The U.S. Mint Has Canceled the Penny. Is the Nickel Next?
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The U.S. stopped minting pennies last year. Could the nickel be next?
After the penny was put out to pasture, a pair of researchers at the Federal Reserve Bank of Richmond explored what might come next. “With the penny being retired, attention may soon turn to the nickel,” Zhu Wang and Russell Wong wrote in a 2025 paper.
From a strictly economic perspective, it makes sense: Pennies were inefficient to produce, but nickels are even worse. A penny costs nearly 4 cents to make, while a nickel costs almost 14 cents.
The U.S. Mint used to spend some $85 million a year cranking out pennies, only for Americans to abandon them or outright throw them in the trash, necessitating the production of more pennies that would ultimately meet the same fate.
In a 2022 report, the Federal Reserve estimated that an astonishing 60% of all coins in circulation were squirreled away in jars and piggy banks. That's not counting the $68 million in pennies and other coins we toss every year. (This is the driving force behind recent reports of penny shortages.)
Getting rid of pennies was a novelty in the U.S., but a number of other countries had already dispensed with their smallest-denomination coins, including Australia, Canada, New Zealand and Sweden.
The Nordic country was ahead of the curve; it stopped making its lowest-value coins in 1972 and subsequently phased out all coins lower than a krona, its primary unit of currency. Some countries that have phased out small-denomination coins let them remain legal tender, while others set a deadline for people to exchange them before revoking their status as currency.
Small change: The case for keeping the nickel
Wang and Wong warned of potential unintended consequences if the nickel is scrapped. The researchers calculated that eliminating the nickel (along with the penny) could result in a so-called "rounding tax," where people would have to pay a few cents more per transaction in order to reach the closest 5-cent increment. The two researchers estimate that the price tag for these tiny transactions could add up to a not-so-tiny $56 million annually.
It’s possible the rounding tax might not be as significant as feared. “Our estimate of the rounding tax should be interpreted as an upper bound,” Wang tells Money via email. But the paper also notes that consumers who are already financially vulnerable — such as people who don’t have bank accounts and rely on cash — could be disproportionately penalized.
Economic forces suggest, though, that the nickel will stick around for the foreseeable future.
“The major reason for keeping the nickel is that people continue to use it,” Wake Forest University economics professor Robert Whaples tells Money via email. “When they stopped bending over to pick up a penny and stopped bringing pennies back to the store, it was time to discontinue the penny,” he says.
Eventually, the same fate is likely to befall the nickel, too — just not anytime soon. “The key driver is inflation, which makes the penny or nickel less and less valuable over time,” Whaples notes. He estimates that at a 3% annual inflation rate, it would take about 25 years for the real value of a nickel to shrink by half.
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