Navigating the End of the Penny: What it Means for You

Rethinking Change: Navigating the Penny's Discontinuation 

Why is the penny being retired?
The main reason is the high manufacturing costs of production.

Producing a penny costs about 3.69 cents. In 2024, the U.S. Mint reported a seigniorage loss – meaning the difference between the coin’s face value and its production costs – of $85.3 million.

Another reason is that in the U.S., roughly 41% of people don’t use cash during the week.

The U.S. Mint stopped production of the penny yesterday (November 12, 2025). However, pennies will still be considered legal tender. There are about 114 billion in circulation, so it might take a long time before they are completely phased out 

These are just a few of the proposed legislation to eliminate or suspend penny production. See details here.

What happens when pennies are phased out? 

At this point, it is not clear. Everyone is waiting for final legislation. Some stores have been rounding up to the nearest nickel and others are rounding down. However, it appears that some states may have prohibited rounding to the nearest nickel.

 

Benefits and Challenges

Benefits

• Potential cost savings.
• Other countries have successfully discontinued their smallest coin in the past.
• In places where low-denomination coins have been phased out, electronic payment usage increased while cash transactions decreased.
• Retiring pennies will reduce labor time and costs related to handling low-value coins.

Challenges

• If we round to the nearest nickel, demand for nickels will increase.
  • In 2024, it cost 13.8 cents to produce a nickel, which resulted in a seigniorage loss of $1.75 for every $1 of nickels. Some are estimating that rounding up could cost consumers about $6.06 million annually.
• According to America’s Credit Unions, in September, more coin distribution spots have already run out of rolls of pennies. Several trade associations sent a letter to Congress requesting “clear and expedited guidelines and relief” to continue cash transactions.
• It is estimated that 16% to 20% of everyday transactions involve cash and coins. Many financial institutions have already stopped offering coin services. This can make it difficult to handle change, and both consumers and businesses often have trouble cashing in coins or getting rolled coins.
  • What happens to people who prefer cash over digital transactions? Or those who are unbanked and underbanked?
• Many believe that retiring the penny signals the beginning of eliminating all coins and cash.
  • In an article in The Financial Brand, “What Bankers Should Think About the End of the U.S. Penny,” a couple of quotes from Kevin McColly, Coinstar CEO, might offer a different view: “The future isn’t digital or cash. It’s both. Layered. Context-based.” And “We’ve spent a lot of time thinking about what to phase out. Maybe we need to think harder about what to maintain.”

What is your next step?

1. How will the following be affected by the discontinuation of pennies?
   • Your organization
   • Businesses
   • Consumers
2. What are your strategies as an organization (including your role in coin services, if applicable)?
3. Do you offer coin services for those cashing in pennies or depositing them?
4. How will you communicate and counsel your staff and your clients (consumer and business)?
   
   

Need help developing a plan or supporting education and marketing materials?
Let’s talk!

Sources:

• Zhu Wang and Russell Wong, “Rounding Up: The Impact of Phasing Out the Penny.” July 2025. Federal Reserve Bank of Richmond.
  https://www.richmondfed.org/publications/research/economic_brief/2025/eb_25-27#
  
• Nicole Volpe, “What Bankers Should Think About the End of the U.S. Penny,” September 2025. The Financial Brand.
  https://thefinancialbrand.com/news/banking-trends-strategies/what-bankers-should-think-about-the-end-of-the-u-s-penny-192144
  
• Amanda Smith, “A Penny Saved Is a Penny … Not in Circulation.” October 2025. https://www.americascreditunions.org/blogs/compliance/penny-saved-pennynot-circulation
  
• Dan Weckerly, “No More Pennies: What Banks Must Prepare For.” June 2025. https://bankingplus.news/enrichment/penny-discontinued/
  
• Congress.Gov – Proposed Elimination of the Penny: Frequently Asked Questions https://www.congress.gov/crs-product/IN12572#_Ref201676980
  
• Federal Reserve FAQ About Penny Deposits and Orders
  https://www.frbservices.org/campaigns/sept-2025-faq