Jump to: What is Seigniorage? | US Mint Report | The Cost of the Penny | How the End Affects Transactions | Opportunities for Collectors | What Happens Next?
President Trump instructed the Secretary of the US Treasury to stop producing new pennies at the 2/9/2025 press conference.
The U.S. penny has been a staple of American currency for over 150 years, but its future is uncertain. With rising production costs, declining purchasing power, and ongoing debates about its practicality, the penny may soon disappear from circulation. President Trump previously instructed the U.S. Treasury to stop producing new pennies, sparking discussions on what eliminating the penny could mean for the economy, businesses, and collectors.
“Pennies would become more scarce over time and eventually increase in value. In the near term, they might become useless, depending on how the Treasury treats them. I would think that would have to be in phases so people could convert them to other denominations, thus removing them from the system,” Gates Little, the CEO of Alabama-based Southern Bank, said.
We explore the potential impact of discontinuing the penny, including its effects on pricing, coin collecting, and silver stacking, and how a new generation of collectors might benefit from this shift.
What is Seigniorage and Net Income?
Seigniorage is the difference between the production cost and the face value of a bill or coin (including circulating, bullion, and numismatic coins).
If the seigniorage is positive, the government will make a profit. If it’s negative, it will result in a loss. The US Mint transfers all profit from seigniorage to the Treasury General Fund to help finance the national debt or fund Federal programs.
In fact, the US Mint recently released its annual report for the 2024 fiscal year where they reported 182.4 million dollars in net income last year.
Data extracted from the US Mint 2024 Annual Report
However, as we analyze the past 5 years, we notice the seigniorage has drastically reduced since 2020, when it was over 600 million dollars.
What Else Did the U.S. Mint’s 2024 Report Reveal?
The FY 2024 U.S. Mint report highlighted significant financial challenges, especially with the penny, which remains unprofitable to produce. The report revealed:
- The unit cost of a penny rose 20.2% to 3.69 cents—more than 3.5 times its face value;
- Nickels also cost more than face value, reaching 13.78 cents per coin;
- This marks the 19th consecutive year that both pennies and nickels have been produced at a loss;
- Overall seigniorage declined by 60% due to rising costs and reduced coin shipments.
These figures reinforce the long-standing debate about whether the penny should be discontinued or redesigned to reduce costs.
What is the Cost to Make Other Denominations?
The rising cost of metals and production affects all U.S. coin denominations. According to the U.S. Mint’s FY 2024 report, unit costs for all circulating coins increased compared to the previous year:
- Penny: 3.69 cents (+20.2%)
- Nickel: 13.78 cents (+19.4%)
- Dime: 5.32 cents (+8.7%)
- Quarter: 11.23 cents (+26.2%)
While dimes and quarters remain profitable due to their higher face value, the growing production costs highlight the challenges in maintaining cost-effective coinage.
Data extracted from the US Mint 2024 Annual Report
The chart above illustrates how the revenue from circulating coins has drastically diminished in the past 10 years across all denominations.
The Cost of Keeping the Penny in Circulation
Production Costs vs. Value
The biggest argument against keeping the penny in circulation is the cost of production. As reported above, producing a single penny costs nearly 3.7 cents—far more than its face value. In 2024 alone, the U.S. Mint reported a loss of $85.3 million from minting nearly 3.2 billion pennies. This cost burden makes the penny increasingly unsustainable.
A Fraction of the Money Supply
Despite being the most widely produced coin, pennies make up only about 0.006% of the U.S. money supply. According to the Federal Reserve, there are 114 billion pennies in circulation, valued at $1.14 billion, but many of them end up lost, discarded, or sitting in jars rather than actively circulating.
Other Countries Have Already Eliminated Their Pennies
Many nations have successfully phased out their smallest denomination coins. Canada stopped minting its penny in 2012, and countries like Australia, New Zealand, and Sweden have eliminated their smallest coins without major economic disruptions. The U.S. could follow suit by rounding cash transactions to the nearest five cents, as other countries have done.
Do you know who is on the Penny?
How the End of the Penny Affects Everyday Transactions
Impact on Pricing and Retail Transactions
Price rounding is one of the most immediate effects of eliminating the penny. Transactions would likely round up or down to the nearest five cents, but electronic payments would still be processed to the exact amount. Retailers might need to adjust their pricing strategies, but overall, studies suggest that rounding has little impact on inflation.
Effect on the Unbanked Population
According to a 2023 FDIC survey, about 5.6 million U.S. households remain unbanked, relying on cash transactions. The elimination of the penny could make small cash-based transactions slightly less precise, but for many, it would simplify everyday purchases by removing the need for handling such small denominations.
Consumer Sentiment and Psychological Pricing
The penny has long played a role in psychological pricing—where items are priced at $9.99 instead of $10. While this pricing strategy is deeply ingrained in retail, its necessity may diminish with the disappearance of the penny.
Opportunities for Coin Collectors and Silver Stackers
The Collector's Advantage: Increased Value Over Time
As seen with the discontinuation of the wheat penny in 1958, once a coin is no longer produced, its value can increase over time. Rare and well-preserved pennies, such as pre-1982 copper pennies, already hold higher melt values than their face value. If the penny is phased out, collectors may see increased demand for historic pennies, leading to potential gains in value.
A Gateway for New Coin Collectors
With the penny no longer produced, young collectors may look for new entry points into numismatics. The absence of the penny could push interest toward collecting older coins, such as wheat pennies, buffalo nickels, or even silver coins. This shift could revitalize coin collecting among younger generations.
A Boost for Silver Stackers
For those focused on silver stacking, the removal of the penny may encourage investors to transition to more valuable metals. Silver coins, rounds, and bars offer better long-term value than zinc pennies and could become a more attractive entry point for those looking to start collecting hard assets.
What Happens Next? The Legal Process of Phasing Out the Penny
Congressional Action and the Role of the Treasury
Under Article I, Section 8 of the U.S. Constitution, Congress has the exclusive power to regulate currency, including the discontinuation of coins. However, the Secretary of the Treasury could halt penny production without congressional approval.
Potential Transition Plans
If the U.S. eliminates the penny, there would likely be a phased transition period where banks and retailers slowly stop circulating pennies. Citizens might be given time to exchange pennies for other denominations, ensuring a smooth shift away from their use.
Will Other Coins Be Next?
With the penny on the chopping block, some experts wonder whether the nickel could be next. It currently costs over 11 cents to produce a nickel, making it another target for elimination. If the U.S. phases out the penny successfully, discussions about the future of the nickel may soon follow.
Final Thoughts: A New Era for Coin Collecting and Everyday Transactions
The end of the penny marks a significant shift in U.S. currency history. While eliminating it could streamline cash transactions, save taxpayer money, and modernize the economy, it also creates opportunities for collectors and investors alike.
For those interested in numismatics, the disappearance of the penny could spark greater interest in historical coins, while silver stackers may see increased appeal in diversifying their holdings. Whether you're a collector, an investor, or someone who simply tosses pennies in a jar, this transition could reshape the way Americans think about money.
What do you think? Should the U.S. get rid of the penny, or should it remain a part of American currency?
