Cash rounding

Cash rounding or Swedish rounding (New Zealand English) occurs when the minimum unit of account is smaller than the lowest physical denomination of currency. The amount payable for a cash transaction is rounded to the nearest multiple of the minimum currency unit available, whereas transactions paid in other ways are not rounded (for example electronic funds transfer such as with payment cards, or negotiable instruments such as cheques). Cash rounding typically occurs when low-denomination coins are removed from circulation owing to inflation. Cash rounding may be a compulsory legal requirement if such coins are no longer legal tender, or a voluntary practice where they remain in circulation but are scarce or impractical.
Cash rounding ("öre rounding", öresavrundning) was introduced in Sweden in 1972 when 1 and 2 öre coins were withdrawn from circulation, and has continued to be applied at incremental levels as smaller denomination coins have been withdrawn. The current level of cash rounding in Sweden is to the closest whole krona, after the 50 öre coin was withdrawn in 2010. The Reserve Bank of New Zealand used the name "Swedish rounding" in 1990 when withdrawing their 1- and 2-cent coins. In Canada, cash rounding to the nearest nickel (5 cents) due to the elimination of the penny in 2013 is also called penny rounding.
When small-value coins are withdrawn, an alternative to the implementation of cash rounding is instead to increase the minimum unit of account to the smallest remaining currency unit and to round all prices and bank accounts to this value. Whereas cash rounding is an ongoing process, this alternative is a one-time conversion. It was done, for example, when the British farthing was withdrawn in 1960.
Rounding is applied to the total of a bill, not to the line items on the bill. Typically, the total is rounded to the nearest multiple of the smallest denomination, which may be higher or lower than the unrounded total. Where the unrounded total is an equal distance from two multiples, practice varies: merchants may be required or encouraged to round down rather than up, giving the benefit to the buyer. An equal distance is possible when the rounding interval is an even number.
The introduction of cash rounding is typically accompanied by publicity campaigns for awareness among both consumers and implementing merchants; smaller campaigns will accompany the extension of an existing rounding system to a higher rounding interval.
This is currently used in New Zealand, which eliminated its 5-cent coin in 2006, and in Hong Kong, which eliminated its 5-cent coin in 1989 and 1 cent note in 1995. In practice only utility bills, petrol stations and banks still keep the cent.
All other businesses use only ten-cent intervals as follows:
In Sweden between 1985 and 1992, prices were rounded up for sales ending in 5 öre.
In China, coins smaller than 1 jiao (10 fen or ¥0.10) are now rare though still valid. As a result, many shops simply truncate their bills down to the next 1-jiao increment, giving the customer a discount of up to 9 fen; however, many other stores round sales to the nearest jiao values, and 5 fen is usually rounded up.
In Chile, the 1 and 5 peso coins were withdrawn on 1 November 2017 (but still legal tender), and rounding for cash transactions was implemented, prices are rounded down to the nearest 10 pesos if the value is $1–5, and rounded up if the value is $6–9. Most prices are already rounded to the nearest 10 pesos, and many small businesses round to 50 or 100 pesos due to the low value and availability of lower denominations.
In Israel, 5 agorot coins were removed from circulation on 1 January 2008, after 1 agora coins had already been removed in 1991. Transaction amounts can still be specified to the nearest agora. Cash purchase totals are rounded to the nearest 10 agorot. A 5 agorot total is rounded up to 10 agorot.
In South Korea, the 1- and 5-won coins are not used (but still legal tender). Prices are generally rounded to the nearest 10 won (though generally to the nearest 50 or 100 won in many stores apart from supermarkets), and cash payments are rounded to the same.
In Ukraine, from 1 October 2019, the 1-, 2- and 5-kopiyka coins were demonetized and withdrawn from circulation, with the 25-kopiyok coin softly withdrawn. From then all cash payments would be rounded to the nearest 10 kopiyok.
In Peru, the 1-céntimo coin was discontinued in 2011, and the 5-céntimo followed in 2019. Prices are now rounded to the nearest 10 céntimos.
In South Africa, the production of 1 and 2-cent coins was discontinued in 2002, followed by 5-cent coins in 2012, primarily due to inflation having devalued them, but they remain legal tender. Prices are nowadays rounded to the nearest 10 cents.
The system used in Denmark from 1989 to 2008 was the following:
This system is used in the United Arab Emirates and Qatar, as the smallest coin in general circulation is the 25-fils/dirham coin, with the 1-, 5- and 10-fils/dirham coins being rarely encountered due to their negligible value.
The system used in Sweden from 1992 to 2010, in Norway from 1993 to 2012, and in Denmark since 1 October 2008 is the following:
In practice, the proportion of transactions rounded upwards is greater, due to psychological pricing of items ending in 90–99 öre. Rounding is only done on the total sum of a purchase, which makes that effect smaller. In some shops, all prices are already rounded to the whole krone, so that no rounding takes place.
This system is also used in India after the 25-paisa coin and lower denominations were demonetised in 2011.
This system is also used in Nigeria since 2007, when all coins issued before 2006 were demonetised, leaving the 50 kobo coin the only circulating denomination below one naira.
The system used in Sweden since 30 September 2010 and used in Norway since 1 May 2012 when both countries withdrew their 50-öre/øre coins.
Same system is used in Czechia, after the 10, 20 and 50 hellers were withdrawn from circulation in 2003 and 2008.
This is also the system similarly used in Jamaica since 15 February 2018, when all coins smaller than one dollar were demonetised. India also uses a similar system since 2019, as the 50-paisa coin is seldom seen in circulation due to its negligible value.
In Mexico there is a trend for most supermarkets to ask customers whether to round the total to the nearest 50¢ or the whole peso to automatically donate the difference to charities. Should the customer choose the latter option, this system is used.