Canadian Pennies Phased Out and Rounding of Cash Change (Up or Down) Begins Today

Update: see previous posts – June 30, 2012 The Loonie’s Celebrates Its’ 25th Birthday on June 30, 2012, March 30, 2012 A Penny for your Thoughts!, March 15, 2012 Never Iron the Canadian Polymer $100 Banknote – Ironing Both Shrinks and Shrivels the $100 Banknote, November 14, 2011 $100 Polymer Bill (A Robbie Borden) Released on November 14, 2011, October 9, 2011 New Canadian Plastic Bank Notes To Be Released in Nov./11, March /12 and the End of 2013

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Phasing out penny from circulation - what it means for Canadian consumers and businesses

Phasing out the Penny

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.

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.

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, as illustrated below:

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, as illustrated:

*A tax rate of 5 per cent has been provided for the purposes of illustration.  Any taxes (e.g., the Goods and Services Tax/Harmonized Sales Tax), as well as any fees or duties, should be tabulated prior to rounding.

Are you ready, as a consumer, for the total elimination of the penny, as it is phased in beginning February 4, 2013?

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2 comments

  1. Hi Les:
    In the US: President Obama faced the dilemma of expensive coins (pennies and nickels) last year. See: http://money.cnn.com/2012/02/15/news/economy/pennies_nickels/index.htm

    In Canada:
    According to the federal conservative government, it costs 1.6 cents to produce the one-cent coins that are now made out of steel. In 2010–11, the Government paid the Mint $120 million for coins and earned $131 million on the subsequent sale of these coins to financial institutions at face value.

    The Mint is suggesting that they will save $11 million a year, when they discontinue the minting of the penny – which they did on February 4, 2013.

    The composition of a penny, mainly consisted of copper from 1858-1996. From 1997-1999 it was zinc. From the year 2000 to present, the penny mainly consists of steel. Once made of golden-red copper, the penny today is made of steel — lightweight and vaguely unpleasant to touch. They leave a strong metallic smell on the hands.

    When Edward VIII abdicated the throne to marry American divorcée Wallis Simpson, the Canadian Mint was caught off guard. They had no image prepared of his successor, George VI, to use on the penny. So they used the dies from 1936, marking the 1937 pennies with a dot. They never went into circulation. Only three are known to exist.

  2. and now they’re talking about getting rid of the nickle too !!!! harper will do anything to squeeze a few cents out of us for his business pals.

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