The St. Louis Fed published a new Page One Economics essay by economic education expert Scott A. Wolla explaining why penny production ended: each cent cost 3.69 cents to produce, cash fell to about 14% of consumer payments, and nickel rounding now settles cash totals. Distributed as a Federal Reserve classroom resource, it is the Fed system's most comprehensive educational treatment of the transition to date.
The Federal Reserve Bank of St. Louis published "When a Penny Costs More Than a Penny: The Economics Behind Ending the Cent" in its Page One Economics series — the Fed's flagship economic-education publication — authored by Scott A. Wolla. The May 2026 essay is also distributed through Federal Reserve Education as a classroom reading assignment, extending its reach into high school and college economics courses.
Negative Seigniorage: The Core Problem
The essay centers on the economics of seigniorage — the difference between a coin's face value and its production cost. By FY2024, each one-cent coin cost 3.69 cents to produce, meaning the government lost money on every penny struck. The U.S. Mint reported an $85.3 million loss on cent production in FY2024 alone, and Treasury projects roughly $56 million in annual savings from ending production.
Declining Cash Use
The second pillar of the argument is the penny's shrinking role in commerce. Citing the Federal Reserve's Diary of Consumer Payment Choice, the essay notes cash accounted for only about 14% of consumer payments in 2024 — the penny's transactional purpose had largely evaporated even before production ceased.
How Rounding Works
The essay walks students through the now-familiar mechanics of cash rounding:
- Totals ending in 1, 2, 6, or 7 cents round down to the nearest nickel
- Totals ending in 3, 4, 8, or 9 cents round up
- Cash totals of exactly 1-2 cents round up to 5 cents
- Electronic payments still settle to the exact cent
Why It Matters
As an educational explainer six months after the final circulating cent was struck, the essay marks the transition's arrival in the economics curriculum — the penny's end is now being taught as a case study in production costs, seigniorage, and currency policy. It is a distinct, deeper companion to the St. Louis Fed's January Open Vault explainer already covered on this page.