Even a copper-plated steel composition can’t save the 1 cent coin in Canada from rising costs.
The government decided to pull the plug on the lowly denomination and announced its decision March 29 as part of its 2012 Economic Action Plan.
Already, Americans are actively debating what it might mean for the United States.
Individually, it costs over 1.6 cents to mint each cent in Canada and collectively the government expects it will save $11 million each year by putting an end to the denomination.
With the Canadian dollar and U.S. dollar trading nearly equally on foreign exchange markets, the cost bind Canada is addressing is even more severe in the United States where it costs 2.41 cents to strike each cent and place it into circulation. Additionally, in any given year the United States strikes five to 10 times more cents than Canada does.
Once the Royal Canadian Mint stops distributing the cent in the autumn, the population will be forced to round amounts that are paid for in cash to the nearest 5 cents. Bills paid by check, debit or credit card or electronically can still be paid to the penny.
The suggested rounding system says that all final cash amounts ending in 1 or 2 cents are rounded down to the nearest 5-cent increment while amounts ending in 3 or 4 cents are rounded up to next 5-cent increment.
In recent years Canada has been no stranger to changing its circulating money to reduce government costs.
In 1987 the $1 denomination paper note was eliminated and a $1 coin was introduced. In 1996 the $2 note was replaced by a $2 coin.
In more recent years plated steel has been introduced as the basic composition of Canadian circulating coins.
The Royal Canadian Mint notes that, “As a result of the Mint’s patented, cost-effective multi-ply plated steel technology, all other Canadian circulation coins cost well under face value to produce.
Canadian cents will remain legal tender. The Royal Canadian Mint has suggested the public can redeem what they have left at their financial institutions or donate them to charity.