U.S. to Cease Penny Production: Implications for Consumers and Businesses

28 May 2025

In a significant monetary policy shift, the U.S. Treasury Department has announced the cessation of penny production, with the final batch expected to enter circulation in early 2026. This decision follows President Donald Trump's directive in February to halt the minting of the one-cent coin, citing its production cost exceeding its face value. According to the U.S. Mint, it costs approximately 4 cents to produce a single penny, leading to substantial annual losses for the government .

The penny, first introduced in 1792, has long been a staple of American currency. However, with over 114 billion pennies currently in circulation, the Treasury anticipates that existing coins will suffice for some time. Once the supply diminishes, businesses will be advised to round cash transactions to the nearest five cents. It's important to note that non-cash transactions, such as credit or debit card payments, will continue to be charged at exact amounts .

The move to eliminate the penny is expected to save the government approximately $56 million annually. This decision aligns the U.S. with other countries like Canada, Australia, and New Zealand, which have already phased out their lowest-denomination coins. Despite its historical significance, the penny's declining purchasing power and the rise of digital transactions have rendered it increasingly obsolete.

For consumers, the impact of this change will be most noticeable in cash transactions. Low-income and older Americans, who are more likely to rely on cash, may be disproportionately affected by rounding practices. However, studies from countries that have eliminated their pennies suggest that rounding tends to balance out over time, with minimal impact on overall expenses .

Businesses will need to adjust their pricing strategies and point-of-sale systems to accommodate the absence of pennies. Retailers may also need to train staff on new rounding procedures to ensure consistency and transparency with customers. Additionally, the cultural implications of retiring the penny, a coin featuring President Abraham Lincoln since 1909, may evoke nostalgia among some Americans .

As the U.S. transitions away from the penny, the Treasury Department plans to provide guidance to states and local authorities to ensure proper tax rounding and compliance. While the penny will remain legal tender, its gradual disappearance marks the end of an era in American currency history.