Eliminating the penny may seem like a cost-saving measure, but it could lead to even higher expenses due to the need for more costly nickels.

President Donald Trump’s recent decision to order the U.S. Mint to halt the production of pennies has sparked widespread debate. The move is based on the argument that the penny costs more to produce than it is worth—3.7 cents per coin, to be precise.

With the country’s mounting budgetary concerns, Trump’s administration seeks to eliminate this wasteful minting practice.

However, the proposed solution could introduce a new financial dilemma: the need to mint more nickels.

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While the cost of producing a penny has long been an issue, the reality is that eliminating the penny could lead to an increase in the circulation of nickels, which are far more expensive to produce.

Each nickel costs 13.8 cents to make, including 11 cents in production costs and an additional 2.8 cents for distribution and administration.

This is nearly four times the cost of a penny, presenting a paradox where eliminating the less expensive coin could actually result in even greater losses.

The problem lies in the way small-value transactions are handled. Without pennies, retailers would need more nickels to fill the gap, especially in transactions involving amounts that aren’t easily divisible by five.

According to Mark Weller, executive director of Americans for Common Cents, the U.S. Mint would likely need to produce between 2 million and 2.5 million additional nickels annually to meet demand if pennies were eliminated entirely.

This would erase any financial savings from discontinuing the penny.

Additionally, the cost of making nickels has been rising steadily over the years, driven by increases in the price of raw materials.

While zinc—the primary component of pennies—has remained relatively stable, the costs of copper and nickel, which make up the composition of the nickel, have skyrocketed.

Since 2022, nickel production costs have surged by nearly 20%, making it even less cost-effective for the government to mint these coins.

Despite these financial challenges, there are proponents of phasing out the penny.

Groups like the National Association of Convenience Stores argue that removing the penny could speed up transactions, which is a critical factor for businesses that rely on quick customer turnover.

In particular, convenience stores, which sell many low-cost products, could benefit from faster checkout times, even if the savings per transaction are minimal.

The United States wouldn’t be the first to eliminate its least valuable coin. Canada stopped producing pennies in 2012, and officially removed them from circulation in 2013.

In doing so, they also saw a reduction in transaction times and a shift to rounding cash payments to the nearest five-cent value.

However, this move wasn’t without its own costs, as the Canadian government had to buy back the pennies in circulation, a process that turned out to be far more expensive than anticipated.

In the U.S., a similar situation could arise if Congress were to act on Trump’s directive and stop the use of pennies already in circulation. The process would require the federal government to buy back the pennies, an initiative that could prove costly.

Moreover, vending machines, toll booths, parking meters, and other machines that rely on coins could face logistical challenges as they adjust to a coinage system without pennies.

Public sentiment on the issue remains mixed. Many Americans simply do not use pennies, leaving them to gather dust in jars or accumulate on the ground.

Surveys show that a large portion of people simply do not pick up pennies when they see them, further diminishing their usefulness.

On the other hand, nickels—while more expensive to produce—remain in circulation and are still commonly used for small transactions.

In the end, while the idea of eliminating the penny may seem like an easy fix to reduce costs, it brings to light the complexities of the U.S. currency system.

The debate over whether to ditch the penny is not just about saving money, but also about addressing the underlying structural issues in coin production and circulation.

It also raises broader questions about the role of physical currency in an increasingly digital economy. With inflation, rising material costs, and shifting consumer habits, the future of American coinage could look very different in the years to come.

In the meantime, the U.S. Treasury Department faces an uncertain path ahead as it navigates the unintended consequences of potentially eliminating the penny, all while keeping an eye on the growing costs of producing its next most-used coin: the nickel.