Rounding Up: The Impact of Phasing Out the Penny

Zhu Wang and Russell Wong

Richmond Fed Economic Brief, 2025, vol. 25, issue 27

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.

Keywords: Payments; household and consumer finance (search for similar items in EconPapers)
Date: 2025
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