Take a Penny, Leave a Penny

I was just cleaning out the change in my car’s console and came across a penny; something that has finally been mostly filtered out of my change drawers and entirely removed from the coinage system of Canada. I poked around a bit online and discovered that we were just about to hit the one year anniversary for the removal of the penny, so I thought I would make an informative post to cover the topic.

The coin in my console was a simple coin wrought of copper. As the smallest unit of exchange, The penny has never been the most glorified member of the Canadian coinage system. You could commonly find a penny on the ground (and sometimes still do!), under your car seat or among other more questionable recovery areas.

Notice of Termination

According to sources in the know, the penny was more trouble than it was worth, quite literally. It was more expensive to produce the penny and get it into circulation than its actual face value. The National Post dropped the news of the penny’s impending doom in early 2012 citing costs as a huge factor. A single penny was estimated to cost 1.6 cents to produce. Terminating production on this money-burning copper relic was estimated to put $11 million back in the pockets of Canadians.

Given the financial burden of producing these one-cent pieces, it is unsurprising that it was also recognized as nonsensical to continue producing pennies based on the environmental costs. As part of its budget, the Government of Canada cited three key environmental benefits to its initiative to end penny production:

• Reduce the use of base metals in the production process.
• Existing pennies may be recycled for use in other products.
• Save energy expenditure used in the production/transportation/distribution of pennies.

While production ceased in May 2012, it was just last year on February 4^th, 2013, that the Royal Canadian Mint ceased distribution of the Canadian Penny.

Any pennies previously minted remain as legal tender for general use. The Currency Act states that one-cent pieces are valid legal tender for transactions not exceeding twenty-five cents where the denomination is one cent.

Ways To Profit (Even Just Marginally)

1) With the penny gone and a rounding system in place, it is possible for consumers to take advantage in a small way. In saying this, it is important to not go overboard with what you’re about to read. I wasn’t sure whether to even include this section since it’s more of a point of interest at the risk of sounding cheap. Then I figured, we are talking about pennies, so what the heck.

First, take a look at a diagram from the aforementioned source from the Canadian Government. These are the guidelines for retailers to round transactional totals with customers.

 

In such a system, it makes sense to – for instance – pump your gas to $40.02 or $40.07 rather than $40.03 or $40.08. You make yourself a few cents by controlling which direction you’re going. In effect, pumping to $39.98 and $40.02 cost you the same amount when paying cash ($40.00) while you get a few extra drops of sustenance for your vehicle. Since you’re going to be filling up your tank anyway, why not tip the odds in your favor? (You must be using cash for this to work, if you use debit/credit the total will be exactly as it is stated on the bill)

 

 

Paying Cash for Gas:

• $10.02 in gasoline = you saved two cents.
• $10.03 in gasoline = you lost $0.02 cents.

With this in mind, it is important to note that stores can decide to round up for all sales regardless of the rounding guidelines. Businesses are expected above all to be transparent and fair in all transactions where pennies are not available with the expectation that a penny here or a penny there will balance out over the long haul.

2) A more significant way to profit from the elimination of the penny is what my brother, Ryan, did. When the news broke about all of this, he bought a Bankers Box of pennies (50 rolls of unused pennies which amounts to $25 total).

Today that Bankers Box is running for +$50 on eBay. He did it more for interest’s sake as a collector than with an intention to turning a profit. However, thinking about it now, that turns out to have been a pretty easy way to double some money over the period of a year or two. It will be interesting to see how the price continues to move as the years roll on.

Conclusion

As a tax-paying citizen, I totally agree with the overall decision to phase out the Canadian Penny. Any coin whose material is worth more than the currency it represents is a problem. If anything, this simply demonstrates the power of inflation to erode nominal value of investments over time. While pennies were at one time a viable medium of exchange, today they are virtually worthless on their own.

Well, Penny, you had a good run. You might be gone from my change jar but you’re not forgotten.

– Rick

For our Canadian readers, how are you coping in a penny-less society? And for our other readers from America and beyond how does the Penny or lack thereof affect you?

Pictures courtesy of pixabay.com