Phasing out the Penny
By Royal Canadian Mint | Monday, 4 February 2013
In Economic Action Plan 2012, the Government announced it would phase out the penny from Canada's coinage system. The decision to phase out the penny was due to its excessive and rising cost of production relative to face value, the increased accumulation of pennies by Canadians in their households, environmental considerations, and the significant handling costs the penny imposes on retailers, financial institutions and the economy in general.
The estimated savings for taxpayers from phasing out the penny is $11 million a year.
The cent will remain Canada's smallest unit for pricing goods and services. This will have no impact on payments made by cheque or electronic transactions–only cash transactions will be affected. Moreover, pennies can still be used in cash transactions indefinitely with businesses that choose to accept them.
Important Dates
To help consumers, businesses, charities and financial institutions to plan, a transition date of February 4, 2013 has been set after which the Royal Canadian Mint will no longer distribute pennies.
On this date, businesses will be encouraged to begin rounding cash transactions.
Rounding Guidelines
As pennies exit circulation, cash payments or transactions only will need to be rounded, either up or down, to the nearest five-cent increment.
The Government of Canada will be adopting a rounding guideline that has been used successfully by other countries for its cash transactions with the public.
Under this guideline, when pennies are not available, cash transactions will be rounded in a fair and transparent manner.
When to round
Again, only cash transactions require rounding. Cheques and transactions using electronic payments–debit, credit and payments cards–do not need to be rounded, because they can be settled electronically to the exact amount.
For any cash payment, only the final amount (or equivalently, the change owed) should be subject to rounding. Individual items, as well as any duties, fees or taxes, should be tabulated in their exact amount prior to rounding.
FAQs
Why is the penny being phased out?
The Government is phasing out the penny due to its rising cost of production relative to face value, the increased accumulation of pennies by Canadians in their households, environmental considerations, and the significant handling costs the penny imposes on retailers, financial institutions and the economy in general.
The estimated savings for taxpayers from phasing out the penny is $11 million a year.
When will the Government stop distributing the penny?
The Royal Canadian Mint will cease the distribution of pennies to financial institutions on February 4, 2013. On this date, businesses will be encouraged to begin rounding cash transactions in a fair and transparent manner. As financial institutions will no longer be receiving pennies from the Mint, they may not distribute pennies to consumers and businesses after February 4, 2013.
Can I still use pennies for buying goods and services?
Yes. The penny will retain its value indefinitely. As such, consumers can use pennies for cash transactions with businesses that choose to accept them.
Will businesses round prices even if I have exact change?
Consumers can use pennies for cash transactions with businesses that choose to accept them.
Where can I bring my pennies for redemption?
Canadians may redeem their pennies at their financial institution. Financial institutions may require that pennies be properly rolled. Canadians may also consider donating them to charities.
Are financial institutions required to accept my pennies?
Canadians can continue to deposit pennies at their financial institution. Some financial institutions may require large amounts of pennies to be rolled or wrapped for deposit. Canadians should consult their financial institution in advance to determine how best to make deposits.
Will I need to roll all of my pennies?
The standard practice is that pennies, like other coins such as dimes or nickels, are rolled or wrapped for deposit. Financial institutions and charities have the discretion to decide whether pennies must be rolled or not. Canadians should consult their financial institution or charity of choice to determine whether unrolled pennies will be accepted.
How long will I have to turn in my pennies?
The penny will retain its value indefinitely. As such, there is no time limit for redeeming pennies.
How will the Government ensure that businesses round final totals fairly?
The Government expects businesses will act in a fair and transparent manner.
Experience in other countries that have phased out low-denomination coins, such as Australia and New Zealand, has shown that fair rounding practices have been respected.
Will the rounding affect the Goods and Services Tax/Harmonized Sales Tax (GST/HST) that I will have to pay?
No. For any cash payment, only the final amount (or equivalently, the change owed) should be subject to rounding. Individual items, as well as any duties, fees or taxes, should be tabulated in their exact amount prior to rounding. This includes the GST/HST.
History of the Penny: Infographic
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