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 do you notice?
Issue #1: Since this is a tiered account, this ad needs to include the balance requirement to earn the APY and it must be in close proximity to the APY.
Reg. DD requires the corresponding minimum balance to be included in close proximity to the APY for each tier. (Note: You can highlight one tier and its corresponding balance — the rest can be included in your disclosure.)
Issue #2: When seeing the ad, it appears that anyone could open the account and get this rate. However, this account has three qualifications the customer must meet every month to receive this APY.
Our Recommendation for #1 and #2: Under the 2.01% APY add something like: “On balances up to $____ when you meet qualifications.” Another option: “On balances up to $______. Terms apply.” This lets the reader know that there are qualifications. Then they can get details one click away.
Additional Insights:
- Some compliance officers want APY spelled out visually on the display ad. Others say one click away in the disclosure is fine. Check with your compliance department to see if they have a preference.
- “Member FDIC” for banks or “Federally insured by NCUA” for credit unions MUST be included in this ad … it cannot be one click away.
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?
- How will the following be affected by the discontinuation of pennies?
- Your organization
- Businesses
- Consumers
- What are your strategies as an organization (including your role in coin services, if applicable)?
- Do you offer coin services for those cashing in pennies or depositing them?
- 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!
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