As of today, the Royal Canadian Mint will no longer be distributing pennies to banks and other financial institutions and will begin the gradual process of removing the coins from circulation.
The federal government announced plans to phase out the one-cent coin in its Economic Action Plan 2012, citing the rising cost of production when compared with its value.
The mint estimates that the phase-out will save taxpayers $11 million per year.
The penny will still be considered legal tender indefinitely.
As for what this means to businesses and consumers, only cash transactions will be affected. Payments made by cheque, credit card and debit card will be unchanged.
Cash payments will now be subject to rounding to the nearest five cents. For example:
- an item that costs $1.03 or $1.04 after tax will be rounded to $1.05; and
- an item that costs $1.01 or $1.02 after tax will be rounded to $1.00.
The Canadian Federation of Independent Business (CFIB) is offering help to small businesses to make sure they are ready for penniless cash transactions.
“While most small merchants and consumers may be aware of the plan to phase out the penny, they may not be clear on the specifics,” said Dan Kelly, CFIB president and CEO. “As we want to ensure the transition goes smoothly, CFIB has put together a set of on-line tools merchants can use to inform employees and customers.”
CFIB’s penny-education tools can be found here.