Canadians might remember the story that came out about a week ago, saying that Finance Minister Jim Flaherty is still apprehensive about scrapping the penny. He wants to keep it around, even though it actually costs about 1.5 cents for the Royal Canadian Mint to produce a single one-cent penny.
We’re talking about the Canadian penny, but it could just as easily apply to American money too. I’d argue that we don’t need the penny. It costs too much to make, too many get “lost” in circulation, and it just ends up in forgotten penny jars and in between couch cushions.
The thing is that the elimination of the physical penny would only have an impact on cash transactions. When you pay online or use a credit card in a store, you still pay the actual amount. If the total is $12.97 at the dollar store, you pay $12.97 on your MasterCard.
If you’re paying cash, though, you’d then fork out $12.95. If the total were $12.98, you’d then round up to $13.00. As an aggregate, the retailer would neither gain nor lose money, as everything would average out. It’s the same with the fractions of a penny that happen with interest, tax, gas prices, and so forth. I’d rather the actual prices get rounded to the nearest nickel or dime officially, but this system is fine.
And it’s a system that, as far as I know, works swimmingly in Europe too. Round up or down for cash transactions, charge the actual amount when paying with plastic. We might have to bid adieu to penny candy, but I think that ship has long-since sailed.