U.S. Treasury Department To Phase Out New Mint of Pennies

The U.S. Treasury Department has confirmed it will phase out the production of new pennies, with the U.S. Mint placing its final order for penny blanks in May 2025. Production will cease once the existing inventory of blanks is depleted, likely by early 2026. This decision, driven by President Trump’s directive in February 2025, aims to cut costs, as producing a penny now costs 3.69 cents, resulting in a $85.3 million loss for the Mint in 2024.

There are approximately 114 billion pennies in circulation, and they will remain legal tender, though their use is expected to decline as businesses may need to round cash transactions to the nearest nickel. The move is projected to save $56 million annually in material costs, with additional savings from repurposing production facilities.

Ceasing penny production is expected to save the U.S. Mint approximately $56 million annually in material and production costs, as pennies cost 3.69 cents to produce but are worth only one cent. Additional savings will come from reallocating Mint resources. Without pennies, cash transactions may need to be rounded to the nearest nickel, potentially affecting pricing strategies. For example, a $9.99 item might round to $10.00, slightly increasing costs for consumers in some cases (estimated at $0.02-$0.03 per transaction). Electronic transactions, which make up over 60% of U.S. payments, will remain unaffected.

Some fear rounding could contribute to minor inflationary pressure, though studies (e.g., Canada’s 2013 penny phase-out) suggest the impact is negligible, less than 0.01% on overall prices. Businesses will need to adapt cash registers and pricing strategies, potentially incurring short-term costs for system updates. Small businesses, especially those reliant on cash, may face higher adjustment costs.

Pennies are often hoarded or discarded (e.g., in jars or lost), with 114 billion in circulation but only a fraction actively used. Consumers may notice little day-to-day change, though some may perceive rounding as a price hike, affecting low-income individuals disproportionately. Penny drives (e.g., for charities) and tipping norms may shift, as small-denomination donations become less common.

Producing pennies consumes significant resources (e.g., zinc and copper). In 2024, the Mint used approximately 1.2 million pounds of zinc for pennies. Eliminating production reduces environmental strain from mining and minting processes. The penny, featuring Abraham Lincoln, holds sentimental value for some Americans. Its phase-out may be seen as a loss of tradition or a step toward a cashless society, raising concerns about financial inclusion for unbanked populations (about 5% of U.S. households).

The decision has polarized opinions, with distinct groups advocating for or against the penny’s elimination. The Treasury and many economists (e.g., citing studies from the GAO) argue that pennies are inefficient, costing more to produce than their value and slowing transactions. They point to successful phase-outs in Canada (2013), Australia (1992), and New Zealand as evidence.

Retail associations, like the National Retail Federation, support the move, citing reduced handling costs and faster checkout times. They note that pennies often clog cash registers or are left unused. Environmental Groups highlight the ecological benefits of reducing metal use and waste from penny production.

A 2023 YouGov poll found 59% of Americans support phasing out the penny, citing inconvenience and inflation rendering it nearly obsolete (e.g., a penny in 1969 had the purchasing power of about 8 cents today). Traditionalists and Numismatists collectors and those valuing the penny’s historical significance (e.g., Lincoln’s legacy) argue it’s a cultural touchstone. Groups like Americans for Common Cents advocate for its retention.

Critics, including some consumer advocacy groups, argue that rounding could disproportionately burden low-income cash users, who may face cumulative price increases. A 2019 study estimated a potential $600 million annual cost to consumers from rounding, though this is debated. Some small retailers, particularly in rural areas, worry about the costs of updating systems and customer backlash over perceived price hikes.

The zinc lobby, represented by groups like Jarden Zinc Products, opposes the move, as pennies account for a significant portion of U.S. zinc demand. In 2024, penny production used about 1% of domestic zinc output, supporting jobs in mining states. While many Americans are indifferent (e.g., 34% in the YouGov poll were neutral), some express mixed feelings, valuing tradition but acknowledging the penny’s declining utility.

Banks are largely neutral, as pennies will remain legal tender, but they anticipate a gradual shift toward digital payments, reducing the need for small change. The penny’s phase-out is a pragmatic step toward cost savings and efficiency, aligning with global trends (e.g., Canada’s penny-free economy since 2013).

However, it raises concerns about fairness, tradition, and economic impacts on specific groups. The divide reflects a tension between modernization and preserving familiar systems, with the outcome likely hinging on how well businesses and consumers adapt to a penny-less cash economy.