Penny about to drop
February 5, 2013, 2:02 am
Kevin Weedmark
The penny is about to drop.
As of today, the Royal Canadian Mint will no longer be distributing pennies and some banks will stop giving them to customers.
Pennies deposited with banks will be boxed up and shipped back to the mint to be melted down for their copper.
Some local businesses will stop accepting or returning pennies today.
As of today, the federal government is encouraging businesses to begin rounding cash transactions to the nearest five-cent increment in a "fair and transparent manner."
For example, a transaction totalling $1.02 would round down to $1, but a purchase of $1.03 would round up to $1.05, while $1.07 would round down to $1.05 and a purchase of $1.08 would round up to $1.10.
Transactions that are paid with cheques, credit cards and debit cards will continue to be settled to the penny. The GST will be calculated on the pre-tax price, not the rounded price.
Individuals will still be able to use pennies indefinitely to pay for purchases, and will be able to deposit them in their financial institution.
The federal government announced in last March's federal budget it was ending production of the penny because it actually cost 1.6 cents to mint each penny, due to rising metal, labor and other manufacturing costs.
The federal government says that eliminating the penny will save taxpayers around $11 million a year.
The federal government has created a web portal on the Finance Canada website, including downloadable signage that can be displayed in-store.
The government has used Twitter and Facebook to get information out on the change, but that doesn't seem to have reached a lot of people, and the government now plans a series of print, radio, television and online ads which will appear across Canada until the end of March.
Several local business owners and managers said they may not be making the transition immediately, as in many cases software upgrades are required for point-of-sale software to round up or down to the nearest nickel.
Arlene Fyke, who manages the Scotiabank branch in Moosomin, says the bank will stop distributing pennies today.
"As of Monday we are stopping circulating pennies," she said. "Customers will no longer be provided with pennies for change. Government cheques being cashed will be rounded up to the nearest five cents and other cheques will be rounded up or down. People can always get the full value for a cheque by depositing it in their account."
She said she hasn't had a lot of questions from businesses about the impact of the change.
Canadian Federation of Independent Business (CFIB) president Dan Kelly said a number of his members aren't prepared for the transition away from the penny.
"Business awareness is low," Kelly said, explaining many business owners likely won't realize the change until they go to the bank and can no longer get rolls of pennies. "There certainly will be a few transitional hiccups."
The primary concern for business owners, he said, is consumers unaware of the rounding off changes may think store employees are trying to cheat them out of a few pennies.
Many consumers may not even notice the change. A majority of retail and hospitality purchases are paid by credit card (35 per cent) and debit card (27 per cent), according to data from the CFIB, which represents 109,000 small and medium-sized businesses in Canada.
Across Canada, only 19 per cent of retail and hospitality transactions are paid by cash, with 15 per cent by cheque, says the CFIB.
Karen Proud, a vice-president at the Retail Council of Canada which represents about 45,000 stores, figures approximately half of the businesses are ready for the change. It will also take time for consumers to adjust, she said, as shoppers receive less or more change than they were expecting.
"In the short term, there is going to be a bit of confusion," she said.
Along with the rising costs to stamp the penny coin, the government said ending the penny's production was necessary because Canadians are indifferent to the coin and that it has retained only one-twentieth of its original purchasing power.
Billions of Canadian pennies remain either in circulation, stashed in piggy banks or lining drawers of homes across the country. It will take years to completely remove the coin from circulation.
"To ensure the transition is as smooth as possible and as smooth as in other countries, we're undertaking a national public awareness campaign to help inform small businesses, retailers, charities, and consumers about how rounding will work," Shelly Glover, parliamentary secretary to Finance Minister Jim Flaherty, said.
