Your parents probably told you “A penny saved is a penny earned”. Well starting on Monday that saying doesn’t take much meaning any longer, as the penny will be phased out of circulation in Canada. This should have been foreseen, as the amount of money it took for the raw materials and labour to create the penny far outweighed its value. With the penny disappearing what kind of effect will this have on your everyday life?
Well for starters, your pockets will get lighter for sure, since you’ll no longer have to carry around pennies. There will be no more holes to fix in your pockets because they will be that much lighter. Quite possibly you’ll no longer have to wait for people to count out 9 pennies while you wait impatiently in line behind them. Seriously though, there will be some changes that you will notice when you go out and buy things from a store. Without a penny, it means that your cash transactions will be subjected to a form of rounding. Most stores should follow standard rounding:
- Amounts ending with 1 or 2 cents will round down to the nearest 10 cents
- Amounts ending with 3 or 4 cents will round up to the nearest 5 cents
- Amounts ending with 6 or 7 will round down to the nearest 5 cents
- Amounts ending with 8 0r 9 will round up to the nearest 10 cents
- Amounts ending with 0 or 5 will not be subject to rounding
Figures taken from http://www.budget.gc.ca/2012/themes/theme2-eng.html
These figures are just a recommendation for stores. There is no law that requires vendors to abide by that rule. Some may just round up all the time to take more money from you. Skeptics will say this is a cash grab for stores to take more money out of your pocket, but to be honest do the math yourself and you’ll probably find that most stores will keep to this rounding practice. Banks have already declared that cashing of cheques will follow these rounding rules.
If you pay most things with plastic, like a credit card or a debit card, then the lost of the penny will have very little impact on you. Electronic transactions will all keep the price as is without the rounding. So if you don’t want to feel like you are getting screwed for something then pay for it with your debit card. If you’re a spend thrift of some sort and want to save 1 or 2 cents here and there then opt to pay with cash whenever you see that the price will round down.
Some stores have already started to change prices to reflect the fact that the penny is phasing out. If you’ve visited your favourite Tim Horton’s coffee shop lately, you’ll notice that prices after tax are starting to end in 0 cents or 5 cents. This takes away from any skepticism that people may have.
One thing to note is that rounding will be done after taxes have been added to the price. For example:
- You buy something for $2.37
- Taxes paid will be $2.37 x 13% HST (in Ontario) = $0.31
- The total there will be $2.68. If you pay in cash you pay $2.70. If you pay credit or debit, it’s $2.68.
What won’t happen is this:
- You buy something for $2.37
- Price gets rounded up to $2.40 and then taxed. $2.40 x 13% HST = $0.31
- Cash price is $2.70 which is the same but debit and credit is $2.71
If you catch someone doing it wrong, kindly remind them that their machine is broken.
One special rule that has been put in place for rounding dollar amounts is that government cheques will always round up for anyone that is converting them to cash. This means that if you are receiving any special assistance or pension from the government and you cash them on a regular, then the vendor cannot round down. There is no exception to this rule and it is the law to do so.
The disappearance of the penny will only have the most effect on people who deal with cash on a regular basis. Despite the fact that the penny is no longer made, it is still legal tender and at the beginning should still be accepted by most retailers and vendors. Eventually, this will change and there is no obligation for vendors to continue accepting them, but I won’t be surprised to see the penny around a little longer, as people get accustomed and smaller retailers adjust to life without it. If you’re freaking out, don’t be, other countries have eliminated their lowest domination and have continued to function quite well without it.
Before I finish, I leave you with a few other famous Pennys that have come and gone.