The questions include, “Why did Canada drop the penny?”; “can consumers still spend their one-cent coins?”; and “what must a business do with Canadian pennies”?

Bonus questions are “Have penny loafers been outlawed?” and “what about buying penny stocks in Canada”?

A link to the official Royal Canadian Mint‘s pages about the penny is near the end of this article.

Why did Canada Drop the Penny? Does it Make Sense to Round the Cents?

The Royal Canadian Mint dropped the penny to improve its profit margin.

The penny coin costs about 1.6 cents to manufacture; of course the Mint realizes no more than 1 cent from selling this coin to banks.

The Canadian federal government under Prime Minister Steven Harper (of the Conservative party) decided to save about $11 million per year by ending production of the penny.

In May 2012, the Royal Canadian Mint stopped minting one-cent coins. Today, Feb. 4, 2013, they stopped distributing pennies.

As of Feb. 4, 2013, it became legal for Canadian businesses to stop accepting pennies in payment, and to stop making change with 1-cent coins.

I’m sure that the Canadian government did not drop the penny simply to make my math demonstrations more expensive to produce. The image, from “How to Change Triangular Numbers into Square Numbers“, could have been made with dimes for the same net cost.

Four Facts about Canadian Pennies in Commerce

The four basic new facts about Canadian pennies in commerce are:

1. The Canadian one-cent coin is still legal tender.
2. This is about the physical one-cent piece, not about bookkeeping. You still continue to pay exactly “to the penny” when you pay by cheque, credit card, debit card or online.
3. A business is not obliged either to take cents or to give change in penny coins. They can round to the nearest nickel, instead.
4. Banks will still accept pennies if they are properly rolled up. (They might accept loose change in small amounts).

Can Consumers still Spend their One-Cent Coins?

Yes, you can still spend pennies; but you need to find a merchant willing to accept them. Or you can use pennies in settling debts with your neighbours, friends and relatives. Just “use common cents”.

Banks will accept pennies for deposit if they are rolled into those little paper tubes.

You might want to give pennies to charities, since they may be willing to do all that tedious rolling to make bank deposits.

I shall boldly predict that the use of pennies will not “stop on a dime”.

What must Business do with Canadian Pennies? What about Rounding to the Nearest Nickel?

A business really does not need to do anything with Canadian pennies in their physical form.

The business must still calculate prices and taxes accurately.

“Rounding off” brings the price from a penny amount to the nearest nickel. The Royal Canadian Mint spells out the rounding rules, but let me make it even more clear.

If the number ends in x, then do y to round off the final number:

• Ends in ‘0’ (zero), then keep it as is.
• Ends in ‘1’ or ‘2’ (one or two), then round down to zero.
• Ends in ‘3’ or ‘4’, then round up to ‘5’.
• Ends in ‘5’, then keep it as is.
• Ends in ‘6’ or ‘7’, then round down to ‘5’.
• Ends in ‘8’ or ‘9’, then round up to ‘0’ (zero) and carry a ‘1’ (one) to the dimes column.

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Rounding the cents only applies to the final total, after GST or HST. The receipt may show pennies in unit prices and taxes. (I imaginge that the same applies to tips and gratuities, as well as foreign exchange fees and interest calculations). It’s only the final cash amount, or the change in cash, that the business may round off.

The business may choose to round off the change rather than the final amount owing. Either way, the final result should be the same for the business and for the consumer.

Have Penny Loafers been Outlawed in Canada?

It seems that penny loafers been not been outlawed in Canada. Even the online retailer JC Penney still offers men’s and women’s penny loafers. (By the way, the “Stafford (®) Microsuede Penny Loafer” is incredibly inexpensive, and has earned 4.5 stars over 60 reviews).

What about Buying Penny Stocks in Canada?

Just what are penny stocks? Penny stocks are shares in a company, that trade at a very low price. Unlike most stocks that are quoted on major stock markets, penny stocks might only be available through specialized brokers.

Penny stocks may be “thinly traded”, meaning that you might have trouble finding a buyer when you want to sell.

Often penny stocks have both high risk and reward. Either the penny stock company becomes successful and the stock price rises; or it sinks without a trace.

What does the Royal Canadian Mint Say about the Penny?

The Royal Canadian Mint’s web pages explain the issues about the penny in some detail.

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Thank you for reading this public service announcement about why the Canadian penny dropped. I suppose that a billion pennies saved is a million dollars earned. (Yes, I know the math is $11,000,000 / 0.006 = 1,833,333,333 pennies assuming they lose $0.006 per penny).

Disclaimer: The information contained in this article is for educational purposes only and should not be used for investing in the stock market. The author is not employed by the Royal Canadian Mint or by any government or political party, and has not been contracted to write this article.