Yesterday we delivered a brief to the Canadian Minister of Finance, Jim Flaherty, expressing our opinion that the penny ought to be abolished here in Canada. In December, the Senate Finance Committee decided to table a report about the penny and its decreasing value. Flaherty himself, according to CTV News, has called the penny a "nuisance." Even though the government has yet to make a decision about the penny, momentum is building against it, and Credit Cards Canada agrees that the penny has outlived its usefulness.
The Penny Isn't Worth Minting
The Bank of Canada has said that the penny has lost 95% of its value since its first minting in Canada, in 1908. The last century has not been kind to the penny, with inflation taking its toll. The Senate report found that every penny costs 1.5 cents to produce. It consts more to make a penny than it is worth! On top of that, the Desjardins Group points out that all the annoyance that comes with the penny, from production to transportation to storage, amounts to a cost of $130 million a year.
Not only is the penny too expensive to make, it is also frustrating for many businesses and consumers. Some don't even feel the penny worth keeping! Plus, in a world where plastic is the preferred method of payment, whether in the form of credit cards or debit cards, the penny is obsolete. Other countries have already gotten rid of their one-cent pieces, including Australia, New Zealand and Sweden. New Zealand has even scrapped the nickel. No sense in dealing with such small denomination coins when they aren't even worth the metal they're minted with.
Indeed, Australians find that living without the penny is no problem, according to Jeremy Cabral, from Credit Card Finder Australia:
Coupled with the larger usage of debit card usage in Australia the 5 cent piece is all that is required for easy fast transactions. There are around 13.5m credit cards in Australia and removing the penny and 2 cent coin hasn’t hurt retailers in the slightest from doing promotions.
In order to deal with pricing problems that might come to light by taking the Canadian penny out of circulation, it has been suggested that Swedish rounding be used. Senate Finance Committee members have also said that there would not be changes to the way that transaction fees are charged to merchants accepting credit cards and debit cards.
The switch should be relatively painless, if it comes. In Australia, even those who opposed the idea of getting rid of the penny came around rather quickly, according to David Boyd at Credit Card Compare:
In Australia 1c and 2c coins were phased out way back in 1992. At that time the older generation, who had lived on old shillings, pounds and pennies, were reluctant to the change. The younger generation thought that 1c and 2c coins were a nuisance. After a short time the opposition to the phase out faded away as people realised it was a good idea. Today, the penny phase out is remembered as a minor issue as people use larger value coins, debit cards and credit cards for transactions.
What Do You Think?
Since government officials haven't decided what they want to do about the penny, you still have a chance to weigh in. You can contact the Finance Minister, or contact your representative.
Do you think we still need the penny? Or is it just a waste of resources?
This article was included in the Canadian Finance Carnival #24 at Canadian Finance Blog, in the Totally Money Blog Carnival at Fat Guy Skinny Wallet, Best of Credit Cards and Saving Money at CardWisdom.com, and in the Carnival of Wealth #26 at Value Stock Guide.