Consumers may face drawbacks from a new U.S. policy aimed at discontinuing penny production by early next year.
While eliminating the 233-year-old 1-cent coin could save the U.S. Treasury tens of millions of dollars, this change may inadvertently lead to increased prices affecting many low-income consumers.
Bill Maurer, dean of the School of Social Sciences at UC Irvine, warns that scrapping the penny will negatively impact individuals who primarily use cash instead of bank cards or digital payment methods. He highlighted two congressional proposals—the “Common Cents Act” and the “Make Sense Not Cents Act”—that fail to address the growing disparity between wealthy and low-income individuals.
The Impact of Rounding
Both proposals would cease penny production within a year and while pennies would remain legal tender, cash transactions would be rounded to the nearest nickel. This is particularly concerning for Maurer, as those using debit or credit cards would retain exact charges, but unbanked and underbanked customers would experience potential losses through rounding.
“Countries like Canada and Australia eliminated low-denomination coins, leading retailers to round up, which primarily affected cash users,” said Maurer. “This change harms those dependent on cash transactions.”
Concerns from Experts
“Rounding up doesn’t harm those with financial stability, but it disproportionately affects the poor over time,” Maurer stated, emphasizing the need for a comprehensive analysis of the payment landscape in the U.S. A representative for Garcia could not be reached for comment regarding these concerns.
Referring to a Federal Deposit Insurance Corp. study from 2023, Maurer noted that 14.2% of U.S. households are underbanked and 4.2% are unbanked. In California, the figures show 13.3% underbanked and 4.3% unbanked, showcasing a significant portion of the population that could be impacted by losing the penny.
The Rationale Behind Cash
Paulina Gonzalez-Brito, CEO of Rise Economy, indicated that marginalized groups heavily rely on cash, meaning rounding at registers could strain their already tight budgets. “It’s crucial to consider how every cent counts when individuals are in financial distress,” she said, advocating for a proposed law to establish a low-fee bank account for unbanked Californians.
The recent push to eliminate the penny comes amidst rising production costs; in FY2024, the U.S. Mint incurred an $85.3 million loss with nearly 3.2 billion pennies produced. On May 22, the Treasury announced plans to phase out the penny in early 2026, citing its production cost of approximately 3.7 cents each.
Ongoing Discussions
Mark Weller, director of Americans for Common Cents, argues that removing the penny would result in retailers rounding prices upward, potentially incurring further costs for consumers. “Eliminating the penny could lead to an excess expenditure of $200 million for increased nickel demands,” he mentioned, cautioning that as the supply of pennies dwindles, retailers may begin rounding transactions up rather than down.
