I remember over 20 years ago I heard that the government was asking the question, “Is it time to kill the penny?” The Penny has been around for so long. About 232 years! It has been such a part of our culture, I mean who hasn’t used the phrase, “A penny for your thoughts.” when you are asking what someone is thinking. Or, almost everyone has used, “That’s my two cents” when offering a modest opinion. Let’s not forget a couple references we use in personal finance all the time. Such as, “Pinching pennies” when we are being frugal, or using “A penny saved is a penny earned.” when referring to saving money is just as valuable as earning it. Last but not least, when you do splurge on that expensive pointy guitar you’ll often say it, “Cost a pretty penny.” Interestingly enough, the U.S. penny may have run it’s course.
After all it has been in been in circulation since 1793. In recent years, it has become kinda of a financial burden than an actual useful coin. As increasing inflation erodes its purchasing power, and the cost of minting the penny far exceeds its actual value, many are asking the question, “why the U.S. is still clinging to this somewhat outdated piece of currency.”
There are, in fact, other countries, including Canada, Australia, and New Zealand, have already ditched their smallest coin denominations. This has proved that commerce can, indeed, continue smoothly without these little copper-colored bastards. So why does the U.S. still produce the penny, and how much money is really being wasted? Let’s break it down.
The Cost of Making a Penny is A Losing Game
The biggest argument against keeping the penny in circulation is simple economics: it costs far more to produce than it’s worth. I mean any other company that would continue to manufacture a product in this way would stop production or go out of business. According to the U.S. Mint, in 2023, it cost 2.72 cents to manufacture just one penny. That’s nearly three times its face value!
Consider this, more than 4 billion pennies were minted in 2023 alone, so the U.S. government lost around $80 million just to keep pennies in circulation. Excuse me while I facepalm myself! This is taxpayer money being just burned on coins that most people don’t even bother to pick up off the ground anymore. I mean, I’d pick it up, but most people wouldn’t.
Why Are Pennies So Expensive to Produce?
So, since the year 1982, pennies have been made primarily of zinc (97.5%) with just a thin copper coating (2.5%). Before 1982, pennies were mostly copper, however because of the rising metal prices it then forced us to switch to the cheaper zinc alloy. Yet, even with this adjustment, the cost of producing a penny continues to rise.
These cost to mint a penny includes:
- Raw materials (zinc and copper)
- Manufacturing costs (pressing, stamping, and transportation)
- Distribution to the banks and retailers
At this point, the penny has become an expensive relic that doesn’t really serve any practical purpose in modern transactions.
The Case for Eliminating the Penny
Beyond the obvious financial waste, there are other strong arguments for eliminating the penny:
It’s a Waste of Time
Think about when you do see people digging through their pockets or purses for pennies at checkout. Some studies have estimated that penny transactions can waste an extra 2-3 seconds per transaction, adding up to millions of wasted hours each year across the economy.
It’s Not Universally Accepted
Many machines—such as vending machines, toll booths, and parking meters don’t even accept pennies. Where have all the gumball machines gone? So what’s the point of keeping a coin in circulation that can’t even be used everywhere?
Inflation Has Made It Useless
When the penny was first introduced in 1793, it had real purchasing power. Today, you can’t buy anything with a single penny. Inflation has rendered it practically worthless, and most people either hoard them in jars or throw them away. You heard that. They end up in the garbage!
Other Countries Have Already Done It
The U.S. wouldn’t be the first country to phase out low-value coins. In fact, many major economies have already done so:
When Canada did stop making pennies in 2013, businesses and consumers simply rounded prices to the nearest five cents. It was a very smooth transition, and their economy continued without any issues. The same thing happened in Australia and New Zealand.
If these countries can do it without causing chaos, why can’t the U.S.?
Why Hasn’t the U.S. Ditched the Penny Yet?
Nostalgia and Tradition
Many Americans feel a sentimental attachment to the penny, especially since it features the bad-ass dude Abraham Lincoln’s face. People don’t like change, and there’s always push back when historical symbols are altered or removed. I mean I kinda get it, but we can’t continue to hold on the past indefinitely. There comes a time to move on.
Fear of Rounding Up Prices
Another concern is that eliminating the penny would lead to businesses rounding prices up rather than rounding fairly. Studies from Canada and other countries have shown that price rounding evens out over time. Some transactions round up, and others round down, leading to no major impact on inflation or consumer spending.
The Pro-Penny Lobby
Yes. You heard that correctly. Believe it or not, there are businesses that continue to profit from keeping the penny in circulation. The company that produces penny blanks what are called planchets, for the U.S. Mint, Artazn, has lobbied hard to prevent the penny’s elimination. Let’s also not forget, Coinstar, the company that operates coin-counting machines, benefits from billions of pennies being dumped into its machines every year.
Could Nickels Be Next?
If the penny is on the chopping block, some argue that the nickel should follow. Again, it’s because it costs 13.78 cents to produce just one nickel! That is more than twice its face value! It’s kinda comical!
Did you know that the U.S. did discontinue a coin denomination. The last one to be retired was the half-cent, which was phased out way back in 1857. I think I may remember seeing a half-cent piece floating around when I was a kid.
Will The Penny Finally Disappear?
For years, eliminating the penny has been a topic of discussion in Washington, but it never really gains enough traction to pass through Congress. However, momentum is growing.
If the U.S. does follow Canada’s lead, we could see a phase-out where pennies are no longer minted, but they remain legal tender indefinitely. This would allow the transition to happen naturally without forcing businesses and consumers to adjust overnight.
With this cost of minting pennies only increasing as well as inflation making them, basically, irrelevant, I’d expect it’s only a matter of time before the U.S. finally pulls the plug.
After all, the U.S. penny costs more to produce than it’s worth, it wastes time in transactions, and has little to no practical use in today’s economy. Other countries have already ditched their smallest coins with zero negative impact. I ask the question, “Why is the U.S. still holding on?”
I think it’s time to face the facts: The penny’s days are probably numbered. The only question left is when will Congress finally act to put this outdated coin to rest.
What do you think? Should the U.S. get rid of the penny, or is it still worth keeping? Keep those horns up, and let me know in the comments!