If Cash is King, How Can Stores Refuse to Take Your Dollars?

cash-bannedBy Jay L. Zagorsky, The Ohio State University

We’ve been talking about society’s transition to a cashless society for a long time, but it begs an important question: Can stores and other retail establishments refuse to take your dollars and cents?

As odd as it sounds, this is not hypothetical anymore as a small number of stores and industries have stopped accepting cash and allow payment only by credit card, debit card or via a smartphone app.

Sweetgreen, a high-end salad restaurant, stopped accepting cash in its New York City stores in January. A Boston restaurant near Fenway Park went cashless this past December. Most airlines stopped taking cash for in-flight purchases of food and beverages around 2010.

While the trend of smaller stores refusing to accept credit cards because of the high fees is more well-established, the opposite trend of refusing to take cash hasn’t been as well-explored. Let’s examine why they do it and if they can get away with it.

Legal tender?

Businesses claim that not accepting cash reduces the chance of stores being robbed, eliminates the temptation for employees to steal money, eliminates the time needed for workers to travel to and from the bank and even reduces expenses by dispensing with the need for bulky cash registers.

Yet eliminating cash is a huge problem for the roughly 10 million U.S. households that have no banking accounts. These “unbanked” families have no direct access to financial services like credit and debit cards. For them, it is a hardship not to use cash.

Furthermore, some customers are quite confused by the policy since the front of every piece of U.S. currency states: “This note is legal tender for all debts public and private.”

Moreover, that statement has been enshrined in federal law in various forms since the late 1800s.

So the question is, why don’t the statements on each piece of currency and the various federal laws backing that up mean that a restaurant, shop or airline has to accept paper money?

When does a Coke become a debt?

The answer might surprise you.

Stores don’t have to accept paper money. Despite the greenback’s apparent claim, the right for a store to refuse cash is supported both by the U.S. Treasury and the Federal Reserve.

There are two reasons that a business can reject cash even if it is “legal tender for all debts public and private.”

First, this statement means that the only circumstance when someone must accept the bill is when a person owes the business a debt. If no debt has been incurred, a person or business is not legally required to take U.S. currency.

Let us say it is very late at night and you need gasoline for your car. Many gas stations in the U.S. do not take large bills late at night to prevent robberies and theft. If the gas station requires customers to pay for gas before pumping it into their car, they have the legal right to refuse US$50 and $100 bills. They do not have to accept large bills because 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. Until you have drunk your beverage, you owe no debt to the airline.

There oughta be a law

The second reason is that while the statement on each piece of currency is enshrined in federal law, there’s no actual federal statute that requires companies to accept it.

As the U.S. Treasury points out:

There is, however, no federal statute mandating that a private business, a person or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.

Massachusetts is one state that 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.

Airlines taking off from Boston’s airport clearly are not retail establishments, but do parking garages in Boston that take only credit cards fall into the retail category?

The Survey of Consumer Payment Choice, an annual survey by the Boston Federal Reserve, shows that paying bills by cash is still very popular. In 2013, the latest year of data, roughly one-quarter of all payments made by individuals were still done by cash. However, the larger the payment, the lower the chance cash was involved.

What does all this mean? Cash might not be king anymore, especially for large debts.

However, cash is not dead or dying, even if some businesses wish that paper money would disappear.

Jay L. Zagorsky, Economist and Research Scientist, The Ohio State University

This article was originally published on The Conversation. Read the original article.


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35 Comments on "If Cash is King, How Can Stores Refuse to Take Your Dollars?"

  1. PERS ponzi 1st repsonders | August 5, 2016 at 1:51 am | Reply

    .
    boycott all business who require credit cards and tsa screenings.

    • Take tons of stuff to the counter first. Then walk away when they refuse your cash

    • Totally agree. The government wants to track every penny to make sure their Shylock gets his due in taxes. Never mind that most people would never dream of being a tax cheat except Democrats and thieves. ooooooops they are one and the same . Sorry

  2. Zaphod Braden | August 5, 2016 at 6:07 am | Reply

    You are paying a “FEE” for every card transaction.
    BANKERS just sit and skim ……….

  3. Stop the 10% credit card scam. Guess what folks – 8 to 17% is debt and never ends. Cut them up and send them back.

    • Actually that game can work both ways if you have discipline. I have made & saved thousands of dollars playing their game. You must have good credit & pay on time. Need a loan for say 10K? Sign up for new card with 0% interest on purchase & transfers for 18 months. Then put the card away in a drawer till paid off. If it is a transfer you pay 3% up front [not 8-17%] . After 18 months free interest if you still owe half ; do another balance transfer @ 3% for 18 months. Because the second transfer was only 5K & if you pay it off on time you have now had 10K loan for 36 months for 4.5% with no loan origination fees or qualifying. If the original charge is a purchase such as a surgery [0% on first 18 months & 3% for transfer on second 18 months] your total for 36 months is 2%.
      Also many cards right now are offering 2-5 % cash back incentives on certain purchases[ gas,wireless,office supplies,food] for a year ,no fees and some will give you cash back if you spend a certain amount within three months [example $150 cash back if you spend $500 in 3 mo]. Of course they are all hoping you will miss a payment so they can ding you or try to make you overspend but that is on you.

    • L. A. McDonough | August 6, 2016 at 12:29 pm | Reply

      Get prepaid cards we use Blue Bird (Am. Ex) from Walmart and Shell prepaid gas cards. Blue B. used on ebay also.

    • Try getting credit cards that charge interest only on unpaid balances and pay off the entire balance every month.

      Economic Management is one of the many “life skills” that should be taught in schools rather than focusing on “social (in)justice” or teaching our children how to use condoms.

  4. Tonya Parnell | August 5, 2016 at 11:49 am | Reply

    IN THE ARTICLE ABOVE, I MENTIONS A COKE. I UNDERSTAND THE GASOLINE PART; HOWEVER, ALMOST EVERYTHING ELSE IS DIFFERENT. WHEN YOU PICK UP COKES (OR SNACKS), FLIP THE TOP, TAKE A DRINK BEFORE GOING TO THE CHECK STAND, SAME WAS FOR SNACK–GUESS WHAT, YOU ARE IN DEBT AND THEY HAVE TO ACCEPT CASH.

    • Sadly, the answer to that would be “No you don’t owe us money, but you just stole a coke. Meet the police.” But I like your thinking. At least you’re trying even if your solution doesn’t work.

      • Tonya Parnell | August 5, 2016 at 11:50 pm | Reply

        THAT IS NOT TRUE, I HAVE DONE IT FOR 50 YEARS, I STARTED DOING IT BECAUSE WAY BACK THEN SOME OF THE SNACKS WERE OLD AFTER I BOUGHT THEM; THEN, PROBLEMS AROSE WHEN THEY COULD NOT CHANGE A LARGE BILL. SO TO FORCE THEM TO TAKE THE LARGE BILL, I OPENED MY DR PEPPER FIRST AND TOOK A SIP. THEY CANNOT ARREST YOU AS LONG AS YOU ARE OFFERING TO PAY FOR IT

        • You can type in upper and lower case letters and still get your point across, Tonya.

          • Tonya Parnell | August 7, 2016 at 12:47 pm |

            I TYPE AT NIGHT, THERE ARE NO LIGHTS IN HERE, I LIVE IN A KENNEL AND BARK FOR FOOD; IT IS HARD TO FIND THE SHIFT KEY ON THIS KEYBOARD; HOWEVER, I SEE YOU MANAGED TO READ IT, THAT IS GOOD. HAVE A NICE DAY.

  5. Free Man (NOT) | August 5, 2016 at 5:21 pm | Reply

    Some places will take your cash, (for example, to pay your phone bill- which is a debt) but they want to charge you a ‘convenience fee’ to use cash.

    Also some banks won’t accept cash to pay your credit card bill.

    BTW: I like Ed Robbo’s idea, and have used it.

  6. You don’t need a bank account to get a pre-paid debit card. Some of them have huge fees, some are OK for low income people. If they had checking accounts they would incur huge fees every month in overdrafts. It’s a fact. They can’t manage checking accounts. They can go to Walmart and get a debit card issued by MasterCard. To avoid ATM fees, just make a purchase at Walmart (any small amount) and get cash back. Direct deposit of paychecks is available with most employers.

  7. If you ever worked for a large retailer, you know what a huge hassle cash is. After the store closes, the doors must be locked. All rest rooms and storage areas must be checked for non-employees (armed robbers). Then each department must bring its already counted and packaged cash to a central secure money room where special employees work under heavy surveillance. They count the money again. It goes into a safe until the armored car comes. Only then can employees go home for the night. With credit and debit cards, non of this is necessary. There is no risk of armed robbery or temptation of employees to steal or embezzle from the cash room. All these expenses detract from the bottom line. They cut the profit.

    • Heavens to Betsy.

      Only the security and cash counting staff need to stay and that’s part of their workday and they are paid for the time.

      They lock the doors when the store closes? Appalling!

      If I’m opening the store in the morning, I’d like to know someone checked the store for invaders the previous night.

    • I have worked for larger retailer & only two people required to stay; usually manager & one other. Money usually put in safe & Brinks picks up daily. Credit cards cut into profit more by the fees they charge merchants; also making you cost higher.

  8. Why are they trying to get rid of cash? To put us totally at the mercy of the banks. If you think your fees from your banks are high now wait until they get rid of cash and you have no choice but to have ALL of your money in the bank all the time. Bank of America tried to charge its customers $5 each time they direct deposited their paycheck and that is just the start of the fees they plan. Why do you think the banks are behind this?

    • L. A. McDonough | August 6, 2016 at 12:28 pm | Reply

      Quit all banks and switch to credit unions.

      • Nemesis du Avocat | August 7, 2016 at 12:27 pm | Reply

        Bitcoin and similar will get stronger as more and more people choose to self govern their lives and interests.
        The FED RESERVE and it’s overlord IMF, will do whatever and kill whomever to keep “their” currency of debt as the controlling currency. That is best done electronically. The paper is a problem of encumbrances

    • It is far more sinister. The law on the books state that all your all assets, i.e.,cash, securities, cars, homes-all personal property, can be converted into debt to the government and as such may be seized to pay off the National Debt. Your digital cash in the banks will disappear almost instantly with a push of a button. A cashless society is a first step in this direction to be followed by a “state of emergency”, Martial Law and nationalization of the banks and industry. How to escape from this? There are means but that is another matter.

  9. Brian Vaughan | August 6, 2016 at 2:50 am | Reply

    The key to understanding this topic is understanding the ancient immutable laws of “commerce” or “trade”. The keywords here are “offer” and “acceptance”. The answer to the question of, “when does buying a coke become a ‘debt’?” is, when the “offer” is made to sell the coke and the buyer “accepts” the offer, it then becomes a binding agreement. Thus, the seller is owed the price of the Coke, and the buyer is obligated to pay the seller, and a private debt obligation is created at that instant.

    The laws of trade have been in existence since long before electronics or bank cards of any kind. There was no commerce or trade unless there was a medium of exchange called “currency”. In the modern age we have sought to make commerce and trade faster and more convenient, especially across distance, so we have invented such other modes of satisfying obligations and facilitating transactions. While they are a substitute for currency they are not superior to it because hard currency can be held in your hand as a tangible thing. Electronic transactions only mean that currency will be transferred by another means, but allow a transaction to proceed on the basis of probability of payment based on the trust and reliability of the system.

    No one who has offered a product or service to sell has the right to refuse cash. It only happens because people tolerate it, and we now have a system that ignores and abandons the ancient and immutable laws, which are based on common sense, in favor of setting precedent that favors the convenience and interests of the banks and corporations. This gives an advantage to all who seek to streamline the transaction process and create an exposure point through which the purchaser’s personal data can be collected.

  10. This is kind f the Millennial Mindset. They are so self absorbed that their own convenience and their life on an I Phone is all they care about.

  11. The banks want to track your every purchase and every move. They are the all seeing eye.
    ICELAND the BANKERS. CASH will always be king, debit cards are ok so long as you mind your p’s and q’s (pints and quarts).

  12. They have already made it to where you are getting SCREWED when you pay with cash. You are paying for credit card services whether you use a credit/debit card or cash on every retail purchase. Retailers who accept credit cards have to jack their prices to cover the banking fees involved with credit cards. The banks forbid the retailers from adding those fees to credit card purchases so the retailers raise prices across the board to cover the expense. So when you pay with cash you are still paying the “credit card fee”.

    So if you want to save a little money then pay with a credit card that pays “cash back” but every transaction you make is monitored and tracked. If you want to be free then pay with cash. While you still can.
    I agree with Ed Robbo below. The more we can throw a wrench in the works the better.

  13. L. A. McDonough | August 6, 2016 at 12:25 pm | Reply

    I have never run into this type thing. If so, I would leave the business and tell them they are violating peoples rights to pay anyway they want. I always pay cash dining out. Risk of scammers and skimmers with credit or debit cards. Ditto for gas stations. A prepaid card with several hundred dollars like Blue Bird Am express would be safe because it is not linked to any bank. I use a prepaid Shell gas card also.

  14. Do you need an urgent cash loan to settle off your bills and pay your debts? if so, please email us today via: [email protected]

  15. One of the biggest lies told in the United States of Americas is that it is a “Wealthy Nation”. That is perhaps the biggest and easiest to debunk lies their is. Right now the U.S. government is almost 20 TRILLION in debt and that will keep growing exponentially. And that doesn’t count state and local governments. Now it is clearer than ever that we live in a Ponzi economy that gives the elusion of wealth but is destined to collapse. But until then they will look for any way to keep it afloat and eliminating cash is just another avenue. And people will go along with it as long as they are not the ones who have to pay the piper.
    At least one state (Louisiana) has passed a law restricting the use of cash for secondhand purchases. In other words it is illegal to accept cash for selling that used “______” if you are an individual. Why? They say to curb crime, but we know it is so they can more easily track the flow of money so they can tax, tax, tax.
    Governments local, state and federal must constantly come up with ways to bail out corporations, wage war, pay people welfare, food stamps, solar panel subsidies, give out cell phones, medical subsidies, etc… The list is long.
    Don’t just blame the banks. Most Americans are just as much to blame as any bank CEO or politician.

  16. So Reagan was a liberal lol

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