Ditch the American penny? ‘Not so fast, my friend’

Before the American penny bites the dust, here are my “two cents’ worth” about whether it makes good business sense for the federal government to stop minting one-cent coins.

The demand for pennies, other coins and paper currency may actually rise in the near future, as more businesses are imposing credit card “surcharges or convenience fees – adding up to 4% onto customers’ bills.

 

Many consumers, especially “wise owl seniors,” are reverting to making payment for purchases with debit cards, cash and personal checks to avoid tacked-on fees.

 

Some businesses are even offering the “incentive” of a “discount or price reduction” off the final tab to consumers who are willing to keep their credit cards in their wallets.

I fear we could be headed toward a train wreck here.

As the wily sportscaster Lee Corso is prone to say: “Not so fast, my friend.” It’s his trademark warning to colleagues in the broadcast booth to consider the potential adverse consequences of “leaping before you look.”

 

R.J. King, editor of DBusiness magazine in Detroit, Mich., commented on the J.D. Power 2025 U.S. Merchant Services Satisfaction Study, which notes that 34% of all merchants are now adding surcharges for customer purchases made using credit cards. It’s an all-time high…and is trending upward.

 

(J.D. Power is a data analytics, software and consumer intelligence company with headquarters in Troy, Mich.)

King reported that John Cabell, an executive at J.D. Power, said: “Many retail customers – specifically, 41% of credit card users – say they decided not to use a card payment method at a large or small business because of a surcharge.”

Herein lies the conundrum. Many businesses believe they need to recover the “swipe fees” that they are being charged by the credit card/merchant services companies (usually between 2-4%) by passing that cost along to their customers – in order to stay profitable.

But many customers are inclined to pinch their pennies and avoid shelling out extra funds to cover the additional “convenience fee” expense.

 

NBC journalists Kayla Steinberg (shown above) and Vicky Nguyen (shown below) recently reported that “Gene-Christian Baca, owner of Walter’s Hot Dogs in Mamaroneck and White Plains, N.Y., estimates that he now pays $50,000 a year in costs associated with processing credit card transactions, a sum that has ballooned with rising card processing rates.”

 

“Every year, 3% of all of our sales is washed away just to credit card processing,” he said.

The alternative, Baca said, is to figure out a way to “bake that cost into our prices”…and still stay competitive.

Pat Burns, owner of Patz Deli in Manchester, N.H., told Steinberg and Nguyen that the credit card processing cost is not something he wants to absorb, “because it’s not our credit card. It’s your choice to use it, not ours, but we’re the ones who get charged for it.”

 

Maybe merchants need to recall the old metaphor: “You can catch more flies with honey than with vinegar.”

If the penny would just vanish overnight, we would awaken in the morning with a terrible headache associated with the trials and tribulations of rounding up or down prices to the nearest nickel. How do we handle sales tax? Furthermore, not everyone has “plastic.”

PYMNTS, a financial services firm based in Boston, is in the business of predicting “what’s next in the digital economy.” Experts there acknowledge that “there are still consumers who prefer using cash in certain situations.”

“And there are still a few small businesses (about 4%) that operate on a cash-only basis.”

 

It’s a safe bet: Carteret County, N.C., has more than its fair share.