Cash transactions in a post-penny world

For cash transactions, local governments will require guidance before implementing rounding procedures as policy
image of a jar of pennies surrounded by pennies and looking from above

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In February 2025, the Trump administration directed the U.S. Treasury Department to cease the minting of new pennies in an effort to reduce federal spending. In 2025, each penny cost about 3.5 cents to manufacture.

While the last new penny was produced November 12, 2025, pennies currently in circulation will remain legal tender. “The Federal Reserve will continue to recirculate the roughly 114 billion pennies currently in existence for as long as possible,” the Treasury stated on its website. “How long existing pennies remain in circulation depends largely on consumer behavior. The Treasury Department encourages the public to spend their on-hand pennies to support a smooth transition and allow retailers and point-of-sale system providers time to adapt. This initiative aims to help keep the existing supply in circulation, ensuring clarity and fairness at the point of sale during the transition.”

While retailers and banks have already begun adjusting to the change, with some rounding up or down to the nearest nickel and updating point-of-sale and cash drawer procedures, the issue may be more complicated for municipal governments.

What does this mean for local governments?

When it comes to cash transactions, local governments will require guidance before implementing rounding procedures as policy. The Common Cents Act (S.1525 and H.R.3074) is bipartisan legislation introduced in April 2025 and now pending before Congress that would establish formal, national rounding rules for cash transactions. Until the law is passed, local governments that round cash transactions may violate the Arkansas Constitution, according to the League’s Municipal Law staff. Please note: Rounding issues due to the elimination of the one-cent coin do not apply to payments made via electronic methods, checks or other non-cash payment methods.

While we await guidance

As municipalities await federal and state guidance to establish formal rounding policies for cash transactions, there are fair and transparent payment procedures they may implement to help prepare for the disappearance of the penny:

  • Consider requiring or encouraging customers to provide exact change for cash payments.
  • Offer alternative payment methods including debit/credit cards, electronic checks or online payment portals.
  • Ensure that any new policy is applied uniformly, and clearly communicate any new policy to local officials, employees and the public.

 

Always consult with your city attorney before adjusting cash transaction procedures. To track the legislative process of the Common Cents Act, visit commoncentsact.com.

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