# Why are most countries still using 1 and 2 cent coins?

I’ve wondered for a long time why most countries still use 1 and 2 cent coins. I can understand there being resistance to change, because of how things have always been done, and it being costly to change the system. However, even most countries that have adopted new currency haven’t gotten rid of them. When countries were transitioning into the euro, it would have been a perfect opportunity for most to set the 5 cent coin as the lowest denominator. Only two countries did this, Finland and Netherlands.

Prices are rounded to the closest 5 cents, which means that sometimes the customer wins 1 or 2 cents, and sometimes the store wins. With time it averages out for both the customer and the seller.
Sum ends with 1 or 6 -> Customer pays 1 cent less
Sum ends with 2 or 7 -> Customer pays 2 cent less
Sum ends with 3 or 8 -> Customer pays 2 cent more
Sum ends with 4 or 9 -> Customer pays 1 cent more

Stores can still use prices like 1.99\$ for advertising, and it’s the final sum that is rounded, so nothing really changes as far as setting prices is concerned. Rounding also doesn’t happen when paying with a credit card. For most currencies minting 1 and 2 cent coins costs more than the actual value of the coin. This means the government is actually making a loss for every coin minted.

The lowest coins are also quite cumbersome to carry for the customers, as you almost never end up paying anything with them. A lot of people just end up storing them in a jar somewhere, or have them weighing down your wallet. Likewise the store almost never receives the lowest coins from their customers, so they’re constantly needing to replenish their stock by exchanging them with a bank. Having to process the small coins also adds a little bit of time into each transaction.

So is there any rational explanation for having 1 and 2 cent coins today, or is just resistance to change?

I agree how the existence of pennies is kinda silly. I haven’t paid for anything with them for years.

1 and 2 cent coins exist because companies still want to price items at .99 and rounding schemes are sufficiently complex as to require explanation.
…And I don’t think you’ve quite finished the explanation, because for the transactions to average out, there would also have to be an equal frequency of final digits, something which has not been shown.

Whenever there’s a change to currency the perception is always that it will give retailers the chance to increase prices. You don’t want to increase this feeling with additional complications.

As someone who lived in another country and regularly traveled back to Finland, my feeling is that most Europeans just don’t understand how much easier it is. They would certainly be ready to try it (except those who in principle deem ideas other people come up with as inferior) but are not going to become pollitically active for it. In other words, it’s just inertia.

As I often say in these threads, Australia withdrew 1c and 2c coins in 1991.

Nobody misses them.

.99 items if purchased alone would round up to the whole dollar.

Since perception is everything with consumers, most people will see it as every .99 item purchased costing them an extra penny. How the averaging works out on multiple item purchases isn’t obvious enough for most consumers to give that equal weight to .99 rounding up.

Maybe, but if the shrapnel were removed, panties may be bunched, tantrums may be thrown - but after a week, no one would care.

How do countries without cents handle purchases for stuff you don’t buy in unit amounts such as petrol? If petrol is £1.40/litre and I buy 1.3 litres that comes to £1.82. Do I pay £1.80 or £1.85?

In this case, £1.80. We round to the closest multiple of 5 cents (or pence, whatever).

ETA: in any case, in some countries gasoline is priced up to a fraction of a cent, so the final price is already rounded.

Probably. So perhaps the various governments need to grow a pair, and stop worrying about people whingeing.

In Britain, when our currency became decimal in the 70s, there was all sorts of uproar before the event about how complicated it would be. But the switch itself was virtually painless.
On the day of the change, one national newspaper found so little to report on that they did a front page story about someone swallowing one of the new coins.

The way I’d heard it, in the US at least, the only people really passionate about the issue are copper and zinc producers (and their federal lobbyists) and congresspeople from copper and zinc producing states. Zinc producers play the “gotta keep the status quo” card so zinc keeps being used in US copper plated pennies, while copper producers rave about the cost savings of losing the pennies, knowing that means more copper-alloy nickels in circulation. (Yes, that seems backwards on the face of the coin, go with me on actual metal content.) People come up with very well thought out rationalizations, like the OP, but the reality comes down to federal subsidy.

We could ask the federal government to lose pennies. Hell, if the government really cared, they could make all coins out of steel, or plastic with embedded RIFD chips for counterfeiting prevention. Or a federally backed credit card system. But the real fighters in this issue are metal producers.

I think there’s another aspect to it on the US side. We’ve needed to update our currency for so long, that we’ve passed over into an entirely different thought process regarding coins and bills.

1950 you could sit down at a diner, eat eggs, bacon, toast and coffee, and pay for the whole thing, including tip, with coins from your pocket. Coins are money - you use them to buy things

2011 You can’t get a cup of coffee that costs less than a dollar, there’s pretty much no point* to carrying around coins since you have to go to your wallet to get bills for every purchase you make. Coins are change - they’re used only to round out purchases that are made with bills.

*People carry around coins so that they get fewer coins returned to them in change. Not high praise for coins.

Coins haven’t been money in so long, I think there’s no impetus for people to want them to have high value, because they have no concept of how convenient it might be to pay for a meal with the coins in your pocket instead of with bills from your wallet.

MY dad was a big muckety-muck at a bank. (How muckety? He showed us a \$10,000 bill once!)
I remember him coming home and announcing that they were going to do away with the penny.

That was in 1959.

You have a very strange concept of “convenient.” Why would I want to carry around heavy, noisy coins when I can carry light, silent bills?

That’s because the change didn’t really take place overnight. For at least 18 months prior to the switch both sets of currency were in circulation (with the old gradually being withdrawn) and prices were marked in both old and new. Thus not much actually happened on the day of the change other than the disappearance of dual pricing.

You already carry around heavy, noisy coins, they’re just worthless heavy noisy coins that never leave your pocket until you get home and put them in a jar.

Inconvenient is buying a cup of coffee and
pull coins out of your pocket
give cashier coins
put left over coins back in pocket
pull out bills from your wallet
give cashier bills
get change as bills and coins
put bills back into your wallet
put wallet back
put remaining coins in your pocket

Or
pull out bills from your wallet
give cashier bills
get change as bills and coins
put bills back into your wallet
put wallet back
put remaining coins in your pocket
carry around massive amounts of worthless coins all day because you don’t use them in transactions

When it could be
Pull coins out of your pocket
pay with coins
get coins back as change
put coins back in pocket

Don’t get me started on the ridiculousness called the bill reading vending machine.

Still a hassle. I just:

take out wallet
swipe card
punch in PIN
put wallet away
walk out with coffee

exactly.

Also, I kind of love my coins. They’re good for, you know, holy shit I’m broke and hey I have \$20 in quarters…also…what about machines that take coins?

I disagree with the premise of your question. Specifically:
[ol]
[li]It is not true that most countries are still using 1 and 2 cent coins. Most countries don’t even have a currency subdivided into cents, and among those that do, I’m not even sure that most have both 1 and 2 cent coins.[/li][li]Even if we extrapolate your question to mean, “Why do countries still mint coins of their lowest denominations?”, you are making the incorrect but unstated assumption that the lowest denomination coins are always practically worthless. This isn’t true; the relative values of currencies are all different, and the prices of goods and labour varies in the places they are used. There are undoubtedly currencies not so inflated that the lowest-denomination coins can still purchase something useful.[/li][/ol]

In general I agree, but there is one area where changes in price of as little as cents is always controversial: postage.

Right now, first class postage in the U.S. is 44 cents. Not 45 cents. And whenever there is talk of increasing postage, even by one cent, it is considered a big deal.

And what that means is that if you buy stamps at the post office, they need to be able to give change that includes single cents.

Last time I was in Denmark, I noticed that the smallest coin was 25 “cents” (they use a different word using letters I can’t type on my keyboard). They also had coins for 1, 2, 5, 10 and 20 “crowns”. Never had any problem with worrying about rounding or anything. The 25 “cent” coin was pretty worthless and I wouldn’t be the least bit surprised if it went away as well.