Key Points
- The U.S. Mint will no longer produce pennies due to rising costs, as each penny costs more than two cents to manufacture.
- Cash transactions will now be rounded to the nearest five cents, while card and digital payments remain exact.
- The U.S. previously had a half-cent coin, eliminated in 1857 due to its declining purchasing power.
President Donald Trump has directed the U.S. Treasury to stop producing the penny, citing its high production cost and inefficiency, according to a post on Truth Social. With each penny costing 3.7 cents to mint, the move is expected to save millions in government spending.
The decision follows years of debate about the coin’s relevance in an era dominated by digital payments. Other countries, including Canada and Australia, have already eliminated their lowest-denomination coins, adopting rounding rules similar to those now being implemented in the U.S.
The U.S. previously had a half-cent, which it eliminated as purchasing power declined.
How Payments Will Work
Other countries have eliminated their lowest denominations and so it gives us a good sense of how payments will work.
While card and digital transactions will remain unchanged, cash transactions will be rounded to the nearest five cents.
For example:
- A total of $9.97 would round down to $9.95.
- A total of $9.99 would round up to $10.00.
- A total of $10.02 would round down to $10.00.
- A total of $10.03 would round up to $10.05.
Most major retailers will continue to charge the exact amount for non-cash payments, preventing any significant impact on consumers using credit or debit cards.
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A Look Back In History: The Half-Cent
The U.S. once had a half-cent coin, introduced in 1793 and discontinued in 1857.
At the time, inflation had rendered the coin nearly useless for everyday transactions, much like the penny today. Its elimination was widely accepted, as larger denominations had become more practical.
U.S. Half Cent
Push To End The Penny
The penny’s future has been debated for years, with economists arguing that it slows down transactions and costs more than its worth. In 2023, the U.S. Mint produced over 4.1 billion pennies, despite the coin’s declining use. Rising metal costs and inflation have only intensified calls to phase it out.
Elon Musk’s Department of Government Efficiency drew attention to the issue last month, accelerating momentum for the change. Trump’s directive aligns with previous proposals to modernize the currency system and cut unnecessary costs.
The penny costs over 3 cents to make and cost US taxpayers over $179 million in FY2023.
— Department of Government Efficiency (@DOGE) January 22, 2025
The Mint produced over 4.5 billion pennies in FY2023, around 40% of the 11.4 billion coins for circulation produced.
Penny (or 3 cents!) for your thoughts.
Sources:https://t.co/Y5LlrpyA62…
What Consumers Should Expect
For most Americans, the change will have little impact. Cash users may notice small rounding differences, but digital transactions will proceed as usual. Businesses are expected to update their pricing strategies, but given that many already round prices to the nearest five cents, the transition should be smooth.
The move reflects a broader shift toward digital payments, reinforcing the declining role of physical cash in everyday transactions. As the U.S. Mint phases out the penny, some wonder if the nickel could be next.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
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