The penny has been a staple of American currency since 1793, when the U.S. Mint produced its first circulating coins—11,178 copper cents featuring a depiction of Liberty with flowing hair. Over the centuries, the penny has undergone various design changes, including the introduction of Abraham Lincoln’s profile in 1909 to commemorate his 100th birthday.
However, the U.S. Treasury Department recently announced that it will cease production of the penny once the current supply of blanks is exhausted. This decision is driven by the rising cost of production—each penny costs nearly four cents to manufacture—and aims to save approximately $56 million annually.
While the penny will remain legal tender, its phase-out marks the end of over two centuries of continuous mintage. This development prompts reflection on the penny’s historical significance and its role in modern commerce.
The Cost of Keeping the Penny
The decision to end penny production is rooted in its growing financial inefficiency. According to the U.S. Treasury, the cost of making each one-cent coin surged by over 20% in 2024, pushing the per-unit cost to more than two cents. In response, the U.S. Mint has placed its final order of penny blanks and will cease production once that supply runs out.
This move is expected to save taxpayers approximately $56 million per year in material and manufacturing costs, based on current estimates. A Treasury Department official, speaking on condition of anonymity, confirmed the expected savings and noted that the decision was made in part to curb “wasteful” government spending.
The announcement followed a directive issued in February 2025 by President Trump on Truth Social:
“For far too long the United States has minted pennies which literally cost us more than 2 cents. This is so wasteful! I have instructed my Secretary of the US Treasury to stop producing new pennies.”
Despite their widespread presence — with over 114 billion pennies currently in circulation — the Treasury notes that the coins are largely underutilized in modern transactions. As Americans increasingly shift toward digital and card-based payments, coins like the penny see less day-to-day use, amplifying the cost-to-value gap.
For context, the U.S. Mint spent $1.04 billion on producing coins in 2023, with pennies accounting for nearly $180 million of that total.
Continuing to produce pennies has become a costly tradition — one the government is now choosing to phase out.
Implications for Consumers and Businesses
With the phasing out of the penny, legislators have proposed that cash transactions be rounded to the nearest five cents. While the Treasury expects the overall impact on consumers to be minimal, the shift has sparked some criticism and concerns about fairness, particularly for groups more reliant on cash.
Low-income and older Americans, who are statistically more likely to use cash for everyday purchases, could be disproportionately affected if retailers round prices in ways that consistently favor businesses. Some people are concerned that unregulated rounding practices could result in small but compounding financial disadvantages for those least able to absorb them.
Economist Jay Zagorsky, author of The Power of Cash: Why Using Paper Money is Good for You and Society, told the Associated Press that Congress should require retailers to round prices up at the point of pricing, not at the register. This, he argues, would remove the need for pennies altogether while still protecting consumers from unfair rounding practices.
Zagorsky also pointed out a potential economic contradiction in the move: “If we suddenly have to produce a lot of nickels — and we lose more money on producing every nickel — eliminating the penny doesn’t make any sense.” According to U.S. Mint data, nickels also cost more to produce than their face value, raising broader questions about the cost-efficiency of the nation’s coinage system as a whole.
Regardless, the shift is expected to affect only a small percentage of transactions, as fewer Americans rely on cash for everyday purchases. Many businesses already round totals when pennies are in short supply or excluded from transactions. For card and digital payments — which account for the majority of consumer spending — it is unlikely that any change will occur, as transactions can still be processed to the exact cent.
For businesses, especially those that handle large volumes of low-cost items, the change may require minor updates to point-of-sale systems or signage, but the transition is expected to be manageable.
Historical Context and International Perspectives
The U.S. wouldn’t be the first country to retire its lowest-denomination coin — and history shows that when others have done so, the impact has been minimal. Nations like Australia, Canada, and New Zealand eliminated their 1- and 2-cent coins years ago, and in each case, cash transactions were simply rounded to the nearest 5 cents. These changes saved on minting costs without disrupting everyday spending.
- Australia removed 1- and 2-cent coins in 1992. Though there was later a push to eliminate the 5-cent coin, it didn’t succeed — but mint officials expect smaller coins to disappear naturally over time as digital payments grow.
- Canada ended penny production in 2012 but allowed them to remain legal tender. It launched a national education campaign, and today, rounding is widely accepted and routine.
- New Zealand eliminated 1- and 2-cent coins in 1990, followed by the 5-cent coin in 2006. Interestingly, studies there found that prices did not increase after the change — and in some cases, even dropped, thanks to market competition.
In many cases, removing small coins led to broader conversations about the future of other low-value denominations — suggesting that if the U.S. penny goes, the nickel might not be far behind.
The decision to discontinue the penny reflects evolving economic considerations and the need for fiscal efficiency. While it marks the end of an era, it also opens the door for modernization in U.S. currency practices.
SOURCES:
Grantham-Philips. (2025, May 24). Here’s how much the US spends on minting its coins and cash. NBC New York.
History of U.S. Circulating Coins. (2018). United States Mint.
Hussein, F., & Suderman, A. (2025, May 22). US Mint moves forward with plans to kill the penny. AP News.
McClain, L. (2025, April 30). McClain, Garcia, Lummis, Gillibrand Introduce Bipartisan Bill to End Penny Production. Mclain.house.gov.
Suderman, A. (2025, May 22). U.S. Mint moves ahead with plans to kill the penny. PBS News.
Tyko, K. (2025, May 24). What killing the penny means for you. Axios.
White, M. (2025, May 22). Trump’s Coin Toss: What’s Going to Happen When the U.S. Scraps Pennies? Nasdaq.com.
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