In fiscal year 2024, the U.S. Mint’s total cost to produce, manage, and distribute a single penny — including materials, labor, distribution, and overhead — was $3.69, nearly four times its face value. This imbalance resulted in a seigniorage loss of about $85.3 million for the year.
With the U.S. Treasury slated to end penny production in early 2026, many financial institutions and businesses are already experiencing shortages. While pennies will remain legal tender, their gradual phase-out presents new operational and communication challenges.
So how can your institution prepare? Below, Pinion advisors share key steps to help banks and businesses plan, respond, and maintain customer trust throughout the transition.
Recommended Procedures for Banks
1. Monitor Inventory and Coordinate With the Federal Reserve
The Federal Reserve’s FedCash Services will continue filling penny orders as supplies allow, but local coin distribution points will gradually stop orders once inventory is depleted. Banks should track coin levels closely, coordinate with their FedCash office, and adjust ordering and deposit practices as needed.
2. Adopt a Rounding Policy for Cash Transactions
When pennies run out, cash transactions should be rounded to the nearest five cents:
- Totals ending in 1¢ or 2¢ round down
- Totals ending in 3¢ or 4¢ round up
Electronic payments — such as debit, credit, ACH, or digital wallets — remain exact to the cent. Each institution should publish a consistent rounding policy and apply it uniformly across all branches.
The Richmond Federal Reserve estimates the nationwide “rounding tax” on consumers will total about $6 million per year, a relatively small amount compared with the cost of continuing penny circulation.
Before implementing rounding, banks should confirm that it’s allowed under state and local regulations. Following are a few links for reference.
Colorado: https://banking.colorado.gov/
Kansas: https://www.osbckansas.gov/
Oklahoma: https://oklahoma.gov/banking.html
Missouri: https://finance.mo.gov/
Montana: https://banking.mt.gov/
Texas: https://www.dob.texas.gov/
3. Communicate Transparently With Customers
Clear, proactive communication will help prevent confusion and frustration:
- Post signage at teller windows, drive-thru lanes, and ATMs explaining rounding policies.
- Train staff to explain the change and reassure customers that pennies remain legal tender.
- Use email, website alerts, and mobile apps to inform customers in advance.
- Encourage digital payments to avoid rounding altogether.
Special consideration should be given to cash-reliant customers, such as those who are unbanked or underbanked. Offering coin-exchange services or educational materials can ease the transition for these groups.
4. Update Internal Systems and Procedures
Ensure technology and workflows are prepared for the change:
- Modify teller and transaction software to automatically apply rounding for cash transactions.
- Adjust vault and branch cash inventories to reflect higher demand for nickels, dimes, and quarters.
- Update ATM coin dispensers or recyclers to eliminate pennies.
- Revise internal policies, disclosures, and account agreements to reference rounding procedures.
5. Continue Accepting Penny Deposits While Possible
Even after production ends, pennies remain legal tender and should continue to be accepted for deposits or payments as long as local FedCash facilities allow. Over time, you may need to redirect deposits or set phase-out dates for penny acceptance at specific branches, with ample notice to customers.
Positioning Your Bank for the Transition
The end of penny production marks a practical step toward modernizing U.S. currency, but it requires careful planning by financial institutions. By monitoring coin supply, implementing clear rounding rules, updating systems, and communicating openly, you can manage the change smoothly with minimal disruption to your institution and customers.
Have questions about these changes? Contact a Pinion advisor.
