Eliminating something that costs almost four cents to produce but is only worth one cent makes sense. It’s long been maintained that the U.S. penny had outlived its usefulness. Cash transactions have remained in a steady decline, and there’s basically nothing you can buy for a single penny anymore. When President Donald Trump announced on February 9, 2025, that the U.S. Treasury Department would have the U.S. Mint stop minting pennies, some applauded the move as a long-overdue move.
However, the lack of any actual plan from the federal government for retailers and other businesses on how to deal with the end of the penny is causing growing consternation and confusion. While solutions like rounding up or rounding down to the nearest nickel may sound simple and effective, not giving a customer their exact change can run afoul of state laws. Many prohibit cash and credit card customers not receiving the same consideration, making the looming penny shortage a legal boondoggle with no federal legislative guidance in place.
In addition to being less than optimal for banks and other financial services institutions, the phasing out of the penny as legal tender poses a significant challenge for convenience stores and other businesses in the retail industry that conduct frequent cash transactions. With the Federal Reserve Bank cutting back its role of distributing new pennies as its stock dwindles, the value of having enough pennies could go far beyond their face value.
Will Nobody Shed a Tear for Hungry Piggy Banks?
There was a time when a penny would get you a handful of appropriately named “penny candy,” but those days are long in the past. Like so much of the U.S.’s financial system, the penny as a denomination was created in 1793 by Alexander Hamilton through the Coinage Act. It’s sported Abraham Lincoln on the front since 1909.
A 2025 poll conducted by the National Association of Convenience Stores showed that once informed of how much a penny costs to produce and how many sit around unused, consumers became more open to the abolition of the one-cent coin. After all, countries like Canada, Australia, and New Zealand have eliminated their pennies and seem to be fine. While the production of the penny in the U.S. has now ceased, an estimated 250 billion remain in circulation. More than enough to meet needs for a long time, right?
Maybe not. Other countries that ended the usage of a one-cent coin due to production costs and fading relevance did so with a plan in place to smooth the transition for consumers, retailers, and financial entities. Rounding to the nearest five cents may put an end to a pocket full of change, but it may cause millions in lost income for some industries. Banks aren’t permitted to shortchange customers, which means they must always round up on applicable transactions. For private businesses operating on razor-thin margins, the loss of a few cents on most transactions does not bode well.
Nickel for Your Thoughts
Banks and credit unions get their coinage from the Federal Reserve, which handles coin distribution. They then supply the coins to businesses that conduct a high volume of cash transactions. While still accepting penny deposits, the Federal Reserve has reduced the distribution of one-cent coins from most of its locations, with only a few remaining to dispense the last pennies.
Not having an ongoing supply of new pennies is a concern, but not having a legal plan in place for adjusting transactions is a much larger (and pressing) concern. In some instances, such as with the Supplemental Nutrition Assistance Program (SNAP), federal law prohibits recipients from being treated differently from other consumers during transactions. A business that rounds off a purchase made by a SNAP customer can find itself in violation.
For other consumer interactions, the lack of federal laws means many state laws designed for consumer protection hold sway. Businesses that attempt to round down on cash transactions can face potential deceptive practices violations and lawsuits. Without new legislation enacted by lawmakers in Congress, questions about the legality of rounding off and when sales tax should be applied are just some of the many troubling issues for affected companies.
Your business may be facing an uncertain future in the rudderless aftermath of the penny’s demise. The Federal Reserve will continue to distribute its remaining new pennies to banks and credit unions until the supply is depleted, but there has been a significant reduction in the number of available outlets. It’s not a bad idea to appeal to your customers to exchange their pennies at home with you for purchases or other types of cash, allowing you to build up a strategic reserve until some sort of resolution is achieved at the federal level.
If you haven’t already done so, it is highly recommended that you locate and understand your state’s business compliance laws. If anything is unclear, either reach out to your state’s Office of the Attorney General or speak with a business attorney well-versed in the laws in your jurisdiction. Not to sound alarmist, but is it a bad time to mention it costs more than ten cents to produce a five-cent nickel?
Related Resources
- The Legal Battle Over SNAP Benefit Funding, Explained (FindLaw’s Law and Daily Life)
- Man Pays $25 Bill With 2,500 Pennies, Gets Sued (FindLaw’s Law and Daily Life)
- Filing a Consumer Complaint About a Bank (FindLaw’s Civil Rights Law)
