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Is It Legal for Businesses to Refuse to Take Cash?

Credit card transaction.
By Richard Dahl | Last updated on

The message on your greenbacks would seem to be unequivocal: “This note is legal tender for all debts, public and private."

Well, not all debts, as it turns out.

Even before the coronavirus, more and more restaurants and stores were going cashless, in effect telling their customers, “Your money is no good here." These retailers cite several good reasons why they reject bills and coins: Increased employee productivity, improved customer convenience, easier bookkeeping, decreased risk of theft and burglary.

Now, of course, they have an additional strong reason to reject cash: The bills and coins handed over by customers might be carrying coronavirus.

Can a Store Require Plastic Payment?

Still, what about that official-sounding language on my $20 bill? Can a store legally refuse to accept it and make customers pay with some form of plastic?

According to the Federal Reserve, at the national level, the answer is yes. “There is … no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payments for goods or services," the nation's central bank says on its website. “Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise."

Prior to the pandemic, some states were indeed saying otherwise. In 2019, New Jersey and Rhode Island passed laws banning cashless stores, and several cities — New York, Philadelphia, and San Francisco — passed statutes. In doing so, they joined Massachusetts, which for 41 years was an outlier as the only state with a law requiring retailers to accept cash when it's offered.

The reason for this backlash was a growing sentiment that cashless retail establishments, while legal, were also discriminatory.

Poorer people in particular are cash-reliant, the Federal Reserve Bank of San Francisco reported in 2018. The bank found that 47% of transactions conducted by members of households with incomes of less than $25,000 were in cash, while the comparable number for households with incomes of more than $100,000 was 24 percent.

Heather Bartels, writing in the Michigan Business & Entrepreneurial Law Review, points out that cashless policies could potentially be open to legal challenge: “Although there is no federal mandate preventing the United States from becoming a cashless economy, the federal Civil Rights Act mandates that all persons be entitled to equal enjoyment of goods without discrimination on the grounds of race, color, religion, or national origin. So if there is a legal argument to be made against cashless enterprises, it is likely to be brought under this Act."

Anti-Cashless Laws Look Like Blips

For a time, anti-cash retailers responded to these critics by pulling in their horns. Amazon, Inc., announced that its cashier-free Amazon Go stores would now accept cash. And Sweetgreen, a national salad chain with a cashless payment policy, also announced that it would also start to take cash.

In the age of coronavirus, however, the more these anti-cashless efforts look like blips. A number of restaurants that have remained open serving take-out orders have reportedly stopped accepting cash. And only a year after Rhode Island passed its anti-cashlessness law, Governor Gina Raimondo is encouraging restaurants to go cashless.

Clearly, the coronavirus has pushed us toward a monetary future with far fewer bills and coins. Obviously, state stay-at-home orders have resulted in extensive online purchasing, but even more noteworthy is the explosive growth of contactless payment forms.

These contactless methods include tap-to-go credit cards and mobile wallets, such as Apple Pay, and are now used by more than half of Americans, according to a survey by Mastercard.

The reason for the mushrooming popularity of contactless devices: While people don't like handling cash for fear of coronavirus, they're also skittish about touchpads. Contactless cards allow them to conduct transactions from a proper social distance.

The entire nation of Sweden intends to be the world's first fully cashless society by 2023, and countries and businesses were being advised to prepare for a cashless future even before the pandemic.

Recent news stories from jurisdictions that passed anti-cashless laws, like Massachusetts and San Francisco, indicate that authorities are still adamant about enforcing them. But, questions of legality aside, the trend is clear.

A cashless world awaits. The pandemic has just sped its arrival.

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