The humble U.S. penny has been a staple of American currency for more than 230 years, but its days may be numbered. The current administration has directed the U.S. Mint to stop producing the penny, citing its high production costs and dwindling use in daily transactions.¹ While this decision has sparked debate, the numbers make a compelling case: it currently costs 3.7 cents to produce a single penny, a net loss of millions of dollars each year.

An estimated 240 billion pennies are sitting in jars and under sofa cushions across the U.S. — and never spent. With fewer pennies coming back into circulation, more are minted to replace them. This has created a currency dilemma: A single penny costs 3 cents to produce, and the U.S. Mint lost $85.3 million making the coin in 2024.²

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A brief history of the penny

The penny has long been a fixture of American commerce. First introduced in 1793, the original one-cent coin was much larger than today’s version and made almost entirely of copper.³ Over time, the composition of the penny changed to keep production costs in check. By 1982, the U.S. Mint transitioned to a copper-plated zinc design to mitigate the impact of rising copper prices.⁴

Previous administrations have considered phasing out the penny, but legislative efforts have stalled.⁵ While other nations such as Canada, Australia, and New Zealand have successfully retired their lowest-denomination coins, the U.S. has hesitated, partly due to concerns about how rounding transactions would affect consumers.⁶

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What happens if the penny is eliminated?

If the penny were phased out, most cash purchases would round to the nearest five cents. Digital and card transactions, however, would still be processed to the exact cent. Studies from countries that have already eliminated their lowest-value coins indicate that rounding has a neutral financial effect on consumers, with rounding up and rounding down canceling each other out over time.⁷

Empower research shows that cash is king for 52% of Americans, and they carry an average of $66 in cash.

Some consumers worry about potential price inflation. While rounding individual transactions up or down by a few cents may seem insignificant, some say that businesses might round up more than down and that could have a slight inflationary effect. However, economic studies on this issue suggest that the impact on overall spending would be negligible.⁸

Another concern is how charities that rely on spare change donations will be affected.⁹ Many nonprofit organizations have historically benefited from penny drives and donation jars, but shifts in consumer habits have already reduced reliance on physical currency. Many charities have successfully transitioned to digital donation methods, suggesting that the impact of losing the penny will be minimal in the long run.¹⁰

The elimination of the penny could be the first step toward a broader re-evaluation of U.S. currency. Each nickel, for instance, costs 13.78 cents to produce.¹¹

If the phase-out proceeds, the penny could join the ranks of other obsolete denominations, such as the half-cent, which was discontinued in 1857 when it became economically impractical.¹²