The Penny Is Being Phased-Out  

Beginning in 2026, the U.S. Mint will stop making the penny due to how expensive it is to produce.  It costs 3.7 cents to make each 1-cent coin which amounts to $56 million each year in taxpayer money.  As pennies get lost or damaged, no new ones will replace them, which will result in their phasing out over time.  Another reason is that Americans use cash less often.  Most people now use cards or phone apps to pay instead of cash.  The end of the penny represents a practical step toward a more modern and efficient monetary system that matches how people conduct transactions today. This change will affect how people pay for things with cash. Here’s what you need to know.

 

How this will affect business owners

While there has been no formal announcement from the Treasury, it apparently has already discontinued production of the penny.  Phasing out new penny production means changes in rules for cash payments.  A proposed bill in Congress would require merchants to start rounding cash payments to the nearest 5 cents (nickel).  However, while the penny’s retirement may affect cash payments, it will have no effect on the final sales price on digital transactions.  

 

The rules on rounding

Rounding will be applied on the TOTAL bill, not on individual items and will impact cash transactions ONLY (on the final total after taxes).  However, If the consumer pays for the purchase electronically, (debit, credit, Venmo, digital methods) the total will remain exact, and no rounding will be applied.

Here's a simple example for rounding to the nearest nickel:

 

What can business owners do to prepare? 

A little preparation now will help ensure your business transitions smoothly.  Therefore, we strongly encourage you to consider the following:

• Change pricing strategies and reassess the managing of cash and coin inventories.
  
• Adopt a rounding system where cash transactions are rounded to the nearest five cents.
  
• Embrace and encourage more electronic and digital payment options.

 

We're here to help

We understand the impact of the penny’s retirement and are here to help you prepare for this transition.  We’ll continue to monitor updates from the Federal Reserve and share guidance as it becomes available. If you have questions or need further assistance, simply send us a message through digital banking, contact us, or stop by a branch office location.