Cash rounding or Swedish rounding (New Zealand English) occurs when the minimum unit of account is smaller than the lowest denomination of currency. The amount payable for a cash transaction is rounded to the nearest multiple of the minimum currency unit, whereas transactions paid in other ways are not rounded (for example electronic funds transfer like credit cards, or negotiable instruments like 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.
Cash rounding was introduced in Sweden in 1972 when 1 and 2 öre coins were withdrawn from circulation; the practice is called "öresavrundning", meaning "öre rounding", and since 2010 applies to all coins less than one krona. 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 due to the 2013 elimination of the penny 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When small-value coins are withdrawn, an alternative to the implementation of cash rounding is instead to increase the minimum unit of account to the smallest remaining currency unit and round all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 It was done, for example, when the British farthing was withdrawn in 1960.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. An exception is that the amount is never rounded down to zero. 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.
Rounding with 0.05 or 5 intervals
|Argentina||Always rounded down.|
|Bosnia and Herzegovina|
|Canada||2013 onward||Penny no longer produced as of 2012. After February 4, 2013 pennies no longer distributed by banks. Electronic transactions are still completed to $0.01.|
|Chile||1 peso coins are legal but rare, prices are rounded to the nearest 5 pesos using the same system.|
|Finland||1980 onwards||1-penni coin was phased out in 1980 and the 5-penni coin in 1990. When Finland transferred to euro notes and coins in 2002, cash payments were rounded to the nearest five cents, however one- and two-cent coins remain legal tender.|
|Hong Kong||1989 to 1995|
|Republic of Ireland||2015 onwards||A National Payments Plan in April 2013 planned "to trial the use of a rounding convention in a pilot project in a mid-size Irish town", with the 1- and 2-cent coins no longer being minted while remaining legal tender. The trial in Wexford was declared successful in June 2015 and rounding to the nearest 5 cents commenced on 28 October 2015. Compliance is voluntary and retailers must make exact charging upon request. One- and two-cent coins remain legal tender.|
|Malaysia||1 sen coins are still legal tender.|
|Netherlands||1980 to 2002, 2004 onwards||The Netherlands did so under pressure from retail businesses, which claimed that dealing with 1- and 2-cent coins was too expensive. After a successful experiment in the town of Woerden in May 2004, retailers in the whole of the Netherlands have been permitted to round cash transactions to the nearest five-cent since September 2004, as was customary with the Dutch Guilder since 1980.|
|New Zealand||1990 to 2006||During that time, the 1- and 2-cent coins were no longer legal tender, but 5-cent coins were. In 2006, the 5-cent coin was no longer legal tender.|
|South Africa||2002 onwards||Rounding is done to the nearest 5-cents.|
|Sweden||1972 to 1985|
|Turkey||1 kuruş coins are still legal tender.|
|Vietnam||500 dong notes are uncommon but sometimes used. Prices are usually rounded to 1,000 dong, with small candies or pieces of chewing gum given as compensation for rounding up.|
- Prices are rounded down to the nearest multiple of 5 cents for sales ending in: 1¢ & 2¢ to 0¢; and, 6¢ & 7¢ to 5¢;
- Prices are rounded up to the nearest multiple of 5 cents for sales ending in: 3¢ & 4¢ round to 5¢; and, 8¢ & 9¢ round to 10¢
- Values ending in 0¢ or 5¢ remain unchanged.
Rounding with 0.10 intervals
This is currently used in New Zealand, which eliminated its 5 cent coin in 2006. This is also the case 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.
- round down to the nearest 10 cent value for sales ending in 1¢, 2¢, 3¢, 4¢;
- round up to the nearest 10 cent value for sales ending in 5¢,6¢, 7¢, 8¢, 9¢;
- In NZ, it is up to the business to decide if they will round 5¢ intervals up or down. The majority of retailers follow government advice and round it down.
In Sweden between 1985 and 1992, prices were rounded up for sales ending in 5 öre.
In the People's Republic of China, coins smaller than ¥0.10 are now rare though still valid. As a result, many shops simply truncate their bills down to the next ¥0.10 increment, giving the customer a discount of up to ¥0.09.
Rounding with 0.50 intervals
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:
- Sales ending in 1–24 öre round down to 0 öre.
- Sales ending in 25–49 öre round up to 50 öre.
- Sales ending in 51–74 öre round down to 50 öre.
- Sales ending in 75–99 öre round up to the next whole krona.
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.
Rounding with 1.00 intervals
The system used in Sweden since 30 September 2010 and used in Norway since 1 May 2012.
- Sales ending in 1–49 öre/øre round down to 0 öre/øre.
- Sales ending in 50–99 öre/øre round up to the next whole krona/krone.
- Stevens, Michelle (19 October 2015). "Ireland set to roll out cash rounding". FStech. Retrieved 20 October 2015.
- "How to use Cash Rounding". Lightspeed POS Support. lightspeed. Retrieved 20 October 2015.
- NZPA (31 March 2005). "Reserve Bank to withdraw 5c coin". The New Zealand Herald. Retrieved 23 October 2015.
Most retailers use a Swedish system of rounding prices up or down to the nearest 5c. ... All we would do is use the Swedish rounding system to the nearest 10c
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- "New rounding rules". Danmarks Nationalbank. Retrieved 2010-05-02.
- "Regulation relating to withdrawal of 50-öre coins as legal tender". Norges Bank. Retrieved 2011-05-09.