Canada getting rid of the penny to save costs
updated 5:38 AM EDT, Fri March 30, 2012
- The government says it will save $11 million a year
- It says the penny costs more to produce than it's worth
- Prices should be rounded up or down
- The government urges people to donate pennies to charity
(CNN) -- Canada is ditching production of the penny, saying it costs more to make the coin than it's worth.
As of this fall, the Royal Canadian Mint will cease distributing Canadian pennies, though consumers will still be able to use them for transactions. The change was included in the country's 2012 budget released Thursday.
The budget calls the lowly penny a "burden to the economy."
"It costs the government 1.6 cents to produce each new penny," the budget says, adding the government will save about $11 million a year with its elimination.
Some Canadians, it says, consider the penny more of a nuisance than a useful coin.
Some retailers say they're worried about the change.
"Something that costs $7.99 looks cheaper than something that's $8," Wendy Butenschoen of Toronto's Essence of Life Organics told the CBC.
Rounding prices will become the norm as the penny is gradually removed from circulation, the budget says.
If consumers find themselves without pennies, cash transactions should be rounded to the nearest five-cent increment "in a fair and transparent manner," it says. Noncash payments such as checks and credit cards will continue to be settled by the cent, however.
It says fair rounding practices have been respected in other countries that have eliminated low-denomination coins. The removal of one-cent coins in other countries such as New Zealand and Australia, it says, did not result in inflation.
The budget urges Canadians to donate their pennies to charities -- or even throw more into the wishing fountain.
"I'm going to believe that people want to just donate four cents more, and that a penny will turn into a nickel," said Lisa Resnic, marketing director for Sherway Gardens, where coins thrown into the fountain are donated to charity.
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