The Federal Reserve Bank of Richmond released a 'Speaking of the Economy' podcast episode featuring the researchers behind the widely cited $6 million rounding cost estimate. Economists Zhu Wang and Russell Wong explain why cash transaction totals are more likely to end in digits that round up than down, creating a measurable — though modest — cost to consumers. They also warn that eliminating the nickel would increase rounding costs ninefold to $56 million annually.
The Federal Reserve Bank of Richmond released "The Demise of the Penny" on its Speaking of the Economy podcast series, hosted by Tim Sablik. The episode features Zhu Wang, Vice President for Research in Financial and Payment Systems, and Russell Wong, Senior Economist — the researchers behind the widely cited Economic Brief No. 25-27 on penny rounding impacts.
Why Rounding Isn't Neutral
The central finding: cash transaction totals show an uneven distribution of final digits. Amounts are slightly more likely to end in 3, 4, 8, or 9 cents (which round up) than in 1, 2, 6, or 7 cents (which round down). This asymmetry creates a measurable cost to consumers.
Research Methodology
Wang and Wong used the Diary of Consumer Payment Choice, a Federal Reserve database containing:
- Nationally representative spending patterns
- Real cash transaction data from 2023
- Every purchase recorded by participants across random three-day assignment periods
Key Findings
- Eliminating the penny costs consumers approximately $6 million annually in aggregate rounding
- The per-transaction impact is measured in cents — small but measurable
- If nickels were also eliminated, transactions would round to the nearest dime, increasing the annual cost to approximately $56 million — a ninefold increase
Disproportionate Impact
The researchers note the rounding burden concentrates on vulnerable populations:
- Older adults who use cash more frequently
- Lower-income households with less access to digital payments
- Unbanked populations who rely heavily on cash
- Heavy cash users at small retailers
Declining Significance Over Time
The economists note that as electronic payments continue to expand, the rounding impact naturally diminishes since rounding applies only to cash transactions. The overall significance of the $6 million figure should be viewed in the context of a $30 trillion economy.
Related Publications
- Economic Brief No. 25-27: "Rounding Up: The Impact of Phasing Out the Penny"
- Econ Focus Q3 2025: "Does Phasing Out the Penny Make Cents?"