Diana Ezerins rarely pays with cash. So after filling her cart at an Albany Park Aldi, she payed little attention to the sign displayed near the checkout register: “Due to the U.S. Mint discontinuing penny production, we may be unable to provide pennies as change. When pennies aren’t available, change due and refund totals will be rounded up to the nearest five cents.”
Ezerins wasn’t surprised.
“It’s been a long time coming,” she said. “I barely use cash at all, much less pennies. If I would ever get change back, I’d just leave it [at the register].”
The U.S. Mint made its final circulating penny last month, hosting an event at its Philadelphia facility with U.S. Treasurer Brandon Beach. It marked the end of a 232-year production run of the coin, which is still legal tender.
Over the last decade, the cost of producing a penny has risen by nearly 160%, or 1.42 cents to 3.69 cents per penny. The higher cost led the Secretary of the Treasury, at the urging of President Donald Trump, to suspend production. It’s estimated to save $56 million annually, according to the U.S. Mint.
Some experts say the death of the copper coin isn’t that big of a deal. There are an estimated 300 billion pennies currently in circulation, and the U.S. Mint said last month that it’s enough for businesses to “continue to price goods and services in one-cent increments.”
But no new pennies have already led a number of Chicago area businesses to change their payment policy, with some like clothing chain Uniqlo at Woodfield Mall asking cash-paying customers to provide “exact change only.” That’s because many businesses have stopped getting pennies from banks.
Store signs, like the one at Aldi, are notifying customers that their change would be rounded when using cash. A McDonald’s in Highland Park, Goodwill locations in Avondale and West Loop and even the Department of Finance at City Hall have signage asking people to pay with exact change or use a card or check.
Chicago-based fast-food chain McDonald’s said in a statement: “Following the discontinuation of pennies nationwide, some McDonald’s locations may not be able to provide exact change. We have a team actively working on long-term solutions to keep things simple and fair for customers. This is an issue affecting all retailers across the country, and we will continue to work with the federal government to obtain guidance on this matter going forward.”
Many retailers will round to the nearest 5 cents when giving out change.
Some Goodwill locations, as of Nov. 18, are rounding down so the customer must pay to the nearest nickel, according to a statement from Goodwill Greater Milwaukee & Chicago. While select Whole Foods Market locations, including a Lake View store at 3201 N. Ashland Ave., will round up.
Albany Park resident Rich Uphues doesn’t believe the end of penny production will affect him much.
“I use my card all the time. I haven’t used cash in years,” Uphues said during an Aldi trip. “I knew it was going to happen at some point, but I think it’s good that most places are rounding up for change.”
Shail Pandit, associate professor of accounting at the University of Illinois Chicago, said the change will only temporarily throw off a company’s accounting.
“Statistically speaking, over a large number of transactions it basically evens out,” he said. “Some transactions get rounded up; others get rounded down. So there is not going to be a net burden on consumers or on businesses.”
Pandit also doesn’t expect a measurable impact on the economy or inflation. He pointed to Canada, which parted ways with the penny in 2012 for similar reasons as the U.S. Canada has enacted a rounding system — now echoed by many U.S. retailers — where totals ending in $0.01, $0.02, $0.06, or $0.07 are rounded down to the nearest 5 cents. Totals ending in $0.03, $0.04, $0.08, or $0.09 are rounded up.
“Economists there find there is really no significant effect, one way or the other, on either consumers or businesses,” he said. “Transactions will be smoother if you have to count out less change, and those seconds add up when you have a thousand customers every day.”
Looking for clarity
For some business owners, the change is causing headaches.
“Both the retailer and the consumer are in a very difficult position,” Rob Karr, president and CEO of the Illinois Retail Merchants Association, said.
Most retailers are choosing to round a transaction’s total down, in favor of the customer, but it might create a problem when businesses have to file their taxes, Karr said.
“If your total is $10.73, including tax, [and I] charge you $10.70, but I have to report tax on the $10.73 — it’s creating a problem for the retailer, and it will create a problem under audit,” he said.
And under federal law, Supplemental Nutrition Assistance Program recipients and non-SNAP customers can’t be treated differently — so rounding a customer’s change but keeping the total for a card transaction, which SNAP customers use, the same may be a violation.
“The federal government needs to clarify the SNAP situation and non‑discrimination on cash versus electronic payment,” Karr said. “The state needs to work with us on how rounding is going to be executed and how it’s going to be applied to tax collection.”
Karr said the trade association is working with groups like the Illinois Department of Revenue to get comprehensive guidance, but so far, “nothing has been clarified yet.”
“If decisions aren’t made in the proper time frame, it just continues to create a huge amount of uncertainty, and the people bearing the burden of that uncertainty are the retailer and potentially the consumer,” Karr said.
‘Just round up’
Payment system Square, used by businesses like H Mart and Shake Shack, announced last week that it would pilot a cash rounding functionality for U.S. businesses. Its platform would automatically round transactions to the nearest 5 cents and offer back-end support to help sellers with reporting the total amount of tax collected.
“Removing the penny may seem small, but the impact on day-to-day operations is very real,” Willem Ave, global head of product at Square, said in a news release. “Large chains have teams who can model scenarios and adjust quickly. There are millions of neighborhood businesses who also have a critical need to maintain smooth operations. They deserve the same level of support, and our job is to make sure they can keep serving their customers without missing a beat.”
A report by the nonpartisan group National Conference of State Legislatures urges lawmakers to adopt formal legislation to help ensure fairness for consumers and businesses, citing the rounding practices of Canada and the European Union as examples.
So far, a few states have provided guidance either through legislation or executive action.
In New York, proposed legislation would require retailers to round cash transactions based on the final cost of the item. Utah’s Division of Consumer Protection offered guidance recommending tax be collected first then rounding to the nearest 5 cents, with clearly posted signs for consumers. The Texas Comptroller of Public Accounts issued guidance earlier this month that said retailers can round to the lowest or highest nickel.
Basil Mahmud, employee at The Fresh Market in Lake View, said the grocer has been without pennies for weeks.
“Most people don’t really mind it,” Mahmud said. “It throws our money off at the end of the night so that sucks. But corporate … understands.”
He said the location doesn’t have any signage about the penny’s demise.
“Anybody who is upset about it, we just round up,” Mahmud said. “But most customers understand what’s going on.”
Still, the discontinuation of the coin is likely to affect consumers who often use cash, as well as small businesses, Pandit said.
“The penny is one of the oldest coins in the U.S. so people have a kind of attachment to it. It’s a cultural icon,” he said. “There is an emotional, gut-level reaction when you hear the penny is going to be discontinued, and especially in the absence of information there are a lot of misconceptions and fears.”