When you pay for something with cash, what do you do with the change? Do you keep it and spend it? Do you toss it all into a jar or other hoarding place? Do you drop all your spare coins in a charity bucket? What about the pennies? Do you hoard them or just drop them on the ground? Do you spend dollar bills as soon as you get them, or only when you have five, ten or more? Do you avoid using cash as much as possible, and use electronic payments? When was the last time you paid cash for something and paid with the exact change?
I don’t want your answers to these questions, but I did want you to have them in mind before I continued. I have found that most people have strong opinions about cash that really do not match their behavior when they actually use it.
What is spare change? I define it as that change that we don’t pay much attention to. The change we are willing to give away or let pile up. For some, that means pennies, for others it means any coins and can even include dollar bills. Most of us fall in between, although there are some people out there that still dig into a change purse or pocket to make exact change whenever possible.
Let’s focus on the penny, or the one cent coin as it is officially called here in the United States. The majority of people do not spend them. Many get rid of them as soon as possible by putting them to a charity donation receptacle or by dropping them in one of those “leave one- take one” dishes at the cash register. Some people take hoarded pennies to the bank and convert them to paper money or deposit them and others are willing to pay around ten percent of the total value of their change to let those counting machines in stores convert them. One of the worst things that happens to cents is that they are merely hoarded in cans, jars, buckets and barrels forever. Even worse, some people get rid of them by discarding them on the ground when they leave the store.
I hoard pennies for a while. Then I get on a kick where I look through them looking for collectible ones, mainly striking errors or the rarer of the wheat pennies. After that, it is back to the bank with them.
Think about how you deal with spare pennies. If you are a hoarder, you are the last stop of the penny’s journey. Now think about how that penny got into your hand. The cashier had to get it from the bank. If you are the type that returns cents to the bank or to a business that converts them into bills, then through your efforts, these coins circulate between the bank, the store, you, and back to the bank. Not as efficient as pennies that are spent at stores, but it is still circulation. Do you look at your change? Have you noticed that more and more new shiny pennies are showing up in your change? The US Mint has to make billions of cents each year just to keep up with the demand because billions of cents are being hoarded each year. At 8,234,000,000 coins, more cents were minted in 2006 than all the other denomination of coins combined. Big Deal, right? Well consider this. It costs more than a penny to make a penny. True! It is right there the US Mint’s Annual Report for 2006. It costs the government 1.21 cents to manufacture and distribute each penny. This represents a loss to the taxpayer of over 17.29 million dollars.
So, tell me; why are we still using the penny? Most people do not circulate them. Many people throw or give them away.
A solution has been presented in congress several times over the years, but each time it goes nowhere. We need to eliminate the manufacturing of the one cent coin and make it legal to round the final cash purchase price (all items tallied, all taxes calculated and added in) to the nearest nickel. Electronic purchases would still be calculated to the cent. The shelf price of items would still be to the cent. Nothing would change, prices for goods would not rise. We already round the final price of gasoline up or down from the mil (one tenth of a cent), rounding to the nearest nickel for cash purchases is just a progression of the same mechanism. *Rounding means that a final total, after taxes, that ends with 1, 2, 6 or 7 would round down to the previous 0 or 5, and 3, 4, 8 or 9 would round up to the next 0 or 5.* At most you would pay or save an extra two cents per transaction. Over time this rounding will balance out. The banks would send all the pennies back to the mint where they can be made into nickels or golden dollars. (FYI, our nickel coin is 75% copper and only 25% nickel)
You would think that people who routinely hoard, give away or throw away up to four cents per transaction would not complain about this rounding. But for some reason nearly everyone I discuss this with gets upset at the idea of eliminating the penny. It must be a comfort thing.
We can do this. We have done it before. From 1793 until 1857 the USA minted and used half-cents. They were eliminated without the economy crashing, or poor people starving, or charities suffering. And the perfect time to do this is fast approaching. 2008 will be the 100th year that Abraham Lincoln has been on our cent. I say we issue a series of commemorative one cent coins next year celebrating Lincoln and all the previous artistic designs that have adorned our penny, and then in 2009 we can just stop making them.
Pennies are spare change. We can dispense with them. We can do without them. We don’t need them. They are spare money.
And they cost too much!