My youngest daughter, Sarah, who’s eight, generally greets me with a big hug when I arrive home from work, but I had no such luck when I walked in one day last week. You see, earlier in the day she had been in town, where she’d bought something for €4.99. After giving the cashier her €5, all she got back was her receipt. The fact that she wasn’t given her one cent in change was bothering her ever since.
This is a scenario Sarah and the rest of us had better get used to, because on October 28, rounding of cash transactions is being introduced to Ireland which will see the phasing out of the one and two cent coins. With rounding, when you’re buying something for cash, the total amount can be rounded up or down to the nearest 5 or 10 cent. For example: 1 and 2 will be rounded down to 0.3 and 4 will rounded up to 5; 6 and 7 will be rounded down to 5; 8 and 9 will be rounded up to 10.
There are many reasons we are introducing this and from a government perspective, the main motivation is due to the cost of producing 1c and 2c coins relative to their face value.
It costs 1.65 cent to produce a 1c coin and 1.94 cent to make a 2c coin. And since the euro was introduced, the Mint in Sandyford, Dublin has produced 2.5 billion 1c and 2c coins, which is equivalent to about 1,500 coins for every household in Ireland.
Other factors which have influenced the introduction of rounding are the increased accumulation of 1c and 2c coins in Irish households, environmental considerations and the significant handling costs dealing with 1 and 2 cent coins has on retailers, financial institutions and on the economy in general.
I don’t know about you, but at the end of the day when I empty my pockets of loose change, I tend to hold onto 10, 20 and 50 cent coins, but the 1 and 2 cent coins I don’t. I either leave them in my car or put them into one of the kids’ money boxes.
According to the Central Bank, this creates a problem and is one of the main reasons it has to produce so many coins. We are not recirculating them because we are stockpiling them at home, so shops are constantly looking for fresh supplies of them. That means more and more need to be produced, which is why – amazingly, as of June 12 this year – the Central Bank had issued 1,096,853,216, 2 cent coins and 1,384,491,236, 1 cent coins.
So will we be short-changed as a result of rounding?
It would appear not, because as far back as September 2010, when a European-wide survey was undertaken, it discovered that Irish people were among the Europeans who favoured most, the removal of 1c and 2c coins. In this survey, 89% of Irish people favoured the scrapping of the 1c coin and 73% wanted rid of the 2 cent.
Fast forward to September 2013, where a trial began in Wexford that lasted for two months, where rounding was introduced, again aimed at the removal of the 1c and 2c coin. And the results of this trial were also very clear, because 85% of consumers and 100% of retailers surveyed in Wexford believed rounding should be rolled out nationally. So, on October 28, that will come to pass.
We are not the only country to introduce this concept. In 1993 Australia melted down its old 1c coins and used them in the bronze medals given out at the Sydney Olympics in 2000.
But will rounding have an impact on the price retailers are going to charge us? Are they going to bump up prices and get an extra 1c or 2c when prices are rounded upwards? According to the National Payments Plan (NPP) whose initiative it was to bring rounding into the country in the first place, this won’t be the case because while the trial was being conducted in Wexford, they carried out, a mystery shopping exercise which showed that rounding had no inflationary effect on the price of goods.
It’s important to note that when rounding is introduced and you are at the till paying for something and the total price is €20.23 and you give €20.25 but receive no change back from the retailer, you can still ask for your 2c back, because participation in rounding is entirely voluntary for both the consumer and the retailer and they must give you back your exact change if you request it.
If you are paying by credit or debit card or even by cheque, then rounding doesn’t apply, it only applies to cash transactions.
If something costs €20.23 and you use your debit card to pay for it, then €20.23 will be debited from your account.
I have referred in this article that rounding applies to the total cost of paying for something and what I mean here is that rounding is applied to the sum total of all your purchases not just to, each individual item. If you buy three items for example, and they each cost €4.99, €20.49 and €6.13, then the sum total amounts to €31.61 which is rounded down to €31.60.
Will people get used to price rounding? I think the majority will, but I suspect my Sarah will still want her 1c or 2c back.
As she told me, “It all adds up, Daddy.”