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Rounding Up: The Impact of Phasing Out the Penny

Author

Listed:
  • Zhu Wang
  • Russell Wong

Abstract

The U.S. government is expected to stop producing new pennies for circulation by early 2026. In 2024, the Treasury incurred a seigniorage loss of $85.3 million on penny production. As pennies phase out, businesses are likely to round cash transactions to the nearest 5 cents, resulting in a "rounding tax." Using data from the 2023 Diary of Consumer Payment Choice, we estimate that rounding tax could cost U.S. consumers approximately $6 million annually. Eliminating the nickel in addition to the penny could result in significantly higher rounding costs: up to $56 million per year for consumers.

Suggested Citation

  • Zhu Wang & Russell Wong, 2025. "Rounding Up: The Impact of Phasing Out the Penny," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 25(27), July.
    • Handle: RePEc:fip:fedreb:101208
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    File URL: https://www.richmondfed.org/publications/research/economic_brief/2025/eb_25-27
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    Keywords

    Payments; household and consumer finance;

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