Why Canada killed the penny
New Zealand, Australia, the Netherlands, Norway and Finland among others have made the transition to a penny-less economy.
Fri, Feb 01, 2013 at 02:00 PM
It's the end of the line for the Canadian penny in retail purchases. On Feb. 4 the Canadian Mint, which stopped producing pennies last spring, will stop circulating the coins to financial institutions and will encourage them to send back any pennies they have on hand. And the majority of retailers will follow the government's proposal to round the prices of all cash transactions.
It's billed as a cost-savings move.
"The penny is a currency without any currency in Canada, and it costs us 1.5 cents to produce a penny," said Canadian Finance Minister Jim Flaherty.
While there may be some nostalgic souls north of the U.S. border who lament the passing of the iconic twin-maple-leaf coin, Flaherty said that when the Canadian senate committee held hearings on axing the penny last year, not one witness came forward to say it should be preserved.
Canadians, though, won't be forced to go cold turkey. Retailers will still be allowed to make exact change in pennies until the supply runs outs. And rounding applies only to cash transactions; it will not affect electronic forms of payment, such as credit and debit transaction.
And the rules on rounding aren't hard and fast. Retailers are expected to follow a variety of rounding approaches, with some expected to round down all transactions to the nearest nickel, others rounding down all sales below 5 cents and rounding up all sales above five cents, and still others using the government's more complicated penny-by-penny rules. [Top 10 Rarest U.S. Coins]
All are good in the eyes of the government. There are also no requirements that retailers change their cash registers. They can simply have their staff use "rounding rules in their head," as long as they are consistent in the approach.
Canada will not be the first penniless nation. New Zealand, Australia, the Netherlands, Norway and Finland are among those that have made smooth transitions to a penny-free economy, according to the Canadian government.
The great consolation for U.S. citizens is that the Canadian penny will now be as useless north of the border as it is south of the border when Americans find one among their change.
Reach BusinessNewsDaily senior writer Ned Smith at email@example.com. Follow him on Twitter @nedbsmith.
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