No Penny, No Problem: How Square’s Penny Rounding Feature Helps Merchants Adjust

After more than two centuries in circulation, the U.S. penny has been retired, with the final one-cent coin minted on November 12, 2025. The decision was driven by cost: producing a penny cost roughly 3.7 cents, creating millions in annual losses. While the vast number of pennies already in circulation will remain usable, shortages have already affected small businesses. Many merchants struggled to obtain rolls of pennies, leading to exact-change policies or ad-hoc rounding at the register.

To address this shift, Square introduced a new cash rounding feature for sellers. As penny shortages increased, retailers asked for a practical way to handle cash transactions without one-cent coins. In late 2025, Square released a built-in rounding function that automatically adjusts cash totals, eliminating pennies while keeping transactions straightforward for both merchants and customers.

Square’s Cash Rounding Solution: How It Works

Square’s cash rounding feature is straightforward but powerful. For any cash sale, the final total is automatically rounded to the nearest nickel (5¢) so that no pennies are required in change. In practice, prices may be rounded up or down depending on the final digits of the amount due. For example, Square’s system follows a symmetric rounding rule (similar to the one adopted in Canada after it axed its penny in 2013):

• Totals ending in $X.01 or $X.02 are rounded down to $X.00
• Totals ending in $X.03 or $X.04 are rounded up to $X.05
• Totals ending in $X.06 or $X.07 are rounded down to $X.05
• Totals ending in $X.08 or $X.09 are rounded up to $X.10

This rounding applies only to cash transactions; electronic payments (card, mobile, etc.) are charged to the exact cents, since no physical change is required. By rounding the final amount due (after applying taxes, discounts, etc.) to the nearest 5¢, Square’s approach keeps item prices, tax calculations, and receipts intact to the cent.

The customer pays a nickel-increment total, and the register displays a nickel change. For instance, if a customer’s purchase totals $10.02, the system would ask for $10.00 in cash; if it totals $10.03, it would round up to $10.05. The goal is to remove pennies from the equation without otherwise altering the pricing structure or shortchanging anyone in a meaningful way.

Behind the scenes, Square also ensures accurate record-keeping despite the rounding. The platform’s back-end transaction reporting continues to log the exact sale amounts and taxes as if pennies still existed, so merchants can report taxes on the true totals.

In other words, even if a merchant collects only $10.00 in cash for a $10.02 sale, Square will still record the 2¢ difference internally. This allows businesses to report the total dollar amount of tax collected and manage their accounts correctly, while the customer-facing side is neatly rounded.

It’s a technical fix that maintains financial accuracy and compliance – no pennies required. Square has emphasized that this is something their system “has always done” – handling sales tax reporting precisely – and the new rounding feature doesn’t change any of those fundamentals.

Square began piloting this cash rounding functionality with select U.S. sellers in December 2025. The timing was intentional: the penny’s end came right before the busy holiday shopping season, when stores often face long lines and hurried customers. By rolling out the feature ahead of the holidays, Square aimed to ensure a smooth shopping season for cash transactions despite the coin upheaval.

Notably, Square wasn’t entering completely uncharted territory with this move. The company had already implemented similar cash-rounding in other countries – Australia stopped using 1¢ and 2¢ coins back in 1992, and Canada retired its penny in 2013 – so Square was able to leverage that experience to deploy a U.S. solution quickly. The technology and know-how were already in Square’s toolkit; it was just a matter of tailoring it to U.S. currency and deploying it at the right moment.

Willem Avé, Square’s Global Head of Product, noted that while removing the penny may appear minor, it has a real effect on daily business operations. He pointed out that large retailers have the resources to plan and adapt quickly, while millions of neighborhood businesses still need practical ways to keep transactions running smoothly. He emphasized that Square’s role is to support those businesses so they can continue serving customers without disruption.

The rounding feature is important because it levels the playing field for small merchants navigating the penny phase-out. Big-box retailers and national chains may have the resources to swiftly reprogram systems or adopt new cash-handling policies. For a corner cafe or a family-run shop, however, figuring out how to handle a penny shortage can be a real challenge. Square’s solution basically hands them a ready-made fix – automatically applied through the point-of-sale – so they don’t have to develop a policy from scratch or worry about unfair outcomes.

Why the End of the Penny Was a Problem for Merchants

For context, cash remains an important payment method for many businesses, even in an increasingly digital age. According to Square, roughly 19% of all Square transactions in the U.S. are paid in cash, and in certain sectors, such as food and beverage, cash usage is highest. In fact, each week, an estimated 16.7 million pennies were changing hands in Square-facilitated purchases before the penny’s retirement.

That’s a lot of copper coins suddenly in limbo. When the U.S. Mint halted penny production, those coins didn’t instantly vanish – but they did become a finite (and quickly diminishing) resource. Banks began distributing fewer pennies, businesses started running low, and it wasn’t guaranteed that customers would bring in enough pennies to make change. This situation led to real headaches: stores unable to break a dollar properly, cash drawers skewed at day’s end, and frustrated buyers and sellers alike.

Small businesses were feeling the squeeze most acutely. By late 2025, some shops put up pleas or policies to cope. Signs appeared at registers saying “exact change only”, effectively urging customers to either fork over the exact pennies or use a non-cash method.

Major retailers and even government offices got in on this; for example, some McDonald’s locations and the Chicago city finance office notified customers they might not get pennies in change anymore.

Others adopted ad hoc rounding: some stores rounded down in the customer’s favor (essentially absorbing the 1–4 cent difference themselves), while others rounded up and asked the customer to pay a few cents more. The approaches varied: Aldi and Goodwill rounded down, while Whole Foods rounded up in at least one area, which only added to the confusion.

From a merchant’s perspective, neither option was ideal. If you always round down, you risk a small loss on each transaction (which can add up over hundreds of sales). If you round up, you risk irritating customers or appearing to nickel-and-dime them (quite literally).

There were also accounting questions and legal gray areas: How should sales tax be reported when the amount charged differs slightly? Could consistent rounding up be considered price gouging, or might it unfairly affect cash-reliant customers? Even organizations like the National Conference of State Legislatures (NCSL) began urging the adoption of standardized rules to prevent businesses from facing lawsuits or audits for improvised rounding practices.

This is the problem Square’s penny-rounding feature was designed to solve. Baking a uniform rounding policy directly into the point-of-sale system removes ambiguity. Every Square seller using the feature follows the same fair rounding rule (nearest nickel), and it’s applied consistently for every cash payer. Back-end accuracy means the books still balance and taxes are remitted correctly, avoiding the accounting pitfalls that worried some retailers.

Square’s solution essentially standardizes what could have been a chaotic, store-by-store experiment. As a result, a small change – losing the lowest-denomination coin – doesn’t spiral into big operational disruptions.

Smoother Sales and Shorter Lines (Pros of Rounding for Merchants)

For many small merchants, eliminating pennies may come as a relief once the transition is complete. One immediate benefit is time saved at the register. Rummaging for pennies or waiting for a customer to check their pockets for an extra cent or two can noticeably slow down checkout. Over countless transactions, those seconds add up. Transactions are a bit smoother when you have less change to count out, and even a tiny time savings per customer can reduce overall wait times when you serve hundreds of people a day.

During busy periods (think holiday shopping rushes or lunch-hour crowds), not accepting pennies can help keep lines moving more efficiently. Small businesses often have limited staff, and anything that speeds up each sale improves customer flow and satisfaction. Square explicitly highlighted this advantage, suggesting that by minimizing the need for pennies, the rounding feature “reduces friction” for cash-paying customers and keeps lines moving. In other words, it eliminates awkward pauses for penny-finding and allows both the customer and the cashier to get on with their day more quickly.

Merchants also see a simplification in cash handling and management. No pennies means one less coin type to stock, count, and roll. Cash drawers can be a little less cluttered (expect to stock more nickels and dimes; at least those are useful in multiple scenarios, unlike pennies, which primarily serve to make change).

Many business owners quietly welcome the penny’s demise because it removes a long-standing source of frustration – pennies often got lost, spilled, or ignored, and employees had to tediously count heaps of nearly worthless coins at closing time. Dropping pennies streamlines end-of-day reconciliation and can reduce the number of bank trips to load coin rolls.

There’s also an argument that ditching pennies could slightly streamline pricing for businesses. While merchants can still set prices at $4.99 or $9.97 if they prefer, they might also choose to simplify to nickel increments (e.g., $4.95 or $10.00) for a cleaner, penny-free pricing structure. Some cash-only businesses have already started doing this – opting for prices that round neatly – which can make cash transactions more straightforward.

Square’s data from Canada and Australia likely gave them confidence that U.S. sellers could adapt without alienating customers. After all, Canada eliminated pennies years ago, and daily commerce carried on with little trouble. In both Canada and Australia, people quickly adapted to nickel-rounding, and economists found no significant negative effects on consumers or businesses. In fact, customers in those countries largely appreciate avoiding nuisance coins, and businesses save time by handling less loose change.

Another pro is that Square’s approach is fair and symmetric – it doesn’t always round in favor of the store or the customer, but rather does whichever is mathematically nearest. This tends to even out over time. Some transactions are rounded up by a few cents; others are rounded down. Statistically, neither side consistently loses. Across many sales, some transactions are rounded up, others are rounded down, so there will be no net burden on consumers or businesses.

In other words, the pennies even out. This should allay shoppers’ fears that they’ll always pay a “rounding tax” and reassure merchants that they won’t lose revenue by rounding down. Square’s system ensures neutrality and transparency – receipts can even show a “rounding adjustment” line, so everyone knows what was done. With trust and consistency established, most folks won’t miss the penny after all.

Potential Drawbacks and Adjustments (Cons and Concerns)

No change (pardon the pun) comes without concerns. Some small businesses and shoppers worry about pricing and fairness once pennies are gone.

One issue is psychological pricing. Retailers love prices ending in .99 because they feel cheaper. If a $4.99 cash purchase often rounds to $5.00, shoppers may start treating $4.99 as “basically $5.” Some call this the “death of .99 pricing.” Over time, more prices may shift to endings like .95 or .00, which can feel less like a bargain.

Another concern is fairness for cash users, especially low-income customers who rely on cash more often. If stores rounded up too often, it would amount to a small fee for the people least able to absorb it. Square avoids this by rounding to the nearest nickel (up or down), not always up. In practice, most customers don’t mind rounding, and many don’t notice, especially when stores explain it clearly.

There’s also a learning curve. Some people still expect pennies in change or get confused by a rounded total. Simple signage and a short script help: “We don’t use pennies anymore, so cash totals round to the nearest nickel.” A few retailers may choose to round in the customer’s favor to protect goodwill, but as people adjust, that usually isn’t needed.

Finally, there are accounting and compliance details. Sales tax is still owed on the exact amount before rounding, so records must reflect that. Programs like SNAP also require equal treatment across payment types, which limits special rounding exceptions. Square’s approach, calculating tax first, then rounding the final cash total, helps ensure consistent, compliant reporting.

Lessons from a Penny-Free World: Canada, Australia, and Beyond

The U.S. may be late to drop the penny, but it has plenty of models to copy.

Canada phased out its penny in 2012-2013, and the change was smooth. Businesses used a rounding system much like Square’s: totals ending in .01-.02 round down, .03–.04 round up, and so on. Over the years, Canada has found no meaningful effect on inflation or consumer spending. Any “rounding tax” was tiny, just a few dollars per person per year at most, and retailers saw only modest gains. Canadians continued to use 99-cent shelf prices, while accepting that cash totals might be a nickel higher or lower.

Australia dropped its 1¢ and 2¢ coins in 1992, and rounding to the nearest 5¢ has been routine ever since. New Zealand followed (1c/2c in 1990, and later the 5c coin in 2006). Many European countries have also moved away from small-denomination coins, often using register rounding to the nearest €0.05, even when 1- and 2-cent coins remain in circulation.

The pattern is consistent: economies don’t break, shoppers don’t revolt, and retail adapts. The main changes are practical, lighter coin jars and simpler cash handling.

For U.S. merchants, these examples should be reassuring. The penny survived in the U.S. largely due to habit and symbolism, but rising production costs and everyday hassles finally prompted change. Now, tools like Square’s cash-rounding feature help businesses make the transition without awkward math or inconsistent treatment.

Pennies also remain legal tender, so people can still spend them. But as they stop circulating, lost, saved, or not returned through banks, their use will fade. The debate has shifted from “Should we get rid of the penny?” to “How do we operate without it?” and standardized rounding is the practical answer.

Conclusion

The end of the penny is a small but symbolic shift in how America handles money. For small businesses, it could have been stressful. With Square’s cash rounding, the transition is smoother. “No penny, no problem” is quickly becoming true at the register.

Square’s rounding feature shows how fintech can adapt to real-world currency changes. It bridges old pricing habits with new cash-handling rules. Sellers save time (less coin counting and fewer bank runs) and can reassure customers they aren’t being shorted. The adjustment is automatic, bi-directional, and clearly shown on receipts. Over time, many shoppers and merchants may no longer notice pennies.

Change can be annoying, but it can also be useful. Other countries have shown that removing low-value coins can streamline commerce without hurting consumers. The U.S. is now following that path, and tools like Square’s feature reduce the friction. For small businesses, the ones most likely to feel the impact, this removes a major hassle.

Retiring the penny should save money, simplify transactions, and speed up checkout. Square’s approach helps merchants keep operating normally while the system adjusts. So if you buy a coffee with cash and get a nickel back instead of four pennies, it’s not a mistake, it’s the new normal, working the way it’s meant to.

Frequently Asked Questions

What is Square’s cash rounding feature?

It automatically rounds cash totals to the nearest 5¢, so you don’t need pennies. Card and digital payments still charge to the exact cent

How does the rounding work?

Square uses “nearest nickel” rounding: .01–.02 down, .03–.04 up, .06–.07 down, .08–.09 up. So $10.02 becomes $10.00, and $10.03 becomes $10.05 (cash only)

Will customers pay more overall?

Not consistently. Some transactions round up, others round down, and it tends to balance out over time. Receipts can show the rounding adjustment to ensure clarity and transparency.

Does this change sales tax reporting?

No, tax is still calculated on the exact amount before rounding. Square records the true totals in the backend, so reports stay accurate.

Do merchants have to change sticker prices, such as $9.99?

No. You can keep the $0.99 price on the shelf. Only the final cash total is rounded, so the pricing strategy doesn’t have to change overnight.