Is not accepting
cash legal?

Magnified dollar bigger

It had to happen sooner or later. “No cash accepted” signs are popping up.

Not long ago, CBS News Moneywatch reported that …

… increasing numbers of restaurants and retailers are now snubbing the lowly dollar bill.

Some merchants such as SweetGreen, a salad chain, refuse to open their registers for cash, telling customers they can pay only with mobile payments or cards. With some newer vending machines, only a card or mobile wallet will get that cold Coca-Cola to roll down the chute.

For many merchants, the benefits of accepting only plastics and digital payment more than compensate for interchange fees. No cash on hand means no worries about holdups, short change artists, pilfering employees, or opportunists grabbing cash from an open till. It makes tracking inventory a snap. It speeds transactions, since cashiers needn’t take time to count out change. It also alleviates the problem of employees who can’t figure out how to count out change, a solid merchant benefit even if it doesn’t speak well for the rising generation’s math skills.

But … is not accepting cash legal?

Since every U.S. bill says, “This note is legal tender for all debts, private and public,” one might ask if it’s legal for an establishment not to accept cash. Apparently many indeed do ask, as evidenced by the fact that no less than the U.S. Department of the Treasury felt it necessary to weigh in on the matter:

… the Coinage Act of 1965 … states: “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.”

This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services.  [Italics added.]

As to the distinction between debt and not-debt, The Fiscal Times explained,

Let us say it is very late at night and you need gasoline for your car … until the customer has put gas into the car, the customer does not owe the station owner anything. However, if the customer is allowed to pump gasoline into the car first and then pay, the owner must accept all types of U.S. bills because the customer has a debt to pay.

The same issue arises on an airplane. If you want to buy a drink for $5, the airline doesn’t have to accept your cash as long as it requires you to pay for the drink first.

The Department of the Treasury statement further explains:

Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.

One state, Massachusetts, does say otherwise. Returning to The Fiscal Times article:

Massachusetts … actually does have a law on the books that requires all retail establishments to accept cash payments. However, at the present moment this law appears relatively unknown, the exact definition of a retail establishment is unclear, but most importantly the law specifies no penalties for breaking the law.

Don’t expect such a law on the national level, not least because even the United States government would stand to gain considerably from going cashless. According to “The Cost of Cash in the United States” by Bhaskar Chakravoti and Benjamin D. Mazotta of Tufts University’s The Fletcher School, cash costs the U.S. about $200 billion annually:

The most important cost of cash to the US government is forgone tax revenue from cash transactions. A conservative estimate yields this value to be $100 billion annually. The government also incurs cash-related expenses from the production and distribution of cash in the United States. In 2012, these costs totaled $1.2 billion.

Cash will still be around for a long time

As I have written before, cash is not likely to fully exit American commerce. As the above-cited Moneywatch piece points out,

About one out of 13 U.S. households are unbanked, which means they have don’t traditional banking accounts, such as checking or savings accounts. Such families tend to be lower-income and rely on cash to make their purchases.

Even consumers with bank accounts rely on cash at certain times. Cash comes in handy for gifts, tipping for great service, and, when needful or simply desirable, not leaving a paper or digital trail.

Ironically enough, the law seems to require banks, the very champions of plastics and digital payments, to accept cash for loan payments. But who knows? That may change. Indeed, the future these days seems to change every hour. It keeps the digital payments business exciting.

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