Give back the pennies

Finally, our Canadian penny is being retired. Having served us for many years. it's been decades since it would actually buy anything. In my youth I could by a double-bubble bubble gum for 2¢. As a teenager I might buy a penny book of matches that actually cost 1¢. These days, nada.

Merchants have been given a choice by government; they can round cash purchases up, down or to the nearest nickel (non-cash purchases are still to be charged to the penny). The recommendation is to round to the nearest nickel. To an accountant, once they've gotten past the shock of not being able to receive the exact amount, rounding to the nearest nickel seems to be the fairest choice. 

This doesn't give the full picture, though. If the customer was not paying in cash, then they must be paying by debit or credit card (or very rarely by cheque). All of these options have costs to the retailer, some quite significant. Debit cards are usually the cheapest for the merchant, at perhaps 20¢ and a fixed cost. (The credit card companies are trying to change that, by issuing their own debit cards and charging a percent of sale as they do credit cards). Credit cards are charged a percentage of purchase, at one time 2% to 4% but the rates are increasing as credit card companies try to out-compete each other with cash-back and points cards. They seem free to the card-holder, but they are paid for through the fees charged to the merchants. There's no such thing as a free lunch. 

Merchants can't charge a debit or credit card customer more to cover these fees. Their vendor agreements don't permit that. It works well for the credit card companies, and not so bad for credit card users either. The fees are generally dumped into overhead by the merchants, so all of their customers pay a little bit more for the convenience of a few. Most merchants have to accept credit and debit cards, since their customers want the convenience and most or all of their competing merchants are accepting them as well. 

So, it's rare indeed that merchants have a chance to encourage customers to pay by cash (saving the merchant a bit in transaction fees). They should not pass this opportunity up. Even though the customer will save only a couple of cents on a transaction, it's a symbolic saving and one that will encourage a few more cash transactions and a few less on the credit card. This will save everyone, except the credit card companies, money.

For a merchant, this seems to be a no-brainer. By foregoing a couple of pennies on cash transactions, they will be saving much more, sometimes a few dollars, on credit card fees. Usually, of course, the pennies won't be a big influence on the cash-or-credit decision, but a few consumers will look at that two cents per transaction and see a case of beer at the end of the year. It will influence behaviour, if just a bit.

Perhaps a bigger consideration is customer satisfaction. Even though it's just pennies, many customers will be ticked off when the register says $6.38 and you're insisting they pay $6.40 . If instead they see that they're consistently paying a few pennies less, they will be your friend; they'll see that you're on their side. That can't hurt, especially if a few of your competitors are doing the same. They'll shop at the store that doesn't steal pennies from them.

So, give back the pennies. It's the right thing to do.