On February 9, 2018, President Donald Trump declared that the US should no longer mint pennies. He cited the exorbitant costs associated with putting on a production as driving this decision. This surprising and unexpected move has sent banks and retailers scrambling to adapt to the overnight disappearance of the one cent coin. The de facto removal of the penny from circulation without a formal legislative process or regulatory direction from the government posed an immense challenge across all sectors.
According to the U.S. Treasury Department, halting penny production will save the federal government about $56 million a year. The U.S. Mint officially ceased penny production in June. By August, they’d released the last of these coins out to institutions like banks and armored car services.
For Troy Richards, president and chief operations officer at Guaranty Bank & Trust Co., it was a difficult position. The penny shortage proved to be major challenges for him and his team. His money bank had $1,800 in pennies, which vanished in less than two weeks.
“In our community, there is still a demand for pennies, and we had to scramble to keep some on hand for our customers,” Richards stated.
The lack of pennies is starting to pose concrete hardship. To cope, many retailers have begun asking customers to pay with exact change to do their part in alleviating the crisis. Most notably of all, convenience store chain Sheetz introduced an exhilarating new premium! Customers can redeem their next classic soda on the house by bringing in 100 pennies.
The absence of pennies is projected to cost retailers millions of dollars in increased costs this year alone. Moreover, many businesses are going to have to start rounding prices down in order to escape lawsuits from improper sales with exact change. Dylan Jeon, senior director of government relations with the National Retail Federation, noted that while two or three cents may not appear substantial, it can accumulate across tens of thousands of transactions.
“It’s a chunk of change.” – Dylan Jeon, senior director of government relations with the National Retail Federation.
The National Retail Federation, calling for more definitive rules to address the sudden penny shortage. At the same time, the National Association of Convenience Stores has been pushing for new, broader legislation to fix this problem. Jeff Lenard, from the National Association of Convenience Stores, expressed his discontent. He was disappointed with the way in which the penny was removed from circulation.
“We have been advocating abolition of the penny for 30 years. But this is not the way we wanted it to go.” – Jeff Lenard, National Association of Convenience Stores.
Eliminated their one-cent coin in 2012. Now, the United States finds itself completely unprepared for its own transition away from small denomination coins. Additionally, the Federal Reserve has announced that coin distribution sites will rotate periodically. This is primarily because of the different inventories of penny deposit-taking places and order-fulfilling businesses.
A spokeswoman for the Federal Reserve indicated that “as a result of the U.S. Department of the Treasury’s decision to end production of the penny, coin distribution locations accepting penny deposits and fulfilling orders will vary over time as (penny) inventory is depleted.”
Many banks are experiencing the impacts of this transition already. Troy Richards mentioned receiving an email notification from the Federal Reserve indicating curtailment in penny shipments, but he was unaware that those shipments had effectively ended for his bank.
“We got an email announcement from the Federal Reserve that penny shipments would be curtailed. Little did we know that those shipments were already over for us.” – Troy Richards.
Amidst all this change, as retail adapts to a new normal of shopping behavior, they are faced with how to deal with the losses. The rounding down of prices may cost some businesses millions this year as they attempt to maintain customer satisfaction without sufficient change.
