|Cash bill totals to be rounded off |
Sasha Harrinanan Thursday, February 16 2017
This country’s supply of new one cent coins, kept at the Central Bank, are expected to be used up by as early as April, leaving the bank with a relatively short window in which to phase in cash rounding rules as the one cent is phased out of circulation.
This was revealed by the Central Bank’s Manager of Banking Operations, Sharon Villafana, on Tuesday in response to Business Day’s question about the bank’s outreach programme for merchants.
“At the present rate of usage from the commercial banks, we see our present stocks lasting us until into April. We are envisioning not ordering any more coins after that and we hope to have reached out sufficiently (by then) to the stakeholders, to be able to introduce those rounding guidelines as the one cent coin is phased out.” Villafana added that the bank is “still currently finalising our outreach programme but we’ve already had initial discussions with a specialised group of persons from the commercial banks; with the currency managers, to sensitise them as to where we were going in terms of the cent.” “We have several other stakeholders we have in mind to reach out to and there are several other initiatives coming on stream in terms of our redemption drive, et cetera. So, we have a lot of work to do in terms of our communication with the public going forward.” Villafana said “merchants and consumers must be comfortable and must agree in going forward with a rounding arrangement so that the debt is completely extinguished when the consumer is at the (cashier) of a retailer or other merchant.” “We have to make sure these rules give that level of certainty to the public in their cash payments. We have to make sure that the mechanisms are open and transparent, and that merchants can display some sort of evidence that they are participating in rounding, so that consumers are pre-notified that they will be subject to a rounding of their cash payments.” Villafana provided an update on the bank’s plans during the first instalment of the 2017 edition of the bank’s “Know Your Money” seminars, Main Conference Room, Level 16 of the Central Bank, Eric Williams Financial Complex, Independence Square, Port-of- Spain.
On January 22, the Central Bank announced it would stop minting one cent coins because it costs more to make than the coin’s actual monetary value.
Each cent costs 21 cents to mint and each year, the bank minted an average of 45 million 1 cent coin pieces.
The bank also plans to save money by changing the metal composition of the 5, 10 and 25 cent coins. Villafana and other senior officials from the Central Bank yesterday assured that the 5, 10 and 25 cent coins will look and feel the same. No specific date was given for these changes but the new coins are expected to be introduced at the same time that the 1 cent coin is phased out of circulation.
While the bank will stop minting one cent coins, Villafana on Tuesday assured that it remains legal tender. As such, “consumers who still have one cent pieces will still be able to pay/tender their one cent pieces, subject to the agreement, of course, of the merchant.” Breaking down how cash rounding works, Villafana said “rounding is the lesser or greater adjustments of a financial cash payment to the nearest five or ten cents.” This would apply to the total bill of cash payments only; not to the price of individual items, so merchants do not have to adjust the prices of their goods.
All “non-cash forms of payment; credit and debit cards, will still require the full value of the payment to be made.” Financial institutions may also stop “giving a one cent again, in terms of actual withdrawals over the counter,” Villafana said.
“They will be implementing rounding as well. So as the one cent becomes less and less available, we hope that more and more persons will be able to adopt these guidelines.” Villafana gave two examples of how cash rounding would work if your total bill ended in 1, 2, 6 or 7 cents and if it ended in 3, 4, 8 or 9 cents. “If you have payments ending in 1, 2, 6 or 7 cents, those will be rounded down to the nearest 5 cents.
Example, total bill of $32.37. All the cash prices for the individual items have remained the same.
We’re looking at the total now to be paid, which is $32.37. That is rounded down to $32.35.” “Similarly, when you look at payments ending in 3, 4, 8 or 9 cents, these will be rounded up to the nearest 5 cents (.05 or .10). The total of the bill is $32.38 (so) we’re rounding that bill up to $32.40.” Business Day also spoke with the Central Bank’s Senior Manager of Operations, Alister Noel, about how rounding up and down affects the bottom line of customers and merchants.
Asked if customers would end up on the losing side of rounding, Noel said everything would balance out from transaction to transaction.
“For example, if your final bill is $98.98 it would be rounded up to $99 so the merchant will look at that as revenue but on another transaction, if the total bill is $98.02, the merchant will take $98 from the customer, so they would lose two cents. In the end, whatever they receive, they would pay taxes on and on average, everything (revenues and losses from cash rounding) ‘washes away’,” Noel explained.