No More Pennies in Canada. Should the US Follow Suit?

In Canada, the Economic Action Plan of 2012 brought about the end of the Canadian penny. The thought process was that, when comparing the face value versus its rising production cost, it just didn’t make sense to make them anymore.

For now at least, the existing pennies can still be used for as long as businesses agree to take them – and February was the last month that financial institutions distributed them. In the future, businesses are encouraged to round to the nearest five-cent increment to eliminate the need for pennies altogether.

The decision to phase out the penny will save Canadian taxpayers about $11 million a year.

Canada is not the first country to do away with their smallest form of currency. Countries such as Britain, France, Israel and Spain have already done this, while other countries like Australia, Denmark, New Zealand, Norway and Sweden have phased out multiple coins (source).

Because other countries have done this and have seemed to survive just fine, many wonder if the United States should take a similar step and eliminate our penny. For example, on their website, a group called Citizens to Retire the Penny notes that in 2011, it cost more than double the value of the coin itself to manufacture a penny. (By the way, according to CNN, it turns out it costs more than 11 cents to manufacture a nickel!) They also point out that the United States successfully phased out a half-cent coin that was used in the 1800s – with minimal public outcry.

Alternatives are also being sought to find cheaper ways to produce the coins, but so far nothing has materialized.

While there are no immediate plans to do away with the penny, don’t be surprised if it happens soon, as lawmakers are looking for ways to save money wherever possible.