As of February 4th 2013, the Royal Canadian mint will no longer distribute one cent coins. Although they will still be kicking around for some time, to all intents and purposes the Canadian penny is on the way out.
News of the penny being phased out first came with Canada’s Economic Action Plan 2012, yet despite advanced notice most businesses have done little to prepare for the transition. And as of February 4th over 80% of consumers surveyed were unaware of the demise of the copper coin. The question is, what are your plans to deal with this change?
Debit and credit transactions will not be affected, but cash transactions will either have to be rounded up or down. The Department of Finance Canada has indicated simple penny rounding guidelines, however it is ultimately up to businesses how they would like to round their transactions. Some businesses are making changes to their software systems to introduce automatic rounding while others will get by with manual rounding in the short-term.
The rounding guidelines are simple:
- First, calculate the total of all items after tax
- If the total ends in a 1 or 2, 6 or 7, round down to 0 and 5 respectively
- If the total ends in a 3 or 4, 8 or 9, round up
Despite the change not being drastic to either business or consumers, some pushback is expected. This raises the question about rounding — should businesses simply round down to ensure customer satisfaction? Should businesses protect their margins by rounding up? Or do you think both parties will be satisfied with the rounding guidelines outlined by Finance Canada?
The decision to do away with the penny was a no-brainer. A penny worth 1 cent costs 1.6 cents to make; an annual loss of $11 million. The U.S. is in a similar, albeit worse, position with their 1 cent coins costing them $58 million a year. Despite this, it seems the U.S. has no immediate plan to be rid of their costly coin. In fact, Time Magazine referred to the phasing out of the penny as a “Canadian experiment” even though Australia did away with its 1-cent piece 23 years ago.
Canada, however, continues to look forward with talks already in progress of phasing out nickels and eventually quarters as well.
When do you think the U.S. will decide to scrap the penny?