Isn't that fee only for anything smaller than 0.01?

Depends on the client installed. usually anything below 0.01btc will get a min charge of 0.01 resulting in that tiny amount being wiped out.

The only way to avoidvthis is to use a central service that allows this.

? My transactions with 0.0005 fee  processed fine  just now.

Due to some bug in GUI of client. I am never saw the field for fee. Its cut off. I am always set fee through bitcoin.conf. It`s not a big problem, so i am never report it.
EDIT: But i never sent really small transactions, my lowest is 0.1 btc. So maybe i am not much of help.

Bitcoin isn't suited for transactions worth less than about one US penny-- it wasn't designed or intended for lots of micro-transactions.

That said, building a micro-transaction system on top of bitcoin is certainly possibly (see witcoin or youtipit for some examples-- or see the way the Bitcoin Faucet is handling payments recently, bundling up lots of small transactions to send them without paying outrageous fees).

That is a good number for micro-transactions for now.  That works out to be less then half a penny.  Compared to alternative financial systems that is an amazingly low number.  Remember, you could send .02 BTC for free which is about 16 cents.

This.  Install the release candidate for 0.3.22 if you can't wait for the release.

That new lower fee is what, 50,000 satoshis (the smallest unit last decimal)?

It just makes sense that a heavyweight international reserve currency with massive security infrastructure, 24/7 watchdogs all over the world and so on is likely to work out more expensive than a throwaway to change jars tip jars buskers local liquor store alc-ies small-change currency suitable for penny-ante poker penny stock games and viewing internet porn one image at a time.

Do you really go to all the trouble of ATM to change-machine and back to busker instead of just dropping one of your smallest bills/notes? I thought usually one either has change or does not and if no oh well hit you next time I come by maybe if I have change then.

If Canadian Tire is actually on to something with its loyalty system, which it might not be since it doesn't seem to get copied a lot, you might end up with lots and lots of different change: three or four different types of air miles, a bunch of pepsicokepalmolivecolgate coupons, some nickels and dimes and pennies, various different colours of poker chips and game gold silver copper and platinum and so on ad nauseum.

A busker who will take those off your hands could be a weight off your mind and an excuse to tell the kids no more candy today see I just gave all my change to this nice busker.

The point of the $0.02 command in my IRC bots is so you might end up having BitNickel whether you want it or not, simply because someone who did adopt them chose to put some in your IRC nick's account using that command.

Coins for tips should be able to work fine that way for people who are themselves worth tipping and others might not feel much desire to tip anyone anyway.

-MarkM- (Assuming the busker doesn't simply make change for you themself, of course, which does sound simpler. )

P.S. New in town? Got any towncoin, Sir? Only five mikes each and the buskers are out today, You'll not want to stalk past them all without showing a little appreciation will you, Sir?

P.P.S. Oh not a problem, my travel agent told me about your town's towncoin and made sure I brought some. How many do buskers customarily get, anyway?