A new development in Ireland has retailers around the country rounding change to the nearest 5 cent, if patrons consent. The scheme was thought up in response to the fact that Ireland spends millions of Euro every year minting 1 and 2 cent coins, which have a nearly insignificant value to consumers.
This problem has cropped up in nations around the world, as more and more retailers and commerce exchanges exist online and virtually. Belgium, the Netherlands, Denmark, and Sweden all implemented similar policies in recent years, with Ireland being the next European nation to attempt to streamline processes and reduce costs.
Keep the Change: Coin Minting Cost Imbalance
It may not make sense, but it typically costs more to produce smaller value coins than they are actually worth. Ireland's Central Bank calculated that the cost of producing a once cent coin is actually 1.65 cents, and similar two cent coins are basically made at cost.
With variations in the cost of metals, and the expenses required to make and staff minting facilities, it makes sense that phasing out these small coins will immensely help solve budgetary concerns in many countries.
Ireland's officials have also cited that fact that a lot of the small change that exists in circulation is being stored by individuals in coin jars and piggy banks, so it is not even being used as often as legal tender.
How the Currency Change Will Work
The first step in phasing out small coins is to significantly cut down on the amounts that are made, eventually ceasing production altogether. This makes sure that no new coins are circulated and so that only what is already made gets used up. Coins will still be able to be used around the country, and it is likely that it will stay this way for some time.
The second step is having retailers adjust their policies. The current process is to adjust change given, rounding to 5-cent intervals. For example, a store that offers something for 99 cents will no longer give a single cent as change if cash is used to purchase the item. For now, this won't affect electronic payments such as credit and debit cards, which will still factor single cents into calculations. Retailers will also be able to opt in or out of the policy, and will be required to display signage alerting customers of what their rounding policy is.
Concerns Over Nixing One Cent Coins
It turns out that most consumers and almost all retailers support rounding methods in 5-cent intervals. Ireland implemented a test run of the change in 2013, and 100% of retailers supported the change.
So who would have a problem with this?
One of the biggest fears of getting rid of small change is that charities will end up taking financial hits. Many charities use collection jars at retail checkouts or coin collection stations around the holidays, and the accumulation of small amounts of change from millions of consumers adds up to constitute a significant part of charities' overall fundraising efforts. The concern is that the less change people have, the less they will be willing to support these charities on the go.
All things considered, the negative effects on rounding change will almost certainly be overlooked in favor of the overwhelming benefits. Just be wary when you are visiting Ireland in upcoming months that your change may be rounded!
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