By now, Americans know the strange math of coinage: each penny costs about 4 cents to make. Chances are you have some in a jar, or scattered among pockets, purses, and car ashtrays.
No matter how small, the coin weighs more than its weight culturally. If it ever disappeared, so might the simple kindness of “take a penny, leave a penny,” along with timeless classics like penny loafers and the tradition of throwing a penny into a fountain.
But the days of the penny are numbered. The US Mint pressed the last 1 cent coin on November 12, 2025, following a directive from the White House. Although cents will continue to be legal tender, the old ones will gradually be withdrawn from circulation.
The impact of this change will go beyond coin jars. Its repercussions will be felt as small, cash-reliant high street traders face another test of adaptability in a system that increasingly favors scale, technology and plastic. This will also be noticed by people who rely on cash – often people without bank accounts who have less room to absorb even small price changes.
My interest comes from my previous lives as a CFO of a large credit union and as a small business owner. Now, as a teacher – or “practitioner-ademic”, as I like to say, one of those who learn to know theory and practice.
When the coin runs out, some will win, some will lose, and for others, it will be a coin toss.
Heads, they win
The first and most obvious winner is the US government, which will save tens of millions of dollars each year by stopping minting a currency that costs more to make than it is worth. Ending production seems like an easy decision for efficiency.
Banks and credit unions are likely to benefit as well. Cents are disproportionately expensive to handle: each bag of pennies is counted, sorted, rolled, verified, and sent back to the Federal Reserve, generating labor and equipment costs that far exceed the value of the coin. Eliminating the smallest denomination removes an entire layer of costs and friction from banking operations, savings that are immediately multiplied across thousands of branches.
Another beneficiary, this one hiding in plain sight, is who transports the money: the armored transporter industry. For companies like Loomis and Brink’s, pennies are a heavy burden, low value, and a logistical waste of money. Eliminating penny pickups eliminates one of your most inefficient services, reducing fuel consumption, labor hours and wear and tear on trucks.
Large retailers are also likely to win. The size and scale make it easy to make preparations both large and small, such as reprogramming cash registers and stockpiling coins to cover against shortages. Larger companies also have the talent and ability to determine the true costs and benefits of accepting cash or non-cash payments. If most of their transactions are already digital, they could be relatively indifferent to the penny end.
Large retailers also negotiate lower card processing fees, which are the fees merchants must pay companies each time a customer uses a credit or debit card. These rates are not uniform: large chains get discounted prices based on sales volume, while small businesses face higher costs for identical transactions. It follows that any policy change that makes more people pay with plastic will disproportionately benefit large retailers.
Of course, some banks, credit unions and large retailers have expressed concern and surprise at the pace of change and lack of guidance from the federal government. But for most, the end of the penny is a minor footnote in the sector. Online-only businesses also operate in this frictionless world: no coins, no counting, no problems.
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Tails, they lose
For small high street businesses, the disappearance of the penny highlights the structural disadvantages they already face, and I think it will force them to reflect on what types of payments benefit their profits.
As pennies disappear, local businesses are likely to round up cash transactions to the nearest 5 cents, what economists call a “rounding tax.” Rounding to the nearest nickel could cost businesses and consumers about $6 million annually, according to researchers at the Federal Reserve Bank of Richmond.
And it wouldn’t bring much relief if more buyers resort to plastic and other non-monetary payments. This is because most small merchants lack the bargaining power to reduce their card processing fees.
Card acceptance carries a number of costs for merchants: interchange fees, network assessments, processor markup, gateway fees, chargeback penalties, terminal rentals, and more. Collectively, these average between 2.5% and 3.5% per sale for many small businesses. Additionally, there are costs associated with adopting the latest and most appropriate payment methods and keeping them up to date.
Consider a quick service restaurant where a typical customer spends $14. If that customer pays by credit card and the company pays an average processing fee of 2.2% plus 10 cents per transaction, each sale involves about 41 cents in fees. Even low-cost debit cards include fixed transaction fees that disproportionately impact businesses when the average per sale is low. When the average sale is $10 or less, it barely covers the cost of processing it as a card transaction.
That said, managing cash also comes at a cost, and it’s not always easy to know what’s best for the business. One analysis found that accepting cash costs 53 cents per $100 of sales, compared to $1.12 for accepting signature debit payments and 81 cents for PIN debit. Of course, businesses should also keep in mind that different customers will have different payment preferences.
And speaking of customers, those most likely to feel the pinch at the penny’s end are those still reliant on cash: older adults, low-income households, people without credit cards or bank accounts – either unbanked or underbanked – and those who budget in cash because it provides firmer spending discipline.
A few cents added to the purchase total or a purchase at a convenience store may not matter to someone who turns to a rewards credit card, but cash-dependent consumers experience those small increases directly, without compensatory points, perks or cash back at the end of the month. And yes, prices usually end at 99 cents, which are rounded up, not down. So the burden falls disproportionately on those least prepared to absorb even small, cumulative increases.
For some, it’s a coin toss
Digital consumers may barely notice the disappearance of the cent. They listen to phones, scan QR codes and use payment apps that still settle with the exact amount.
Although businesses have not received final guidance on how to manage payments in the post-penny era, one option is to price electronic transactions to the penny and round cash transactions to the nearest nickel. If that were widely adopted, digital payments alone would still be accurate.
Consumers who use cashless payments may believe their choice doesn’t affect how they shop, but behavioral research says otherwise. Credit cards reduce the “pain of paying,” leading people to spend more, often 10% to 20% more than with cash. Credit card rewards programs further incentivize card usage. In a final nod to the cost of non-cash payments, those rewards are funded by higher commissions for merchants that ultimately translate into higher retail prices.
Killing the penny makes economic sense for the government and some businesses, but it also reveals a deeper truth: efficiency tends to reward those who are already efficient. However, for many, even when the change is small, every penny still counts.
*Nancy Forster-Holt is a Clinical Associate Professor of Innovation and Entrepreneurship at the University of Rhode Island.
This article was originally published on The Conversation/Reuters
