The US Treasury has recently announced that it will cease producing the one cent coin, known as the penny. This has got a lot of press coverage and has been held up as an example of the cost cutting of the current Presidential term.
But there are more payment geek facts to it than first meets the eye!
Those who have seen me present know I like to occasionally quote Yogi Berra, the US baseball player. One of his quotes, “A nickel ain’t worth a dime anymore”, certainly springs to mind here.
Last year 3.2 billion pennies were created, and it cost more than 3 times the value of the penny (3.78 to be precise) to make. But the savings from ending production will be relatively small ($56m), and other coins, such as the nickel, also cost 3 times its value (14 cents versus 5 cents). Furthermore, production has been falling anyway - 4.1 billion in 2023 and 5.4 billion in 2022.
Even with that reduced volume in previous years– and is true in most countries – that the lowest denominated coin is the one most frequently minted. This is in part why the cost saving isn’t greater. The bulk buy cost of materials is a factor, and that the cost of distribution is relatively fixed, means that the costs for other coins will likely rise.
It's also worth noting that it is not being produced rather than removed from circulation or ceasing to be legal tender. There are estimated to be more than 114 billion in circulation. Much of the “true” cost of a penny is actually associated with these – machines to accept them, the counting and cashing up of them,
The US is far from the first country to make the move; Canada killed off its penny in 2012, citing costs and its falling utility. In fact, dozens of countries have chosen to remove their smallest denomination coins, and bills have been introduced in the US to try and remove the penny many times over the year. Other countries, such as Norway, withdrew their equivalent in the 1970s.
