Yahoo Finance Is it time we eliminated the nickel from Canadian currency?
We’ve already gotten rid of the penny, how about offing the nickel while we’re at it, too?
According to one credit union, it’s not such a bad idea.
A new study released by the Quebec-based Desjardins this week is encouraging Canadians to adopt alternative denominations and eliminating the nickel in the next five years, The Huffington Post reports.
“Due to the gradual increase in the cost of living and decreased buying power of small coins, the time will come when the nickel will have to be taken out of circulation,” wrote Desjardins economist Hendrix Vachon in the study, titled "Is cash going the way of the dodo?."
Before you start any “save our nickel!” petitions, however, you should know that this isn’t the first time Desjardins has pushed the idea of moving away from the nickel. The firm concluded in a 2008 study that the nickel was on its way out, In a 2014 client note, the firm wrote after the penny’s demise: “we’ve gotten rid of something that was both useless and costly…the goal is to reduce the total number and weight of the coins that people handle and carry.”
In that same client note, Desjardins pushed for the creation of a $5 coin. Since that time, the financial institution has moved away from the idea of the higher-valued coin (due largely to the resiliency of the new polymer bills) and suggests that instead, we should be using 10 cent, 20 cent and 50 cent coins. These denominations are already being used in other countries around the world, and is the currency division being used by the European Union.
While the initial cost of eliminating the 5- and 25- cent coins and minting new 20- and 50- cent coins woudl be costly, Vachon says it would be worthwhile in the long run.
"At the end, the removal of the nickel will reduce the number of coins in circulation. But it’s true that before that, we will have to pay for the development of new coins. That cost will be paid once however, and will bring benefit on the long run," Vachon told Yahoo Canada Finance.
Desjardins’ current study found that cash is no longer being used for small transactions (likely due to the increased use of ‘tap’ payments supported by all of Canada’s major banks).
Vachon wrote that Canadians are more likely to hold on to cash, rather than actually spend it. Or, it may be used for more nefarious purposes.
“We might also assume that they [smaller bills] are used more for illicit activities, or in the underground economy,” Vachon wrote. “This is one of the reasons the $1,000 bill has not been issued in Canada since 2000.”
While Canada isn’t likely to go completely cashless in the next 10 to 20 years — how are you going to pay for things if the power goes out? — the Desjardins study suggests that an increase in electronic payments means it’s time to re-evaluate the denominations in our currency.
