Could it be that local currency will also face phase-out? - Should we Eliminate the Use of Pennies as Well?
In the United States, the production of the humble penny is set to cease from the beginning of next year, with no new coins to be minted. The Department of the Treasury and coin producers have confirmed the move, citing high production costs that surpass the coins' one-cent value. This decision could save an estimated $56 million annually, according to the producing companies.
Meanwhile, Germany is still debating the fate of its one- and two-cent euro coins. The German Bundesbank's National Cash Forum proposed in March that cash payments in Germany should be rounded to the nearest five cents. For example, a purchase of €4.99 would require €5, while a payment of €1.02 would only need €1. This could expedite transactions at checkouts, as customers would no longer have to dig for coins in their wallets.
The proposition has sparked rationale over the high production, packaging, and transport costs of the small coins compared to their face value. A large portion of the smaller copper coins ends up in piggy banks or gets lost from circulation. The new federal government's stance on the proposal is yet to be disclosed.
Despite the myriad digital payment options available, cash remains the primary payment method in Germany. However, many consumers express frustration over the smallest coins, particularly when their wallets are close to bursting. A Eurobarometer survey revealed that a majority of respondents support the abolition of one- and two-cent coins.
For retailers, odd amounts serve as a crucial tool for price differentiation and customer competition. Traders are hesitant to relinquish the option of asking for €4.98 instead of €5, as consumers tend to focus on the number before the decimal point and perceive such prices as cheaper.
If Germany were to phase out its one- and two-cent coins, it would follow the lead of other European nations such as Belgium, Estonia, Finland, Ireland, Italy, the Netherlands, and Slovakia who have already implemented official price-rounding procedures for cash transactions. Estonia, for instance, has ceased minting these coins. Yet, as of now, Germany has not formally stopped the minting or circulation of the one- and two-cent coins.
In the United States, the trend is definitive: the Treasury has announced that it will phase out minting new pennies, with production slated to end in 2026. Legislation is also being proposed to eliminate the one-cent coin altogether and round cash transactions to the nearest nickel.
- Germany: Considering phase-out, but not formally implemented yet
- United States: Phasing out production, plans for complete elimination in 2026
[1] https://www.reuters.com/business/us-treasury-mull-ending-production-penny-2023-05-12/[2] https://www.cnbc.com/2023/05/10/no-more-pennies-us-treasury-plans-to-end-production-of-1-cent-coins.html[3] https://www.marketwatch.com/story/ideas-to-kill-the-penny-surface-as-us-treasury-prepares-to-shut-down-production-11683821685[4] https://www.bundesbank.de/Redaktion/DE/Pressemitteilungen/2024/20240614-Bargeldforum.html
- Given the differing approaches, the European Countries, such as Belgium, Estonia, Finland, Ireland, Italy, the Netherlands, and Slovakia, have already implemented the official phase-out of one- and two-cent coins, while Germany is still considering the phase-out, yet not formally implemented.
- In contrast, the United States is actively moving towards the elimination of small change, with the Treasury planning to end the production of pennies by 2026, and legislation being proposed to eliminate the one-cent coin altogether, ultimately rounding cash transactions to the nearest nickel.
