No more pennies, at least in Canada

[Chen]

http://www.cbc.ca/news/business/story/2 ... -cent.html

Seems odd it took so long to actually get rid of the damn things. Ever since visiting Australia its just been annoying to get pennies back on cash purchases. I'd be willing to round up all my purchases just to get rid of the damn thing but from what they're saying it'll be standard rounding (and will only effect cash purchases no debit or credit ones).

[elasto]

!!

Take a cup of coffee in Medicine Hat, Alta., that currently costs $1.80 and is subject to five per cent GST. A consumer today would pay $1.89 for that drink. Once the penny plan is implemented, that price would be rounded up to $1.90.

But the nickel and diming can work both ways. A sandwich combo at a deli in Oakville, Ont., that today costs $4.86 after HST would round down to $4.85 under the plan.

Credit, debit and cheque transactions will be unaffected, so one cent is still going to be the base unit of Canadian currency.

(1) If the transaction rounds down, pay by cash
(2) If the transaction would round up, pay by cc/dc/cheque
(3) (left as an exercise for the reader)
(4) Wealth beyond imagining!!

[PeteP]

Or like ~9 A$ per year with one purchase per day if every purchase is rounded down by 2,5 cent. But that doesn't take the new purchases you could make with 9 A$ in account, it's an endless loop!

I hope they will do something similar with the Euro, small change is an annoyance.

[Роберт]

And Canada proves yet again that they have saner policies than their southern sibling.

[Diadem]

We've had this system in The Netherlands for decades. It worked very well. Then when the Euro was introduced, the 1-cent and 2-cent coins were also reintroduced. It was pretty horrible, and everybody disliked it, and they were quickly kicked out again. So we're back to having 5 cent as our smallest coin.

Our system works pretty much the same as the proposed Canadian one. If you buy something with a debit or credit card you pay the exact amount, if you pay in cash it's rounded to the nearest 5 cent. Of course the 1 and 2 cent coins are still made in other Euro countries, and some of those make their way towards us. They are still legal tender, but shops aren't required to accept them (banks are), and almost no shop does.

Having experienced both systems, I can say that not having to bother with the 1 and 2 coins is amazingly nice. It saves so much time when paying with cash, you never have to wade through a heap of small brown coins trying to figure out which one is which.

[omgryebread]

And Canada proves yet again that they have saner policies than their southern sibling.

Abraham Lincoln! Tradition! American values ($.01 is a true American Value!) Zinc mining lobby!

Clearly sir, you are a communist and want to undermine everything we stand for.

[ahammel]

Oh thank fuck. I will gladly pay the rounding-up tax not to have to deal with the little copper fuckers anymore.

[yurell]

Wow, and here I am waiting for them to decide the 5c coin is useless and should be abolished.

[Ghostbear]

Abraham Lincoln! Tradition! American values ($.01 is a true American Value!) Zinc mining lobby!

Clearly sir, you are a communist and want to undermine everything we stand for.

Also: christian values. Socialism. Freedom.

More seriously: I wish the US would do this. And maybe fix our paper money system to be more durable and blind friendly too, while we're at it. I found it interesting that Canada only loses $11 million / year making pennies though. I wonder how long it will take for the pennies to exit circulation? Anyone have some figures from other nations that dropped their lowest denomination coin?

[Tirian]

A 2 cent corporate grab on every cash transaction. Why am I not surprised that this doesn't bother the Harper government?

To everyone who can't be bothered with change: you don't need to wait for government action to round your purchase price up.

[yurell]

A 2 cent corporate grab on every cash transaction.

How do you figure? 3,4,8 & 9 round up, 1, 2, 6 & 7 round down. On average you end up with no real noticeable difference.

[Роберт]

Wow, and here I am waiting for them to decide the 5c coin is useless and should be abolished.

I want the U.S. to stop making pennies and dollar bills. I'm unsure on nickels.

[Diadem]

More seriously: I wish the US would do this. And maybe fix our paper money system to be more durable and blind friendly too, while we're at it. I found it interesting that Canada only loses $11 million / year making pennies though. I wonder how long it will take for the pennies to exit circulation? Anyone have some figures from other nations that dropped their lowest denomination coin?

If I recall correctly, here in The Netherlands the 1 and 2 cent coins disappeared very quickly. I'm not entirely sure, but I think there was a transitional period where shops still accepted them, but didn't give them back. So your payment was rounded to the nearest 5 cent, but you could still make a €0.05 payment with one 1-cent and two 2-cent coins if you wanted. So people very quickly got rid of those coins. Actually thinking back I think most smaller shops shopped accepting them pretty much right away (since it's a lot of hassle for a small shop to keep track of all those coins). I'm really not a 100% sure anymore though.

But the transition doesn't take long either way. Almost all coins disappear in the first few days.

[Chen]

More seriously: I wish the US would do this. And maybe fix our paper money system to be more durable and blind friendly too, while we're at it. I found it interesting that Canada only loses $11 million / year making pennies though. I wonder how long it will take for the pennies to exit circulation? Anyone have some figures from other nations that dropped their lowest denomination coin?

I think the $11 million is only the direct cost the government has in making them. I assume costs transporting and storing them is probably transferred to the banks or something which is why its not included in the $11 million.

[Tirian]

A 2 cent corporate grab on every cash transaction.

How do you figure? 3,4,8 & 9 round up, 1, 2, 6 & 7 round down. On average you end up with no real noticeable difference.

If you believe that companies are going to arrange their purchase prices so that half of them lose money, I don't know what to say to you. I almost don't want you to wake up.

[PeteP]

A 2 cent corporate grab on every cash transaction.

How do you figure? 3,4,8 & 9 round up, 1, 2, 6 & 7 round down. On average you end up with no real noticeable difference.

If you believe that companies are going to arrange their purchase prices so that half of them lose money, I don't know what to say to you. I almost don't want you to wake up.

So what do you think they will do?
Are Australian prices displayed with taxes included? I will assume they are. When you sell a single item and want a beneficial rounding direction you would price it 3,4,8 & 9. Sounds easy. But you don't always buy a single item so multiply these amounts with the numbers 1 to 10. For 3 you get 3,6,9,12,15,18,21,... resulting in the following rounding (+2,-1,+1,-2,0,+2,-1,+1,-2,0), for 4 it would be (+1,+2,-2,-1,0,+1,+2,-2,-1,0), for 8 (+2,-1,+1,-2,0,...) for 9 (+1,+2,-2,-1,0,...). You get the grist, all prices beside multiples of five cycle through rounding up and rounding down. Maybe you could statistically analyze the most common numbers of items and price accordingly. But a 2 cent crab on every transaction doesn't work.

[Chen]

A 2 cent corporate grab on every cash transaction.

How do you figure? 3,4,8 & 9 round up, 1, 2, 6 & 7 round down. On average you end up with no real noticeable difference.

If you believe that companies are going to arrange their purchase prices so that half of them lose money, I don't know what to say to you. I almost don't want you to wake up.

Prices are rounded per purchase not per item. Stores already have most items set to be rounded up (since prices ending in 9 are common). Thing is, if you purchase multiple items and then take tax into account it starts becoming an annoyance to change your prices so that you ensure rounding up. I mean already companies could be doing this since tax ends up rounding to the nearest cent anyway. Most don't though and just leave their goods at 1.99 or the like since the marketing effect evidently trumps the gain they'd make due to rounding.

[ahammel]

Prices are rounded per purchase not per item. Stores already have most items set to be rounded up (since prices ending in 9 are common). Thing is, if you purchase multiple items and then take tax into account it starts becoming an annoyance to change your prices so that you ensure rounding up. I mean already companies could be doing this since tax ends up rounding to the nearest cent anyway. Most don't though and just leave their goods at 1.99 or the like since the marketing effect evidently trumps the gain they'd make due to rounding.

Not to mention the fact that the would have to pay somebody to figure out the pricing scheme which results in the most round-ups per purchase. This research programme would have to collect data on which items are most frequently bought in concert and which purchases of which items are most likely to be paid in cash, among other things.

Really, I'd be surprised if they recouped their investment during the current century.

[Роберт]

Yeah, rounding is already an issue. And it would only become a big issue if the rounding was worthwhile money.

Here's an experiment: put a nickel in an easily visible but hard to reach place. See how long it takes for someone to bother getting it.

[Ghostbear]

But the transition doesn't take long either way. Almost all coins disappear in the first few days.

Wow, that's pretty good. Yeah, I really hope the US can join this bandwagon while I'm still alive.

Really, I'd be surprised if they recouped their investment during the current century.

While I agree with you guys for the most part, I think there is some disparity in the types of places that can benefit from this. Someone like Best Buy or Wal-Mart, with thousands of SKUs and products with multiple different purchase demographics to worry about, probably can't do much to profit from price rounding. A company like McDonald's, however, is probably in a perfect position to make money off of it. Data on most purchased combinations would be easy to find, their pricing structure is relatively simple, and there are only so many product intersections to worry about. Though even they would be stuck with something they can't get around: sales tax. It's probably a lot more uniform in Canada, but at least in the US, there's something like several thousand different taxing jurisdictions to worry about. Optimizing to get the prices to consistently roundup with such a situation would be unlikely to be worth the effort, even after you've created an easy to solve product list.

[Tirian]

Really, I'd be surprised if they recouped their investment during the current century.

On the other side, the Canadian government is taking this on to save 11 MILLION dollars per year in expenses at the mint. I'm concerned when a major currency decides to abolish nearly a decimal point of precision, and I frankly would be more interested in spending such chump change to preserve the fluidity of hard cash to cover all expenses that are expressed in your society.

[DavidH]

Really, I'd be surprised if they recouped their investment during the current century.

On the other side, the Canadian government is taking this on to save 11 MILLION dollars per year in expenses at the mint. I'm concerned when a major currency decides to abolish nearly a decimal point of precision, and I frankly would be more interested in spending such chump change to preserve the fluidity of hard cash to cover all expenses that are expressed in your society.

A 2008 report by Quebec-based bank Desjardins estimated the penny's existence cost Canada's economy about $150 million in 2006. Canada's big banks alone handle more than nine billion pennies a year, which costs them $20 million annually to process.

All for a tiny change. Doesn't sound so terrible now, does it? Hell, people hate using pennies too. People are loving this as a convenience factor.

[ahammel]

While I agree with you guys for the most part, I think there is some disparity in the types of places that can benefit from this. Someone like Best Buy or Wal-Mart, with thousands of SKUs and products with multiple different purchase demographics to worry about, probably can't do much to profit from price rounding. A company like McDonald's, however, is probably in a perfect position to make money off of it. Data on most purchased combinations would be easy to find, their pricing structure is relatively simple, and there are only so many product intersections to worry about. Though even they would be stuck with something they can't get around: sales tax. It's probably a lot more uniform in Canada, but at least in the US, there's something like several thousand different taxing jurisdictions to worry about. Optimizing to get the prices to consistently roundup with such a situation would be unlikely to be worth the effort, even after you've created an easy to solve product list.

First point: while McDonalds certainly has a smaller number of possible purchase combinations than a department store, that number is still so large that my computer has just choked trying to calculate it, so you'll have to figure it out for yourself.

Second point: sales tax is uniform in Canada? I would not be surprised to learn that no two provinces have exactly the same sales tax structure, and they keep changing it. And whenever they make a small change, people freak right the hell out and demand that it be changed back to the old way. Still beats thousands of taxing jurisdictions, though. How does that work? Can municipalities levy sales tax in the US?

Third point: say that McDonalds does manage to game the rules so that they make a little more money from rounding up. Why do I care? We stand to save $150 million federally, should we hold off on that because a corporation stands to gain as well? Trying to game the system to make an extra two cents every fifth purchase is certainly a lot less scummy than McDonalds's basic business model, viz. sell people disgusting food that causes them to have heart attacks.

[Ghostbear]

First point: while McDonalds certainly has a smaller number of possible purchase combinations than a department store, that number is still so large that my computer has just choked trying to calculate it, so you'll have to figure it out for yourself.

Having 500,000,000,000 combinations doesn't matter if 70% of customers get one of five different options, which is what I was getting at. McDonalds customers are probably much more concentrated within a certain set of predictable purchases than other places.

Second point: sales tax is uniform in Canada? [... ] How does that work? Can municipalities levy sales tax in the US?

More uniform, not completely uniform. Sorry. I meant there's likely to be less than several thousand different tax systems at work, if only because at the very least, there's a lot less provinces than states. And yeah, cities and counties and whatever can have their own sales (and I believe income as well, if they desire) tax in the US.

Third point: say that McDonalds does manage to game the rules so that they make a little more money from rounding up. Why do I care?

No specific reason, I was just trying to point out edge cases. That while the average company might not be able to make this work to their advantage, many companies might be able to do.

[Darryl]

While I agree with you guys for the most part, I think there is some disparity in the types of places that can benefit from this. Someone like Best Buy or Wal-Mart, with thousands of SKUs and products with multiple different purchase demographics to worry about, probably can't do much to profit from price rounding. A company like McDonald's, however, is probably in a perfect position to make money off of it. Data on most purchased combinations would be easy to find, their pricing structure is relatively simple, and there are only so many product intersections to worry about. Though even they would be stuck with something they can't get around: sales tax. It's probably a lot more uniform in Canada, but at least in the US, there's something like several thousand different taxing jurisdictions to worry about. Optimizing to get the prices to consistently roundup with such a situation would be unlikely to be worth the effort, even after you've created an easy to solve product list.

First point: while McDonalds certainly has a smaller number of possible purchase combinations than a department store, that number is still so large that my computer has just choked trying to calculate it, so you'll have to figure it out for yourself.

Second point: sales tax is uniform in Canada? I would not be surprised to learn that no two provinces have exactly the same sales tax structure, and they keep changing it. And whenever they make a small change, people freak right the hell out and demand that it be changed back to the old way. Still beats thousands of taxing jurisdictions, though. How does that work? Can municipalities levy sales tax in the US?

Third point: say that McDonalds does manage to game the rules so that they make a little more money from rounding up. Why do I care? We stand to save $150 million federally, should we hold off on that because a corporation stands to gain as well? Trying to game the system to make an extra two cents every fifth purchase is certainly a lot less scummy than McDonalds's basic business model, viz. sell people disgusting food that causes them to have heart attacks.

I don't believe most municipalities can levy sales tax in the US, however there is a separate county and state sales tax.

[DavidH]

What company would be willing to risk pissing off customers by rounding up every item? Seeing the cash register say a number, and seeing it increase when you say you're paying with cash would be a terrible, terrible public relations situation.

I bet most companies would prefer to make it so that it rounds down, especially if it encourages customers to pay with cash over credit cards (which costs the company money to process).

[DaBigCheez]

As to the "setting prices so they'd round up to grub some cash" strategy...how would this effect compare to, say, normal cost increases due to inflation? Assuming an annual inflation rate of 3%, the extra 2 cents would is less than the change due to a year's worth of inflation on anything that costs more than a buck fifty. I really don't feel like that's worth getting riled up over.

Of course, it's always a public relations issue to raise prices, and I'd be interested to see whether gas stations keep their "4.27-and-nine-tenths" advertising. If the "customer sees $1.99 as advertised price, pays $2.00, gets annoyed because of this" effect does seem to occur and companies stop doing that as a result, well...I'd be more than happy to pay the extra cent just to see things advertised as $2 even, and have price-setters quit with the psychological trickses.

That's probably wishful thinking, though.

[Diadem]

Seriously guys, the rounding really is a non-issue. I can't believe we're spending that much time talking about it.

Look, companies are already in the business of charging the most they can get away with, giving the constraints of demand and competition. Almost every retailer regularly changes its prices too. And marketing trumps those few extra cents made every single time. But most importantly, society saves a lot of money overall. Everybody wins.

And if you're really concerned about companies gaming the system to squeeze out that extra money, game it back yourself! Very easy to do. Just buy stuff, check the total price, and then whenever you would otherwise round up, pay with debit card, and pay with cash if it will round down. You'll be saving an average of 0.6 cents on every purchase you make, and there's nothing companies can do to stop you! So if those few cents really matter to you, you'll be gaining from this change in change, not losing!

[Tirian]

A 2008 report by Quebec-based bank Desjardins estimated the penny's existence cost Canada's economy about $150 million in 2006. Canada's big banks alone handle more than nine billion pennies a year, which costs them $20 million annually to process.

So banks will get to lay off two thousand employees and cycle that money to their shareholders. I'm inclined to stick with my perception that this is a regressive economic policy.

And if you're really concerned about companies gaming the system to squeeze out that extra money, game it back yourself! Very easy to do. Just buy stuff, check the total price, and then whenever you would otherwise round up, pay with debit card, and pay with cash if it will round down. You'll be saving an average of 0.6 cents on every purchase you make, and there's nothing companies can do to stop you! So if those few cents really matter to you, you'll be gaining from this change in change, not losing!

IANA economist, but is building arbitrage into the system a progressive sign for a currency? Canadians might be more comfortable with this than I am -- I've never traveled so far north that my greenbacks weren't easily negotiable at what struck me as a fair and common exchange rate, so maybe waiting to see how much something costs before deciding how to pay for it might fit with the way they roll. If so, have fun with it.

[lutzj]

A 2008 report by Quebec-based bank Desjardins estimated the penny's existence cost Canada's economy about $150 million in 2006. Canada's big banks alone handle more than nine billion pennies a year, which costs them $20 million annually to process.

So banks will get to lay off two thousand employees and cycle that money to their shareholders. I'm inclined to stick with my perception that this is a regressive economic policy.

Are you suggesting that Canada should keep minting wasteful pennies just so that people counting those pennies have have jobs?

IANA economist, but is building arbitrage into the system a progressive sign for a currency?

It is as long as the Treasury saves $11 million every year and the overall economy many times that as a result of the change.

[sourmìlk]

The cost of the penny is insane. It's expensive to manufacture, it's expensive to track, and it's useless. In the US, the half-penny was retired when it had as much buying power as the modern dime. We should abandon all coins less than quarters.

[++$_]

If we get rid of the penny we should also insist that retail establishments set their prices in 10 cent increments (unless the item is cheaper than 10 cents, maybe). Not only does that get rid of rounding issues, it also changes the annoying $X.99 prices to either $X.90 or $X+1.00.

[Tirian]

Are you suggesting that Canada should keep minting wasteful pennies just so that people counting those pennies have have jobs?

No, I am suggesting that Canada should keep minting wasteful pennies so that all citizens can exercise the economic agency to pay the amount of their purchases. Canadians can make their own rules, but I wouldn't want to live in a nation where rich people can pay $4.58 for a purchase by swiping a debit card but the underprivileged have to pay $4.60.

If pennies bother you as a consumer, then overpay and leave the change on the counter. If pennies bother you as a business, then undercharge and round your change up to the nearest nickel. Now you are a consumer or a business who hardly ever has to deal with pennies, and it's a win-win because everyone you do business with is happy to receive the pennies that strike you as such a burden. But don't force your mentality on someone with the equally valid perception that a hundred pennies are worth a buck.

[ahammel]

So banks will get to lay off two thousand employees and cycle that money to their shareholders. I'm inclined to stick with my perception that this is a regressive economic policy.

I doubt that this is a serious concern. It's not like the banks hire people specifically to deal with pennies. Most of the money lost is probably the cost of storing and transporting the damn things rather than wages to penny-counters.

And it's not like this is something that the went over the heads of the more progressive parties on. The NDP have been wanting to get rid of the penny for some time. It's my impression that the Liberals are happy with it as well.

[Роберт]

The cost of the penny is insane. It's expensive to manufacture, it's expensive to track, and it's useless. In the US, the half-penny was retired when it had as much buying power as the modern dime. We should abandon all coins less than quarters.

We should definitely abandon dollar bills. I'm not sure about dimes. You can actually buy things for nickels and dimes still.

[ahammel]

We should definitely abandon dollar bills. I'm not sure about dimes. You can actually buy things for nickels and dimes still.

Do you mean that you should abandon them in favour of dollar coins? Because that worked out pretty well up here.

I assume you don't mean that you want to pay for a four dollar item with a fist-full of quarters.

[sourmìlk]

I use dollars all the time.

[Роберт]

I use dollars all the time.

Sure. But we don't need dollar bills, dollar coins are just fine.

[ahammel]

I always like going to the States because having my wallet stuffed full of singles makes me feel like I've got a lot of money.

[mike-l]

Checks calendar... not april fools yet.... YAY, about time. I agree with sourmilk that coins less than quarters are pretty useless and not worth having.

@Tirian, your argument would only make sense if we didn't already have a smallest unit of currency. All we're doing is changing what that is to reflect the point that nobody cares about the current smallest denomination. Why aren't you upset that you don't have halfpennies and quarterpennies? It's a .5 cent tax grab on every transaction!

The main problem with no dollar bills is it means you have to give at least a 5 to a stripper, damn sin taxes!