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 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 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Cash rounding ("öre rounding", öresavrundning) was introduced in Sweden in 1972 when 1 and 2 öre coins were withdrawn from circulation, and has continued to be applied at incremental levels as smaller denomination coins have been withdrawn. The current level of cash rounding in Sweden is to the closest whole krona, after the 50 öre coin was withdrawn in 2010.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 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When small-value coins are withdrawn, an alternative to the implementation of cash rounding is instead to increase the minimum unit of account to the smallest remaining currency unit and to round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 It was done, for example, when the British farthing was withdrawn in 1960.
Video Cash rounding
Practice
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.
Rounding with 0.05 or 5 intervals
- Prices are rounded down to the nearest multiple of 5 cents for sales ending in: 1¢ & 2¢ (rounded to 0¢); and, 6¢ & 7¢ (rounded 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 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; however, many other stores round sales to the nearest ¥0.10 values, and ¥0.05 is usually rounded up.
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.
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.
Maps Cash rounding
See also
- Mil (currency)
- Penny debate in the United States
- Take a penny, leave a penny
References
Source of article : Wikipedia
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