How Will Stores Handle .99 Prices Without The Penny?

The United States is preparing to phase out the penny, a move that will impact how cash transactions are handled nationwide.

🪙 What We Know: The U.S. Mint has announced plans to cease penny production once the current supply of blanks is exhausted. This decision stems from the rising cost of manufacturing the coin, which now exceeds its face value.

💰 How Much Does it Cost to Make a Penny?: In 2024, the U.S. Mint reported that it cost 3.69 cents to produce and distribute each penny, resulting in an $85 million loss for the year. This marked the 19th consecutive year where the cost of producing a penny exceeded its face value.

💵 Impact on Pricing: In other countries like Canada and Sweden where their 1 cent piece has been eliminated, cash transactions are be rounded to the nearest five cents. For example, a total of $1.99 would be rounded up to $2.00, while $1.96 would be rounded down to $1.95. This rounding applies only to cash payments; electronic transactions will continue to be charged the exact amount. In the U.S., stores will need guidance from the U.S. treasury or local governments on how to handle pricing.

Experts say the change could put an end to prices ending in 99 cents, such as $1.99 or $5.99 — a tactic that has been used to make prices appear lower, but consumers will have to wait and see if that prediction pans out.

🔍 Why It Matters: The shift away from the penny could lead to subtle changes in consumer behavior and pricing strategies. Retailers may adjust prices to avoid the need for rounding, potentially impacting the prevalence of prices ending in .99. Additionally, consumers who rely heavily on cash transactions, such as low-income and older Americans, may be more affected by the rounding adjustments. In case you were wondering, 16% of transactions in the United States are cash transactions.

📊 By The Numbers: Approximately 114 billion pennies are currently in circulation in the U.S., amounting to $1.14 billion. The Treasury Department estimates that discontinuing penny production will save about $56 million annually.

📈 In Context: Other countries, like Canada, have successfully eliminated their lowest-denomination coins and adopted rounding practices without significant economic disruption. Studies suggest that the overall financial impact on consumers is minimal, as rounding tends to balance out over time.