Effective February 4, 2013, the Canadian government will not distribute any more pennies and that may mean you may lose or earn a few pennies when making purchases in cash.
As part of its Economic Action Plan 2012, the government announced that the Royal Canadian Mint will cease distribution of the penny to save the government $11 million a year. It was widely reported that producing the one-cent coin is costing the government 1.6 cents each.
This means that the penny can still be used to pay for any money transactions but consumers and businesses should not expect pennies for change. Instead, cash transactions will be rounded up or down. If pennies are not available for cash transactions, the government guidelines urged businesses to round up or down "in a fair and transparent manner."
For illustration purposes, the Mint suggested that if the transaction is $1.01 or $1.02, this can be rounded down to $1 while transactions of $1.06 or $1.07 should be rounded down to $1.05. If the transaction is $1.03 or $1.04, the total should be rounded up to $1.05, while transactions totalling $1.08 or $1.09 should be rounded up to $1.10.
However, transactions done electronically -- by credit or debit card -- or through cheques will not be rounded.
Any taxes, fees or duties have to be calculated first before the final amount is rounded for cash transactions, according to the government guidelines. The rounding should also be done for the total and not for individual items, the guidelines added.
The government said the penny will remain legal tender like other Canadian coins.
Ready or not
There are conflicting reports if Canadian businesses are ready for the transition.
According to a Canada Newswire report, a survey by the Retail Council of Canada (RCC) revealed that retailers in the country -- big and small -- are ready to deal with penny-less transactions.
The report quoted the RCC survey showing that:
- 55% of retailers surveyed are prepared for the transition;
- 74% of small retailers and 75% of medium-sized businesses will do the rounding manually at the cash register; while
- 63% of large businesses will change their point of sale systems, and this would entail cost.
But a report by the Ottawa Citizen said some small businesses are not yet ready for the transition. The report also noted that some businesses are concerned with the lack of sufficient information campaign about the phase-out.
[For more info on the Canadian penny, read Final Canadian penny to be produced this week at special ceremony]History
The February 2013 schedule was actually postponed. The government had earlier planned for a phase out of the penny in fall 2012.
Digital Journal earlier reported that the postponement was to allow consumers and businesses, including financial institutions and charities, to prepare for the transition.
On May 4, 2012, the last penny was struck in special ceremonies in Winnipeg by Finance Minister Jim Flaherty and Parliamentary Secretary Shelly Glover.
While the government will not issue any more new pennies, the government said the penny will remain legal tender.
On the government's FAQ page, it reads:
While businesses do not have a legal obligation to accept any particular Canadian coins or bank notes in a retail transaction, the penny will continue to be legal tender like all other Canadian coins, and businesses may accept the coin as a means of payment if they so choose.
Consumers can deposit the pennies with their favourite financial institutions.
The Canadian penny was first minted by the British Royal Mint in London in 1858.