The Penny Is Retiring: What It Means
Pennies Are Going Away - Here’s How It Affects Cash, Pricing, and Your Business
After more than two centuries in pockets and cash drawers, the U.S. has stopped producing new pennies. Existing pennies remain legal tender for now, but supplies will gradually shrink as coins leave circulation. Here’s what’s changing, why it’s happening, and how Hills Bank can help you navigate the transition with clarity and confidence.
Why the Penny is Being Retired
Producing a penny costs significantly more than one cent. Recent estimates put per‑coin costs around 3.69 cents, creating annual losses for the government and prompting a policy shift to end new production.
At the same time, everyday spending continues to move toward cards and mobile wallets, reducing the need for low‑denomination coins.
What this means in practice: the U.S. Mint has ceased minting new pennies, while the Federal Reserve’s coin distribution is adjusting as inventories decline. Existing pennies can still be used and deposited, but over time, they’ll become harder to source for change orders.
Are Prices Changing? Understanding Cash Rounding
When pennies aren’t available, cash totals (not item prices) may be rounded to the nearest five cents. A commonly used symmetric rounding approach works like this: totals ending in 1, 2, 6, or 7 cents round down; totals ending in 3, 4, 8, or 9 cents round up; 0 or 5 stay the same. This rule is consistent with practices adopted in other countries and analyzed by the Federal Reserve.
It’s important to note that electronic payments (debit, credit, and mobile) are not rounded. Rounding only applies to cash.
Will Rounding Raise Costs for Consumers?
If you use cash for most of your purchases, you might notice a slight "rounding tax" over time. Because totals ending in 3, 4, 8, or 9 cents round up, frequent cash users could pay a little more across many transactions.
The good news? The impact is small and if you prefer exact totals, paying with a card or mobile wallet avoids rounding altogether
What Consumers Should Know
You can still spend or deposit pennies. Bringing coin jars back into circulation can help ease local supply issues in the near term.
What Does This Mean for Bank Cash Transactions Involving Pennies?
• Effective 4/6/2026 all Hills Bank Cash Transactions will be rounded to the nearest nickel.
• For Hills Bank Customers, any remaining pennies (your exact change) will be deposited into the Hills Bank account of your choice.
• For non-Hills Bank Customers, the tractions will be rounded to the nearest nickel.
• Pennies can still be deposited at Hills Bank.
• Electronic payments and non-cash transactions will not be affected by the penny’s retirement.
• Loose, rolled, or bagged pennies will no longer be available.
What Businesses Should Do Now
If your business handles cash, plan for a gradual, uneven decline in penny availability. Our recommendation is to prepare before coins run out so your customers experience a smooth transition.
1) Update cash‑handling procedures
Enable rounding to the nearest nickel on cash totals and test for edge cases (e.g., returns, voids, split tenders).
2) Train your team
Equip frontline staff with simple talking points: “Pennies are still legal tender, but when exact change isn’t available, we round cash totals to the nearest five cents. Card and mobile payments remain exact.”
3) Communicate clearly
Post concise signage at registers and on receipts, and update checkout pages or kiosks with a one‑line notice. Clear communication reduces confusion and builds trust.
4) Coordinate with your bank
Ask your banker about coin inventory trends and what to expect for future change orders. Industry groups report that distribution locations may vary over time as inventories deplete, so local conditions can change quickly.
5) Encourage digital payments
Steer customers toward card and mobile options to minimize rounding scenarios and keep transactions precise.
Hills Bank: Here to Help
We’re prepared to support businesses and consumers through this change - answering questions, coordinating coin orders, and helping you implement clear, customer‑friendly rounding.
Have questions?
Connect with your Hills Bank business banker or reach out to our customer support team to get started.
Frequently Asked Questions
Are pennies still legal tender?
Yes, there’s no recall. You can spend and deposit existing pennies while they remain in circulation. Availability will decline naturally over time.
Will the government mandate a rounding rule?
There is no official U.S. rounding rule today; symmetric rounding is widely referenced by economists and central banks as a fair approach and has precedent abroad.
Is the Fed still distributing pennies?
The Fed has indicated penny orders and deposits will vary by location as inventories are depleted; some distribution points have already adjusted operations.
