There appears to be quite a bit of confusion surrounding the announcement made in Budget 2012 that the penny would be eliminated from our coinage system. Some Canadians believe that by eliminating the penny, businesses would always round up the cost of individual items and hence drive up prices. That is not quite true.

The Federal Government is simply going to stop producing and distributing pennies as of Fall 2012. Existing pennies will remain in circulation but over time, as the supply of pennies diminishes, businesses will resort to rounding off on cash transactions. Here’s an example: You walk into a dollar store and purchase an item selling for $1.25. Add 13% HST and the final tally is $1.4125. If you are paying cash, the store will round down the price to $1.40. Another customer buying 11 items and paying cash will be charged $15.55 ($15.5375 rounded up), not $15.95 ($1.4125 rounded up to $1.45 * 11). There is already many good examples of this principle at work such as gas prices, which often have a lowest unit of a tenth of a cent.

The eventual elimination of the penny will have no effect on credit, debit, cheque and electronic payments, where the cent will remain the smallest pricing unit. And even if every single retailer refuses to play ball and opts to round up the total final cost to the nearest nickel, it is a cost well worth paying for the hassle of dealing with those pesky pennies.

This article has 9 comments

  1. Seems like this is a software designer nightmare as now when you design a POS system you’ll have to know the payment method before you can calculate taxes.

  2. I have been hoping for elimination of the penny in Canada for a long time ever since I went to Australia where they stop using their penny years ago. It was joyous to not have to deal with all that extra change and the rounding was quick and efficient. I also loved the plastic bills used in Australia (waterproof and virtually indestructible) which Canada is moving towards as well.

  3. Tim Hortons dropped the penny a couple of days after the budget. It is refreshing to not get a bunch of pennies in your coffee change.

  4. @Traciatim: A small store owner was saying that the switch will be a nightmare because customers will complain that the rounding is not fair and she will have to take the time to explain it to them.

    @Michael: One problem I noticed with plastic bills is that they seem to stick together. I don’t deal much with cash but a couple of times already the bank teller missed counting 1 or 2 dollar bills.

    @Rob: Agree. I wish Tims would also do something about their ridiculous coffee cup lids.

  5. @CC
    Bank error in your favour. Collect $200.

  6. If I throw a penny in a fountain for good luck, do I now have to round it up to ensure my wish is heard?

    Also, when I give my opinion, is it now worth $0.05, rather than $0.02 or is it worth $0 because of inflation?

  7. Pingback: Best of Blogs | Retire Happy Blog

  8. I’m so glad that Canada is finally going to do this. Australia did this 20 years ago in 1992. It’s so annoying to carry pennies that don’t have any value.

    The plastic bills in Australia don’t stick whatsoever. They’re awesome.

  9. I will miss the Penny! I know that they are pretty well useless right now, but I do remember buying gum for 1 cent.