, noting that the cost of producing each penny far outweighs its value, a conundrum called “negative seigniorage.”
The U.S. Mint produces billions of pennies each year (more than 3 billion last year), even though each one costs 3.7 cents to produce. The price tag for the billions of pennies minted in the last year alone was more than $85 million. One potential downside to getting rid of pennies would be an increased reliance on nickels, which are even more economically inefficient: It costs nearly 14 cents to produce a nickel.
Although Congress authorizes U.S. Mint coin production, telling Secretary of the Treasury Scott Bessent to halt penny production isn’t completely out of left field. For an article for The New York Times Magazine last year, reporter Caity Weaver spoke to an expert in the constitutional law of money from Harvard University, who said, “There’s nothing in here that indicates the secretary has to issue [pennies].” That assertion, though, has yet to be tested or validated by either Congress or the court system.
There’s actually precedent for that. In 2020, the U.K.’s Royal Mint said it would stop producing 2p coins (as well as £2 coins) for a decade because there was an overabundance of them. The coins remain in circulation and are recognized as legal tender.
But this doesn't mean getting rid of U.S. pennies would be easy. Lawmakers have tried before: In 2006, when the price of zinc (the primary metal in pennies) hit a record high, an Arizona congressman proposed a system of rounding for transactions that would render the penny irrelevant. A decade later, two other lawmakers — also from Arizona, where the biggest copper mine in the country is located — introduced a bill to stop the production of pennies. These bills were never taken up by Congress.
What happened when other countries eliminated their 1-cent coins?
In short, not much. Countries that have eliminated low-denomination coins have saved the cost of minting the currency, and cash transactions are rounded up or down in 5-cent increments. If anything, countries that have eliminated the lowest-value denominations of currency often implement subsequent changes to phase out the next-smallest increment. In other words: Watch your back, nickel.
Australia
Australia took 1- and 2-cent coins out of circulation in 1992. More recently, there was a push to get rid of the 5-cent coin, as well — meaning that every transaction would be rounded to the nearest 10 cents. That effort didn’t succeed, but in 2020, the head of the country’s national mint predicted that 5- and 10-cent coins would eventually meet a "graceful death" as fewer people use them.
Canada
When Canada got rid of its penny in 2012, it allowed the coins to remain in circulation and legal tender but encouraged merchants to round monetary amounts to the nearest 5-cent increment and implemented a consumer education program so shoppers would become accustomed to the idea. Today, the practice of rounding up or down to the nearest 5-cent increment when paying with cash has become as ordinary to Canadians as being a fan of ice hockey.
New Zealand
New Zealand eliminated 1- and 2-cent coins in 1990, and then took things a step further in 2006 with the elimination of its 5-cent coin. Researchers found that prices actually went down instead of up. One government official suggested that market competition was enough to keep retailers from trying to game the system.
Sweden
Sweden was an early adopter of the trend. It stopped production of its lowest denominator coins, the 1 öre and 2 öre, back in 1972. (One öre was 1/100 of a krona, the country's primary unit of currency.) In subsequent years, Sweden gradually eliminated other coins smaller than a 1-krona denomination.
Making heads or tails of the question
Most of the arguments for keeping pennies are arguments against phasing out cash transactions in general, which some advocates say is detrimental to low-income people who don’t have bank accounts. The use of cash has been declining for years, though. It accelerated during the pandemic as more people switched to contactless forms of payment. About 18% of transactions were cash-based as of 2022, according to the Boston Fed.
If the U.S. did decide to scrap the penny, officials would have to decide how to treat those coins going forward. Some countries that have eliminated their version of the penny simply stopped minting the coins but let the ones already produced remain in circulation. Other countries stopped making them legal tender after giving people a period of time to turn in their coins.
In most places that have eliminated small-denomination coins, cash transactions are rounded to the nearest 5-cent increment. (Cashless transactions are still calculated to the cent.) Some people in favor of keeping pennies argue that consumers would lose out because all of the prices that currently end in nine would be rounded up by a penny. A 2007 study dispelled that concern. Wake Forest University economics professor Robert Whaples found that the odds of rounding up or rounding down are about as even as, well, a coin toss.
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