Bye-Bye Penny – Hello Swedish Rounding?

The Senate Committee on National Finance has just recommended that the Canadian government stop minting pennies "as soon as practicable" and to begin removing it from circulation a year later (and even help charities collect the pennies in circulation).

It now costs 50 percent more to produce the penny than the coin’s actual face value. Nobody has collected data on the cost of ripped pockets resulting from penny-overload.

“The penny has simply outlived its purpose,” Senator Irving Gerstein is quoted in the Toronto Star. “It is a piece of currency, quite frankly, that lacks currency.”

CBC News reports that "According to a Royal Canadian Mint survey released in October 2007, 63 per cent of small retailers said they were in favour of getting rid of the penny, citing efficiency as their prime motivation."

Can you say "öresavrundning"?

The Committee also called for guidelines to be established for rounding off prices when purchases are made with cash. On that note, Canadians might want to look to Australia and New Zealand, both of which have already ditched the penny. New Zealand has even scrapped the also-pretty-worthless nickel, and has similar (but more complicated) guidelines.

In Australia, cash purchases are rounded to the nearest five cents, using a method called "Swedish rounding", which was first introduced in Sweden in 1972 when the 1 and 2 öre coins were removed from circulation. (In fact, it's properly called "öresavrundning" in Sweden - much like the Swiss don't call Swiss cheese "Swiss cheese" and the French don't call French fires "French fries".)

Here is how Swedish rounding works in Australia:

• Prices ending in 0 and 5 would not change.
• Prices ending in 1, 2, 6 and 7 would be rounded down to the nearest multiple of 5 cents.
• Prices ending in 3, 4, 8 and 9 would be rounded up to the nearest multiple of 5 cents.

With more and more use of electronic payment - including credit cards and debit cards - and the value of pennies having been grossly eroded by inflation, the penny has long ago outlived its natural lifespan. If you really want to flip the birdie at the penny, before the Senate Committee's recommendations can be reviewed, duly considered, studied, debated, delayed, sent back to committee, redrafted, delayed again...just which out your credit card or debit card, or write a cheque.

Ironic Postscript

In other news, Canadian gas stations continue to post priced to the one-tenth of a percent...or, more commonly, nine-tenths of a cent.  If you don't happen to have any nine-tenths of a cent coins in your pocket, there's always your credit card.

Image source: cbc.ca

This article was included in the Carnival of Struggling Bumbling Newbies at The Income Blog, in the Carnival of Wealth at My Personal Finance Journey, and in the Anything Goes Carnival of Politics at The Salty Blogger.