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3 Ways to Kill the Penny

Posted By Jim On 06/24/2010 @ 7:16 am In Personal Finance | 50 Comments

You all probably know my stance on the penny, I think we should kill the penny [3]. Unfortunately, the only legislator willing to put some teeth in the move was ousted after his involvement in a bunch of scandals [4] in 2007. Since then, there hasn’t been a peep out of Congress on the issue though I suspect it’s because there are a lot of other, more pressing, issues on the docket.

So, it’s up to us to figure out a way to give the penny (and maybe even the nickel) the boot.

Why Kill The Penny?

Before we go into how to kill the penny, let’s take a look at why. The main reason is that it’s utility as a coin is very limited, it’s expensive to produce, and it consumes a lot of resources. The main reason why it’s expensive to produce is because it contains zinc, which is getting more expensive each year as demand for zinc grows in places like China.

They didn’t break it down in the 2009 Annual report but in 2008, this is how much it cost to produce each coin (materials plus delivery). In 2008, both the nickel and the penny were negative seigniorage (or seigneurage), meaning they cost more to make than they were worth.

  • $1 – $0.26
  • Half Dollar- n/a
  • Quarter – $0.1089
  • Nickel – $0.0884
  • Penny – $0.0142

So, how do we kill it? Joining Facebook groups, writing to your legislator, and complaining to your friends won’t work by itself. It might make you feel better, but for real change you have need to have an economic impact.

Use More Plastic

As more and more of our transactions occur electronically, the less reliant we are on paper and metal currency. The Denver and Philadelphia Mints produce 65 million to 80 million coins a day [5]. While many of these are the much maligned penny, the more we use electronic payment systems, the fewer coins we’ll need.

In 2005, the U.S. Mint produced 14.2 billion coins for circulation according to their 2005 Annual Report [6]. In 2009, it reached a 45-year low [7] of 5.2 billion because of “fewer cash transactions.” (2008 was 9.97 billion)

If you want to kill the penny, use your credit, debit, or charge card.

Don’t Hoard Pennies

You probably don’t hoard coins intentionally and you probably don’t even think of it as hoarding. You have a piggy bank or a coin jar and you toss your loose change into that jar every time you go home. It’s your vacation fund or your golf fund or your shopping fund. If you want to kill the penny, or more specifically kill new pennies, don’t keep them in your home. Don’t leave them in your couch. Take them to the bank and send them back through the system. The Mint produces coins based on demand and the more coins we have locked away in piggy banks and sock drawers, the more they need to produce.

You get better interest rate in a online savings account [8] anyway.

Use $1 Coins

Why would using more $1 coins help kill the penny? It won’t, but it’ll achieve the same objectives as killing the penny. The argument against the penny is that it’s expensive to produce and not used very often. Well, by using more $1 coins, you are reducing the amount of waste in the currency system. The life expectancy of a coin [9] is 30 years, compared to 18 months for a paper bill. You can buy them at cost with free shipping from the Mint’s $1 Direct Ship program [10].

By using more coins, you are reducing how many bills need to be produced each year. And if there are places you like going to that only take cash, these are a mighty fine way to pay and still get cash back.

So do your part.

(Photo: caitlinator [11])


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URLs in this post:

[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/3-ways-to-kill-the-penny.html

[3] should kill the penny: http://www.bargaineering.com/articles/coin-act-to-kill-penny.html

[4] his involvement in a bunch of scandals: http://en.wikipedia.org/wiki/Jim_Kolbe#Mark_Foley_scandal

[5] produce 65 million to 80 million coins a day: http://www.usmint.gov/about_the_mint/index.cfm?action=Mint_facilities

[6] 2005 Annual Report: http://www.usmint.gov/downloads/about/annual_report/2005AnnualReport.pdf

[7] reached a 45-year low: http://www.usmint.gov/downloads/about/annual_report/2009AnnualReport.pdf

[8] online savings account: http://www.bargaineering.com/articles/top-5-online-banks-savings-or-checking-accounts.html

[9] life expectancy of a coin: http://www.usmint.gov/kids/coinNews/funFacts.cfm?funFactID=18

[10] Mint’s $1 Direct Ship program: http://www.bargaineering.com/articles/busting-cashback-tiers-with-mints-1-coin-direct-ship-program.html

[11] caitlinator: http://www.flickr.com/photos/caitlinator/2516570127/sizes/m/

Thank you for reading!