A Penny Saved...

By Daniel Kadlec

The last time I went to the bank with a jar of pennies, the teller laughed so hard you'd have thought I was asking for a loan, not trying to make a deposit. Times have changed. The loan officer isn't friendlier. But the teller accepts every penny I find, and lately I've been looking under seat cushions. In case you haven't heard, there's a penny shortage. It's so severe that a bank in my neighborhood pays 55[cents] for 50 pennies, and some restaurants offer free desserts to anyone hauling in enough coin.

The whole thing is preposterous. Rather than paying a premium to lure pennies back into circulation from jars and drawers, shouldn't we just eliminate them? It now costs about a penny to make and ship a penny. Retailer Walgreens figures it loses $1.3 million a year counting them. Pennies are uneconomic and inconvenient. Shortage? We've got too many.

The U.S. Mint and the Federal Reserve made the penny pinch official a few weeks ago, saying retailers in pockets around the nation were unable to make change even though the mint bumped up penny production 33% this year.

No one knows for sure why pennies are disappearing. A big factor, though, clearly is people's low regard for the things. Few carry them to spend or are willing to lug heavy sacks to the bank. James Benfield of the Coin Coalition, a lobby group for eliminating the penny, figures that 25% of annual penny production ends up in landfills.

When I was laughed out of Citibank with my jar a few years ago, I was told to roll my pennies and write my name and 14-digit account number on every roll. Then the bank would accept them--for deposit only, the sum to be held against my account until the bank got around to its own count. The message seemed clear: even banks don't want pennies. By the way, that penny dish at many checkout points is a nice idea, but it doesn't help. I contribute often but rarely withdraw because I wither under the lethal stare of the cashier, who I assume has a penny jar far larger than my own.

People who want to keep the penny are either coin collectors, somehow related to the zinc industry (pennies are 97.5% zinc) or paranoid that stores will raise prices if we start rounding to the nearest nickel. Yet rounding is in force on military bases and in some foreign countries. Three and four get rounded to five; one and two get rounded to zero. Even Einstein would be hard-pressed to defeat that system. You round at the end, not item by item, and you wouldn't round at all if paying by check or credit card. Sure, Dunkin' Donuts could price a cup of coffee at 98[cents] and round up. But two cups would cost $1.96, which means rounding down. And what makes you think retailers don't already charge as much as they can?

The penny shortage points up an important money lesson. The bank's offer of 55[cents] for 50 pennies constitutes a riskless 10% return. Sometimes it's the deal right in front of you that makes the most sense. Your 401(k) plan is one of those. Contribute enough to get the full company match. Of course, most investments require thought. And we'd have more time for that if we could just get rid of all those pennies. That's my 2[cents].

See time.com for more on pennies. Dan appears on CNNfn Tuesdays at 12:45 p.m. E.T. and BNN radio Mondays at 5:40 p.m. E.T.