Use the penny to start a retail revolution

For many, the penny is nothing more than an annoyance. For others it represents a treasured part of our history and culture that needs to be preserved.

And for more than 10 years there has been a debate brewing concerning whether the penny should be taken out of circulation.

As of 2008, it cost 1.7 cents to make each penny. Pennies are now mostly comprised of zinc and the cost of raw materials alone amounts to more than the face value of a penny.

Each year the government mints 7 billion pennies - half of all coins minted - for a total cost of approximately $120 million. Unfortunately most pennies are either thrown away or stored in jars.

The government calculates that $10.5 billion of pennies that have been issued are not in circulation. In fact, Coinstar estimates that the average household has $93.75 of pennies socked away.

There have been several attempts to take the penny out of circulation. Opponents argue that pennies are vital to charities that collect loose change.

In addition, there is quite a bit of sentiment for the penny, especially since it commemorates the presidency of Abe Lincoln.

But never in U.S. history has a coin in circulation had such minimal purchasing power.

In 1857 when the halfpenny was taken out of circulation, it had the equivalent purchasing power of over 11 cents today. That transition was accomplished without any detrimental effect on commerce - even though society at that time mostly dealt in cash transactions.

Let's face it, in modern society the only real use of a penny is in retail transactions.

In fact, much of retail is transacted without cash. Those transactions are consummated with checks - another pet peeve but better saved for another day - credit cards, debit cards, gift cards and other forms of payments.

Other cash transactions of less than a dollar, such as tolls, vending machines and parking meters, don't permit the use of pennies.

There are some who advocate adjusting prices so that they all end in a 5 or a 0. This tactic, however, would be a futile effort.

With sales tax rates not only varying from state to state but from community to community, it is virtually impossible to adjust pricing to ensure the after-tax result to be an even nickel.

Leaving little cups with pennies next to registers hasn't proven efficient. Walgreens estimates that the use of pennies adds approximately two to two and a half seconds to every transaction.

Some smaller retailers have taken to rounding down to the nearest nickel as a labor saving measure. They absorb the small loss of profit as a prudent expenditure for the good will generated with their customers.

Nonetheless, this policy will never work for the large scale retail organization.

Former U.S. Rep. Jim Kolbe of Arizona tried to solve this problem with two pieces of legislation, in 2002 and 2006, that required mandatory rounding. His bills also included segments requiring the issuance of commemorative currency, but they never got any traction.

It's now time for a retail revolution. Retailers can accomplish what Rep. Kolbe could never get through Congress.

By rounding only those cash transactions that do not end in 5 or 0, retailers can effectively take the penny out of circulation.

Here's how it works.

For cash transactions that end in 1, 2, 6 or 7, the transaction is rounded down to the nearest nickel. For cash transactions that end in 3, 4, 8 or 9, the transaction is rounded up to the nearest nickel.

This policy will have no effect on non-cash transactions such as credit and debit card purchases.

It sounds so simple, but it would be extremely effective without requiring an act of Congress.

On each transaction, a very small gain would be realized by either the consumer or the retailer. Over the long term and over a large number of transactions, the gains and losses will average out fairly evenly.

The possibility does exist for the individual experience of a person or retailer to have skewed results and not have transactions even out over time. However, the value of a penny is so small in today's economy that the likelihood of rounding having a significant impact on any individual or retailer is virtually nil.

Having fewer coins to deal with will lower costs for retailers. In addition, it will reduce the amount of time that every consumer spends on line waiting to pay for their purchase.

The time is right to make this happen. By retailers adopting rounding, we can solve a financial and emotional issue without the need to take the penny out of circulation.