Member Sign In

Every Friday morning, we take the boys to the little donut shop near our house. Still in pajamas, hair sticking up like they slept in a wind tunnel... It's become our weekly thing. 

 

The specialty donuts cost $0.99, so each kid gets a dollar bill to pay for his donut, partly because I'm trying to introduce some early money concepts, but mostly because it makes them feel like tiny high rollers.

 

Last week, though, there was a new sign taped to the register:

 

 

I knew the U.S. Mint officially retired the penny in November, and that ending production would save the government tens of millions of dollars a year.

 

But this was the first time the change (or in this case, no change) literally showed up in my real life.

 

After picking out their donuts, the boys slapped their dollar bills on the counter, and since I didn't have any pennies on me, we just ate the missing two cents. No big deal.

 

But walking back to the car, it hit me: This tiny moment wasn't going to feel tiny for everyone.

 

Because the story of the penny's retirement isn't actually about the penny. It's about who absorbs the friction when a system "modernizes" — and who gets to move through that shift without even noticing.

On paper, the case for killing the penny is airtight:

 

- It costs almost four cents to mint a one-cent coin.

- The government loses tens of millions per year producing them.

- People leave them in jars, cars, couch cushions — anywhere but the checkout counter.

- Other countries like Canada, Australia, and New Zealand eliminated their smallest coins years ago with minimal drama.

 

Economists call this a classic efficiency gain. A tidy fix to a small but stubborn problem.

 

But here's the thing policymakers sometimes forget: A change that's tiny for people at the top can feel very different at the bottom. 

 

And when you multiply that "tiny" change across millions of daily transactions, it stops being tiny at all.

 

For example, take our weekly donut run. When I lost out on those two pennies in change, I just shrugged. That's the point. The individual cost is designed to be invisible.

 

But let's zoom out.

 

If cash purchases now get rounded to the nearest nickel — and if most prices end in $X.99, which means cash buyers round up, not down — those pennies start stacking.

 

The Richmond Federal Reserve estimates that rounding differences could cost consumers roughly $6 million every year. And that's before you factor in long-term behavior changes, pricing adjustments, or inflation psychology.

 

Small things add up. And unfortunately, they rarely add up evenly...

Let's talk about who benefits most from the end of the penny. (Spoiler: It isn't people buying donuts with dollar bills.)

 

1. The U.S. Government.  Sure, the savings matter — tens of millions no longer spent minting a money-losing coin. But those macro savings don't trickle into cheaper groceries or lower rent. They just balance a spreadsheet somewhere in Washington.

 

2. Banks and Credit Unions.  Pennies are expensive to handle relative to their face value. They require counting, sorting, rolling, transporting, and verifying. Multiply that across thousands of branches, and you get a huge operational win for banks the moment the penny disappears.

 

3. Armored Carriers.  Pennies are heavy. Heavy cargo burns fuel. Fuel costs money. This is a no-brainer efficiency win for companies like Brink's (ACO) and Loomis.

 

4. Large Retailers.  This is basically a non-event for mega retailers like Wal-Mart (WMT). They already run on digital payments. They already negotiate lower card-processing fees than anyone on Main Street. Their POS systems can be updated with a keystroke. For them, the penny wasn't a part of daily operations. Its retirement is mostly just an email from corporate.

 

5. Credit Card Companies.  This is the big one — the quiet winner. Every time a cash transaction flips to a card? Visa (V), Mastercard (MA), and the banks (KBE) make money. The end of the penny subtly nudges more people toward plastic, and plastic comes with interchange fees. Card networks don't just win — they win millions of times per day.

Here's where the friction lands, and where the "tiny" change stops being tiny.

 

1. Cash-Dependent Consumers.  This includes older adults, lower-income households, people without bank accounts, and households where every dollar — and every cent — is allocated. A few cents per purchase may sound trivial, but when cash transactions round up again and again, the burden becomes both cumulative and regressive.

 

Two cents for donuts. Three cents for milk. Four cents at the corner store. Over and over. This isn't catastrophic for most. But for people already under pressure? It matters.

 

2. Small Businesses.  Small businesses already pay some of the highest card-processing fees in the economy — often 2.5% to 3.5% every time someone taps or swipes. For a quick-service restaurant where the average ticket is $14, that can mean 41 cents per transaction lost to fees.

 

Now add rounding rules, customer frustration, pressure to become "card only," and thin margins that absorb tiny losses many times a day. A policy meant to clean up inefficiency at the national level creates new inefficiencies for the people least equipped to absorb them.

 

3. Communities Who Use Cash for Control.  Behavioral economists have spent years proving it: People spend more when they use cards than when they use cash. For families using cash because it's the only dependable way to follow a budget, eliminating small denominations forces coarser, less precise spending. You can't budget a $40 envelope the same way if your purchases get rounded unpredictably.

The penny didn't disappear because anyone thought it would make life easier for low-income families or small businesses. It disappeared because it made life easier for the big players...

 

- The government

- The banks

- The retail giants

- The credit card networks

 

When policymakers focus on macro-efficiency, they often miss micro-impact.

 

The United States also did something unusual compared to other countries that retired their lowest-denomination coins... it didn't create national rounding rules. That means we're effectively letting every business figure out its own rounding policy. And chaos like that almost always hits the most vulnerable groups first.

 

In a country where millions of households rely on cash because it's the only stable budgeting tool they have, that inconsistency becomes a real cost.

So what does the post-penny world look like in practice? I have a few predictions. They include...

 

- More exact-change signs...

- More rounding up than rounding down...

- More small businesses nudging customers toward cards...

- More pressure on budgets that are already tight...

- More fees landing on the smallest transactions...

- And yes... an eventual debate about killing the nickel too (which costs at least 13 cents to mint).

 

Because once the penny disappears, the math gets awkward. Retailers start asking, so when does the nickel go? And the cycle repeats — only the stakes get higher.

A missing penny at a donut shop is nothing on its own. I didn't notice it. You probably won't.

 

But someone will. And when you multiply that tiny moment across millions of daily transactions, millions of customers, and millions of purchases made by Americans who still rely on cash?

 

You start to see the divide — the one between Main Street and the mega-systems shaping our financial world — get just a little wider.

 

I'm not arguing that retiring the penny was necessarily a bad decision. From a policy and production standpoint, the math makes sense. My wheelhouse is personal finance, not politics. But part of that job is pointing out when the downsides of a policy land hardest on the groups already dealing with the greatest financial pressure. And this is one of those cases.

 

The penny may be gone. But the cost of its disappearance isn't being shared equally.