The final American penny was minted last week in Philadelphia, capping more than 230 years of production that had become increasingly expensive as the coin became essentially worthless.
In a strange short-term twist, the 1-cent piece is as valuable as it has been in years, at least to many stores across the country.
Retailers are running out of pennies. For them, it’s causing all sorts of headaches. For you, that could mean a checkout hassle or slightly higher price. It could also mean a sweet deal.
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Why We’re No Longer Making the Penny
In February, President Donald Trump ordered the Treasury Department to end the “wasteful” production of the penny. The cost to produce one penny had ballooned to nearly 4 cents, Treasury officials estimate, and the U.S. expects to save taxpayers $56 million annually by discontinuing the coin.
First authorized by the Coinage Act in 1792, the penny enjoyed a long run as both a common currency and cultural icon. Even though it will no longer be made, it remains accepted legal tender.
The Nov. 12 final striking of the penny was largely ceremonial, as the U.S. had halted most of its penny production over the summer. Soon after, retailers began to experience a penny shortage.
Penniless Stores Are Feeling the Pinch
Gas stations, grocery stores and other merchants are struggling to keep enough pennies on hand to provide correct change.
Although the Treasury estimates that 300 billion pennies remain in circulation, the problem is that they don’t actually “circulate” as much as paper bills or even other larger coins. Instead, the coins typically collect dust in glass jars, center consoles and under couch cushions. Meanwhile, the Federal Reserve’s penny inventory is becoming depleted, making it harder for businesses to replenish their supplies through banks or distributors.
“We’ve heard from our retail members that they have stores in multiple locations in multiple markets and regions that are currently out of pennies as of today,” says Dylan Jeon, senior director of government relations for the National Retail Federation. “Others are worried that their inventory will be out in the very near future. So it’s definitely something that’s impacting any cash-accepting business.”
Nearly one-quarter of the country’s largest retailers say that more than 1,000 of their store locations are now without pennies, according to a November survey conducted by the Retail Industry Leaders Association.
The shortage is hitting a wide range of U.S. retailers, from fast-food chains like McDonald’s to major grocers such as Kroger to convenience stores like Kwik Trip.
To deal with the issue, many merchants have been rounding purchases to the nearest nickel. Two-thirds of respondents to the RILA survey said they’ve been rounding charges down in the customer’s favor, which may improve customer relations but can cost businesses millions of dollars over time.
Rounding can also introduce potential legal liabilities, since it can result in cash customers paying a different price from others. In an October letter sent to U.S. Department of Agriculture Secretary Brooke Rollins, industry groups said that the penny shortage “is beginning to cause a cascade of negative events in stores across the country.” The groups expressed particular concern that retailers who accept SNAP benefits may be at risk of violating equal treatment provisions by charging slightly different prices for food stamp recipients than for cash customers due to rounding.
Gas stations and convenience stores are hit particularly hard by the shortage, says Jeff Lenard, vice president of media and strategic communications for the National Association of Convenience Stores. He says roughly half of in-store purchases at convenience stores are cash transactions, and the average purchase is about $8. That means a high volume of transactions are impacted by rounding. If a convenience store is regularly rounding down, either by choice or by law, losses will likely add up faster than they might at retailers where customers make larger purchases and typically use a card.
Retailers have been posting signage throughout their stores informing customers that charges may need to be rounded to the nearest nickel and requesting that cash-paying customers try to use exact change.
“The goal for retailers is that consumers don’t see it as a problem, but it definitely is a problem,” says Lenard. “Retailers are working behind the scenes to see how can they get a sufficient supply of pennies. And it really depends upon where you are and what you sell for how bad the problem is. That determines what percentage of your customers are cash customers.”
Most industry groups are in favor of the elimination of the penny, but are seeking federal guidance for how merchants should address supply issues as it is phased out.
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That Jar of Pennies Might Earn You a Gift Card or Free Drink
While the penny’s demise is causing headaches for many businesses, the impact on the average consumer is relatively minor. Prices of some items might rise or fall by a couple of cents. Checkout lines might be slightly slower as clerks and machines fine-tune their rounding practices. Some self-checkouts may not be programmed to return amounts other than exact change.
However, you might be able to turn your pennies in for something extra. Some stores have started rewarding customers for bringing in that loose change they have sitting around. Here are a few of the deals that have been offered so far:
— Market 32 and Price Chopper grocery stores held a “Double Exchange Day” at all locations on Sunday, giving customers a gift card for twice the value of the number of pennies they brought in.
— Giant Eagle supermarkets held a similar exchange at all of their locations, offering a gift card worth twice the value of pennies brought in.
— Sheetz convenience stores rewarded customers with a free drink if they trade in 100 pennies.
Jeon says the penny shortage will likely worsen in the coming months, and he expects retailers to continue to offer deals and find other creative solutions to the problem.
“It’s such a low-utilization coin,” says Jeon. “Whatever businesses and retailers can do to help increase the circulation and get those coins back into the flow is helpful.”
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Penny Shortage Means You Can’t Get Correct Change originally appeared on usnews.com
