The old adage about penny-pinching is about to fall by the wayside: after more than two centuries in circulation, the U.S. penny has finally outlived its practical usefulness. Once a staple of jars, trays and piggy banks, the coin has steadily lost relevance as Americans have shifted toward digital payments and cash use has declined.
Earlier this year, the federal government moved to end the penny’s run for good — stopping new production in February and placing its final order for penny planchets (the metal disks stamped with a coin’s design) in May, with the U.S. Mint striking the last penny into circulation this month. The decision came down to simple economics: each coin costs more than 3X its face value to make, adding up to tens of millions in losses annually. Phasing it out is expected to save more than $50 million a year.
Now, as retailers absorb the practical consequences of the penny’s retirement, industry experts warn the transition won’t be seamless — especially while no federal guidance exists on practices for rounding prices up or down. The strain is already being felt sharply across the sector, according to Jeff Lenard, VP of Media and Strategic Communications at the National Association of Convenience Stores (NASC): Roughly 100 of the Federal Reserve’s 165 coin terminals are already out of pennies, leaving tens of thousands of stores unable to make exact change.
No More Pennies, and No Federal Guidance
Without regulatory clarity, retailers are stuck with “three bad options,” said Lenard in an interview with Retail TouchPoints. One is rounding down and absorbing the loss; another is rounding to the nearest nickel and risking fines in jurisdictions that require exact change, while the third option is steering customers toward card payments, which invites costly swipe fees and undermines convenience.
Advertisement
“NACS has urged Congress to act, emphasizing that in a business where basket sizes average around $8, losing even 2 cents per cash transaction quickly becomes financially punishing,” said Lenard. “Encouraging customers to pay by plastic is the worst option of them all [for convenience stores]. First, it’s inconvenient for customers, and convenience is in our name. Worse, paying by plastic incurs swipe fees, which are significant.”
Other retail analysts share similar concerns: “Some retailers are being hit by a shortage of pennies,” said Neil Saunders, Managing Director and Retail Analyst at GlobalData Retail in an interview with Retail TouchPoints. “That means they can’t always give customers the correct change. This impacts a lot of convenience stores and gas stations where people will often pay cash for sundries. Retailers are mostly trying to round prices or round [only] when giving change. The issue is, when giving change, retailers have to round down to avoid annoying customers or breaking laws. That obviously costs money and eats into margins.”
Retailers Risk Running Afoul of Laws with Rounding Practices
Several legal issues also are causing confusion, said Bill Maurer, Professor and Director of the Institute for Money, Technology and Financial Inclusion at UC-Irvine in an interview with Retail TouchPoints. “Some states have laws forbidding rounding,” he said. “Second, federal law requires SNAP recipients to be treated the same as other customers; if a merchant starts rounding up or down for a cash customer but charges the exact price for a SNAP customer, they risk civil penalties and not being allowed to serve SNAP customers any more. There is a bill in Congress, The Common Cents Act, that initially provided provisions for rounding but those ended up getting edited out — and in any event, it’s still just sitting in Congress.”
For the Moment, Retailers are ‘Winging it’
Saunders noted that Canada faced comparable challenges during its own penny phase-out, but benefited from more structured national guidance — something U.S. retailers currently lack.
“I don’t think it will have a huge impact on how people pay, especially as many retailers will round down in cash transactions,” added Saunders. “We might see more prices ending in five or zero rather than ending in odd numbers like nine, but this will happen over the longer term.”
So, given the absence of structured national guidance for retailers, how are they adapting?
“They’re winging it,” said Maurer. “I haven’t seen any systematic data on this yet, but I suspect many are rounding down and charging SNAP customers the same price as cash customers with the final tally rounded down.”
The penny shortage is disrupting everyday retail transactions nationwide, leaving cashiers unable to return exact change and forcing retailers to improvise on the spot, added Maurer. “It’s now being felt all over the country,” said Maurer. “On Sunday for the first time in my experience, the barista apologized to the customer in front of me in line at a local café in Long Beach for not being able to return exact change because they’d run out of pennies. Retailers and cashiers are currently struggling with how to deal with this, both to ensure they’re complying with the law and to maintain their relationships with their cash customers.”
While Maurer noted there are “still billions and billions of pennies out there, and they are still legal tender, so the issue seems to be coin distribution.
“The Fed’s regional coin terminals stopped accepting penny orders, as well as deposits from banks and credit unions, choking off their circulation — and I have no idea why!” Maurer added. “But this is the reason why there are penny shortages at retailers, not the fact that the last one was minted a few days ago.”
Pricing and Consumer Ramifications Remains Unclear
The disappearance of the penny marks more than the end of a long-lived coin — it has exposed gaps in the rules and infrastructure that support everyday cash transactions in the U.S. Retailers are improvising, customers are feeling new friction at checkout and legal and operational questions remain unresolved.
And for the moment, until clear national guidance emerges, the post-penny transition looks set to remain unbalanced, shaped not by nostalgia, but by the real costs and challenges the coin’s absence creates for cash-reliant businesses.
“I don’t think it will accelerate the shift toward digital payments,” said NACS’ Maurer. “The elimination of the penny will not change this. It may only change how further disadvantaged such consumers are. We may start to see the end of the practice of the ‘.99’ in pricing, which is a psychological trick to make a price seem lower. Dual pricing is legal everywhere in the U.S. so we might see merchants taking the time to post separate cash and non-cash payment prices, but that’s an awful lot of work for a retailer, so I doubt it would be done except perhaps for at big box stores. Still, time will tell.”
