Keeping up with a blog a day is hard! Especially after happy hour. So I turn today to Jeff Turin for inspiration. Jeff, like me, is from the U.S. but now calls New Zealand home. He arrived in New Zealand with his wife and kids in 2010 and shared some of his initial blog posts with me so today I am borrowing (with permission) from Jeff.
Jeff’s blog just goes to show you how New Zealand is a ridiculously practical country.
Stop making cents
by Jeff Turin
I have a growing “I hadn’t even thought about that” file that contains interesting tidbits that I discovered about New Zealand after arrival, but hadn’t even considered pondering prior.
The New Zealand dollar has varied approximately between US $0.67 and US $0.80 in the last two years or so. Today it is at about $0.74. That would make 1 New Zealand cent worth 0.74 US cents. Except there isn’t a New Zealand cent (at least not physically).
New Zealand, like Australia, got rid of their 0.01 coins years ago. They don’t even have a 0.05 denominated currency. The smallest is 0.10 or 10 cents. This means that anything paid for with cash is rounded. If the bill ends in 0.01 to 0.04 it is rounded down, otherwise it is rounded up.
Now if payment is made with a check (cheque in NZ) or electronically (debit card, credit card, or EFTPOS* at point of sale OR on-line bill pay/funds transfer) the amount is precise to the cent.
Because transactions are rounded to the 0.10, there is also no 0.25 piece. Currency is as follows:
Coins: $0.10, $0.20, $0.50, $1, $2
Paper: $5, $10, $20, $50, $100
The smallest paper denomination is $5.
It has been well noted that it costs more to make a penny than the penny itself is worth. Additionally the cost of handling them, by banks, consumers and merchants, certainly far exceeds the significance of precision they offer. The fact that many American retailers resort to give-a-penny-take-a-penny cups is a clear indication of indifference to their value, and this practice is simply a proxy for formalized rounding.
Canada seems to be poised to drop it’s cent:
While there would be costs is changing some accounting practices and some POS software, it seems prudent for the US to consider the same.
*EFTPOS, which would apparently stand for “electronic funds transfer, point of sale”, is a debit card payment system that is ubiquitous in New Zealand. It is pronounced “ehftpahs,” which although awkward, is better than having to say the six letters individually every time you buy something. Its prevalence is partly because New Zealand is a fairly cash-oriented consumer culture. EFTPOS is used to make retail purchases, but also to pay a doctor, library fines, customs fees, etc. The EFTPOS card is swiped through a reader at the point of sale, the user chooses a linked account and enters a PIN to complete the payment.