Canada kills its penny

The coins, which cost 1.6 cents apiece to make, will be gradually withdrawn from circulation this year.

By MSN Money Partner Mar 29, 2012 5:16PM

By Jacqueline Thorpe, Bloomberg

 

Bloomberg on MSN MoneyCanada will withdraw the penny from circulation this year, saving taxpayers about $11 million annually and forcing retailers to round prices to the nearest nickel, the government has announced.

 

Canadian flag (© Royalty-Free/Corbis)The Royal Canadian Mint, which has produced 35 billion pennies since it began production in 1908, will cease distribution this fall due to the coin's low purchasing power. Production and handling cost for the 1-cent coin are a $150 million drag on the economy, according to a 2006 study by Desjardins, a financial institution based in Levis, Quebec.

 

"Pennies take up too much space on our dressers at home," Finance Minister Jim Flaherty said in the text of his budget speech in Ottawa late last month. "They take up far too much time for small businesses trying to grow and create jobs."

 

Business groups welcomed the announcement, which follows similar moves by countries such as Australia, Brazil and Sweden. Economists said the phase-out would have little impact.

 

"If there's a rounding up, you'd see a rounding down somewhere else," said Craig Wright, the chief economist for the Royal Bank of Canada.

 

The savings to financial institutions alone may be about $20 million a year as banks reduce transportation, storage and handling costs, the study estimated.

 

It costs the government 1.6 cents to produce one penny, which has been made of copper-plated zinc and copper-plated steel since 1997.

 

Withdrawn from circulation

 

The penny, with two maple leafs on one side and Queen Elizabeth II on the other, can continue to be used in payments. As the coins are gradually withdrawn from circulation, price rounding on cash transactions will be required, the government said.

 

The calculation of the federal goods and services tax and provincial sales taxes will continue to be calculated to the penny and added to the price, with rounding taking place on the total payment.

 

Noncash payments on checks and credit cards will continue to be rounded to the nearest cent. (Post continues below.)

"If businesses round cash transactions to the nearest 5-cent increment, any gains or losses relating to cash transactions (a maximum of 2 cents per transaction) will balance out over time," the government said in its budget documents.

 

Retailers and other businesses can continue to price goods and services in 1-cent increments, and there will be no need to reprogram cash registers, according to the government.

 

Increase efficiency

 

Catherine Swift, the president and chief executive officer of the Canadian Federation of Independent Business, said the move will increase efficiency.

 

"It has been a long time coming," she said. "It's been a real pain more than anything else. We've actually polled our members on this, and they're supportive."

 

The mint used 3.3 million pounds of steel, more than 154,000 pounds of copper and 50,700 pounds of nickel last year to make pennies at its facility in Winnipeg, Manitoba. It put 1.3 billion coins in circulation in 2011, half of which were freshly minted and half made from recycled materials.

 

More from MSN Money:

 

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68Comments
Mar 29, 2012 7:09PM
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Another great idea from a smart, proactive country!  This country is too stupid for good ideas that make sense.
Mar 29, 2012 6:32PM
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They just had an article that gave the cost of a U.S. penny at over 2 cents each, and the nickel at over its manufacturing cost as well. Lose our penny, and shrink the nickel. at the very least it would make materials slightly cheaper for manufacturing, and save the Fed money.
Mar 30, 2012 10:04PM
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It will take the USA another 10 years or to figure this one out, were VERY slow on things like this.
Mar 30, 2012 10:24PM
Mar 30, 2012 9:57PM
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Ok, government idiots when are we going to do the same thing. I never like a 99 cent item a dollar is easier to figure tax on anyway.

Another good idea from Canada who knows how to save a few dollars in government...

Mar 29, 2012 8:05PM
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As always, Canada shows the  way.  This is EXACTLY what our worthless politicians need to do with our penny plus eliminate dollars bills for a quarter size coin with yellow tint and some flat sides to distinguish from a quarter.  Also, make $2 bills the smallest paper currency AND make it illegal for gas station or any other seller to advertise prices showing pennies or 9/10th of a cent!  
Mar 30, 2012 8:28PM
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If you do not want your pennies, send them to me.  I will take care of them.
Mar 30, 2012 8:31PM
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"The savings to financial institutions alone may be about $20 million a year..."

 

I'm sure the banks will be eager to pass this savings on to their customers!      Wink

Mar 31, 2012 12:05AM
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Canada - getting rid of the penny and universal health care...two steps ahead of its southern neighbor.
Mar 30, 2012 10:48PM
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Canada may come to lack cents, but not good sense.  Smile
Mar 30, 2012 10:45PM
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the penny is a waste of time and money... and thats my two cents.
Mar 30, 2012 10:20PM
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Smarter then the united states!!!!!!!!!!!!!!!

 

Mar 29, 2012 6:56PM
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It's about time Canada got rid of the penny.  I think it's a great idea not only to reduce the amount of coin Canadians carry, but also as a means of saving money in the long run. Only in Canada can you reach into your pocket and pull out $20 in coins....

In response to 'good bargains', the rounding is not always up, it is up or down by no more than two cents according to the article. So $2.52 roundsdown to $2.50  and $2.53 rounds up to $2.55. 
Mar 29, 2012 7:56PM
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About time the U.S. Mental Midgets started to do their math. A Galvanized washer the size of a penny Costs me 10 cents. Guess what I use for a washer ? ! I haven't purchased washers in 20 years !  I suggest that  all contractors do the same and the penny would disapear in a few years. 

Make the nickle out of aluminum and it would be lighter in the pocket.

Mar 30, 2012 10:14PM
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But if the USA did this what would the effect be on the copper market, the zinc market. My gosh think of the humanity man. The lobbys that may be effected. Oh no, this may be the end of life as we know it.
Mar 30, 2012 9:03PM
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Canada...the country where common sense rules...do the math...it let go of the foolish culture of the penny...without any lawyers filing any alw suits...and they have health care for all their citizens...but we are smarter...we have our pennies and crap for health care unless you are rich or in Congress.
Mar 30, 2012 11:39PM
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I think it is a good idea and hope we start it in the USA!
Mar 30, 2012 11:45PM
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Great idea! Way 2 go Canada :) USA needs to do this. Ppl will need a course in basic math101. If something costs $18.73, it will be rounded to the nearest .05, so that means it will cost $18.75. So quick math lesson .01 and .02 goes to .00 &  .03 and .04 goes to .05.
Mar 30, 2012 11:49PM
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Pennies?! We don't need no stinking pennies!

 

Mar 30, 2012 9:12PM
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most people aren't smart enough to calculate tax.  If they lost a penny they would never know.
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