Rounding rule to start to apply to payments in cash from 2025

TALLINN - From Jan. 1, 2025, the final price of a basket of shopping paid for in cash in a physical point of sale in Estonia will be rounded to the nearest five cents.

The change to the law will mean that shopkeepers no longer have to give out one and two-cent coins as change, meaning that there will no longer be as much need in Estonia to circulate those coins, which people use for paying with only extremely rarely. The law will require all merchants accepting cash to round the final price of the basket of shopping. There will be no rounding for payments made with a bank card, the Bank of Estonia said in a press release.

From the new year, Estonia will become the seventh country in the euro area to introduce the rounding rule, which is intended to reduce the number of one and two-cent coins in circulation. The central bank has previously issued an average of two truckloads of one and two-cent coins into circulation each year. Most of these small coins never make it back to the central bank because although shops need them for giving change, customers pay with them only very rarely. As it no longer makes sense to use these coins, the final price of a basket of shopping paid for in cash in a shop will be rounded to the nearest five cents from the new year.

When paying in cash in a shop next year, people must remember that the merchant is obliged to round the final price to the nearest five cents. The amount people have to pay can be rounded upwards or downwards by one or two cents. The prices of individual goods and services will not be rounded, and so the rounding rule will not cause inflation to rise at all. If paying by different means, such as a bank card, smart device, gift card or transfer, the price will be charged to the exact cent and will not be rounded. This means the shopper can decide whether or not rounding is done, and it is not the decision of the shopkeeper. If the customer wants to pay using one and two-cent coins, this will be perfectly possible, as those coins will remain legal tender in Estonia and shops will still have to accept all euro cent coins whatever their value. The law requires shopkeepers to accept up to 50 euro coins at any one go, regardless of their value.

The rounding rule will be obligatory for all merchants from Jan. 1 and must be applied when goods and services are sold to customers for cash. This will primarily mean making changes to the cash till system and the financial software so that it rounds the final total of the basket of shopping to the nearest five cents. It is also important to inform customers about the rounding before they pay for their purchase, so that they can decide whether they want to pay in cash or by bank card.

The introduction of the rounding rule will mean that shopkeepers no longer need to hold one and two-cent coins to give out as change, as the smallest amount of change they will need to give will be five cents from the start of next year. This will save them the cost of handling those small coins, and make it more convenient and simpler to accept payments in cash. One and two-cent coins will remain legal tender after the rounding rule has been introduced, and customers who want to will be able to use them for paying with.

Shopkeepers will exceptionally be able to give out one and two-cent coins in change if they do not have enough other small coins in their cash till. This will only happen for a time, because the number of one and two-cent coins in circulation will start to fall after the rule is introduced. The law will continue to require shopkeepers to accept up to 50 euro coins at any one go, regardless of their value.

The six countries in the euro area that already apply the rounding rule are Finland, the Netherlands, Ireland, Italy, Belgium and Slovakia. Lithuania will join Estonia in introducing the rounding rule next year, but will do so from May 2025.

The Bank of Estonia has worked with the Estonian Traders Association and the Ministry of Finance to make preparations so that the change will happen smoothly for people and for businesses. Guidelines and information materials for traders have been issued, companies working with cash till software have been informed directly, and information has been sent out to associations of merchants, local governments, and other representative organizations.