In the spring of this year, a bill was approved, which establishes a rounding rule for cash payments in shops, and from January 1, 2025, 1- and 2-cent coins will no longer be returned as change.
This means that stores will begin to mathematically round the final amount of the shopping cart to the nearest 5 cents when paying with cash at the checkout. According to the rounding rule, the purchase amount that ends with 1, 2, 6 or 7 euro cents is rounded down. An amount that ends with 3, 4, 8 or 9 euro cents upwards. The final amount of the shopping cart is rounded, not each product separately.
However, this change does not mean that you can no longer pay in stores with 1- and 2-cents – all currencies are official means of payment in the euro area, and it is still possible to pay for purchases with them. To date, six more euro area countries have introduced the rounding rule – Finland, the Netherlands, Ireland, Belgium, Italy and Slovakia. The last decision to abandon small cents was made by Lithuania, where this change will enter into force on May 1, 2025.
How does the rounding rule affect merchants?
The introduction of the rounding rule makes settling with cash faster and easier, and in the long run the costs associated with coin handling will also decrease. However, the implemented change also requires certain one-time efforts from merchants. For example, there may be one-time costs in the form of changes to cash register systems and financial software. A lot depends on the software in use here and the software partner/provider, but probably the change that takes effect will not require large development resources. It is definitely worthwhile to be ready and to find out in time whether or what steps are necessary to be ready on January 1.
Notifying customers should also be considered. In the case of cash payments made at a physical point of sale, the customer must be provided with information about rounding off the final price of the goods or services in writing and in a clearly understandable way, e.g. on the wall or screen of the point of sale. You should also be prepared so that the customer service representatives are able to explain the situation to customers for whom the change comes as a surprise. At this point, it is possible to get more information from the website of Eesti Pank, where there is more detailed information and explanations about the change.
The rounding rule only applies to cash payments – nothing changes with a bank card or digital wallet, and the final amount of the shopping cart remains the same. Based on the data of the 1st quarter of 2024, there are still small businesses in Estonia that allow their customers to pay for goods/services only in cash. The share of such companies is about 2% and they are mostly active in the field of beauty services, vehicle repair or home and household work. As a comparison, it can be stated that the share of such companies in Latvia is almost 9% and in Lithuania 4%. From the point of view of merchants, they should be ready to offer the customer an alternative way to pay for goods/services in addition to cash payment. In certain cases, when paying with cash, the amount in the shopping cart may be higher than, for example, when paying by card, and the customer may therefore prefer card payment.
Riho Treumuth
SEB business segment sales manager
2024-11-06 08:28:00
#year #rounding #rule #effect #paying #cash
**Interview with Financial Expert, Maria Horowitz, on Cash Rounding Implementation**
**Editor:** Welcome, Maria! Thank you for joining us today to discuss the new cash rounding rules set to take effect in January 2025. Can you start by explaining what this rounding rule entails?
**Maria Horowitz:** Thank you for having me! The cash rounding rule is quite straightforward. When customers pay in cash, the amount due will be rounded to the nearest 5 cents. Specifically, if the total ends in 1 or 2 cents, it will round down; if it ends in 3, 4, 8, or 9 cents, it will round up. So, the final amount is simplified, making cash transactions quicker at the register.
**Editor:** That’s an interesting change. What motivated lawmakers to implement this rounding rule?
**Maria Horowitz:** The main goal is to enhance efficiency in cash transactions and reduce the costs associated with handling small change. With 1- and 2-cent coins being phased out, it’s about streamlining operations for both consumers and merchants. Countries like Finland and the Netherlands have already seen success with similar measures.
**Editor:** Speaking of merchants, how are they expected to adapt to this new system?
**Maria Horowitz:** Merchants will need to make some adjustments, particularly regarding their cash register systems and financial software. While many may not require extensive changes, it’s essential for businesses to evaluate their current setup and consult with their software providers to ensure compliance and operational efficiency.
**Editor:** Are there any concerns from businesses regarding this rule?
**Maria Horowitz:** There are always concerns when implementing regulatory changes. Some business owners worry about the initial costs of updating their systems or the confusion that might arise among customers who are used to receiving 1- and 2-cent coins. However, most agree that the long-term benefits, such as reduced handling costs and quicker cash transactions, are worth the effort.
**Editor:** And what about shoppers? How will they need to adjust to this rounding rule?
**Maria Horowitz:** Shoppers can still use 1- and 2-cent coins, but they should be prepared for transactions to be rounded. It’s important for them to understand that this change aims to simplify the payment process and not eliminate cash payments entirely.
**Editor:** Thank you, Maria, for shedding light on such an important topic. Do you have any final thoughts?
**Maria Horowitz:** Just that adapting to change can be challenging, but if managed well, this rounding rule could provide a more streamlined and efficient cash payment system across the euro area. I encourage both merchants and consumers to remain informed as we approach 2025. Thank you!
**Editor:** Thank you for joining us today, Maria, and for sharing your insights on cash rounding!