Arizona Embraces “Swedish Rounding” as Penny Production Ends
In a move that’s poised to lighten the load in Arizonans’ pockets, new legislation allows merchants in the state to round cash transactions to the nearest nickel. This change follows the U.S. government’s decision to cease penny production, citing the cost of manufacture as a financial loss.
Governor Katie Hobbs recently signed a bill that officially permits the practice of rounding up or down the change given to customers paying with cash. This aligns with what some retailers have already been practicing informally. The legislation was met with overwhelming support, including an emergency clause for immediate effect upon the governor’s signature.
Representative Teresa Martinez emphasized the importance of uniformity across businesses. “McDonald’s restaurants ‘will keep the penny for itself,'” she noted, while Fry’s customers benefit from a reduction in their final bill. The new law mandates that Arizona merchants adhere to “Swedish rounding,” a system named after its adoption in Sweden following the elimination of small coins.
The rounding process is straightforward: if the final amount ends in 1, 2, 6, or 7, it is rounded down; if it ends in 3, 4, 8, or 9, it is rounded up. To ensure transparency, merchants must display a sign stating, “cash transactions are rounded to the nearest five-cent increment pursuant to state law.”
The decision to eliminate pennies comes from the realization that producing them has been unprofitable. Despite attempts to reduce costs by switching from pure copper to zinc in 1982, the production cost remains at 3.7 cents per coin.
While the penny is being phased out, it is not illegal in Arizona, and businesses may continue to accept and distribute them as change. However, the state legislation does not require retailers to accept pennies, aligning with the Federal Reserve Board’s stance that no federal law obligates private businesses to accept coins or currency.
Consumer protections are built into the new law: rounding applies only to the final total, not individual items. Additionally, non-cash transactions must be processed at the exact amount, with no rounding permitted.
Despite broad legislative support, not everyone is convinced. Representative Mariana Sandoval expressed concerns that cash customers, especially those in Latino and undocumented communities, might face financial disadvantages over time due to frequent rounding up of common price points. “People work really hard for their money,” Sandoval remarked. “And even if it is one or two pennies, if you add it up over time, it could affect them.”
Senator Sally Ann Gonzales also opposed the measure, consistent with her usual stance against emergency clauses. This clause not only accelerates enactment but also removes the public’s right to challenge the legislation by referendum.
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