Q. Is it legal for a business in the United States to refuse cash as a form of payment?
A. Section 31 U.S.C. 5103, entitled "Legal tender," 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 is 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 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.
I read through this statute at some point awhile back. To my understanding, one way businesses get around this is by charging money before the product/service first--essentially putting themselves in "debt" first. By not providing the product/service until you pay, you aren't arguably in any potential form of debt and a business can dictate the form of payment they want.
If you pay after receiving a service, then you could loosely be considered in debt. Usually, that doesn't hold enough water from what I read and it really means, until you go to court and have an established debt, you're forced to pay through whatever mechanisms were agreed to in the transaction. Only then does it have to be payable by cash.
It's interesting to me because the transactions you're most likely to have cash on hand and pay for are items most would never have to go in debt for (a coffee, lunch, etc.) whereas large transactions you may need to go in debt for ideally use some other non-cash medium (loan, cashiers check, etc.).
Basically makes cash useless (why I rarely carry more than say $50 anymore).
More interestingly, you'll see businesses adapt quickly to accept cash when their electronic payment/management system goes down for a day. They're incredibly resourceful when it's convenient for themselves. I've had this happen at a coffee shop that was cashless that suddenly decided they'd accept cash when the other option was to not make money.
This is probably the loophole by which both statements "cash is legal tender for all debts" and "not accepting cash is legal" can coexist. There is no debt if the transaction does not happen because one of the participants is unwilling to enter it for some reason (with the reason being that the other person does want to pay cash).
Banning specific reasons for not making business is possible however (it is done to protect ethnic minorities for example), so the situation can probably easily be changed by legislation that bans "wants to pay in cash" as a legit reason for not entering into a transaction at stores that are open to the general public.
> Businesses that still want cashless transactions can provide a machine that exchanges cash for a gift card, but must accept cash if the machine breaks down, according to the new law.
This would be a huge issue to me. I will admit that I don't live in NYC, but if I was to travel there on business and a random restaurant made me trade in $20 for a gift card to pay for a $8 meal in a place that I will probably never go back to, that's $12 out of my pocket that I paid in "cash is inconvenient" tax to that restaurant.
Even worse, if I go to a store all the time (e.g. it's the only grocery store within walking distance and I don't have a car) but I'm underbanked, then I have to continually keep money in their "bank".
> "Your total comes out to $20 but you only have $8 in store-bucks! Don't have exactly $12 in cash? That's a shame. I guess you'll have to come back to spend the rest!"
Later you find out that the gift cards expire. Oops.
Those cards are basically debit cards with incredibly shitty rates. Using them as such would be far far worse for your economic health than just keeping the cash
yes I agree. How about an app that allows businesses to become ATMs where you not only withdraw cash but also reload an E-wallet which in turn would allow you to buy things online without a bank account?
Are they required to tell you? I've been to more than one restaurant that said "sorry, we don't take cash" when there was no signage to inform me of this fact.
We should focus on finding a way to provide vulnerable groups a way to pay at cashless stores rather than increasing the overhead of operating a business (accepting cash, maintaining change, coordinating bank deposits, etc.). Many of these places are coffee shops where their entire ledger is automated.
How can we complain that small businesses are closing in NYC and then continue to add regulations which may make it harder for them to operate? That seems like an oxymoron.
The vulnerable are often underbanked. They might not have a bank account, debit or credit card, or smartphone with Venmo/Cash app/(whatever app is popular today).
Cash is the easiest way to help vulnerable groups. If a homeless person wants to buy a cheeseburger, its better to accept the cash rather than have him fill out FORM NY-892-F INDIVIDUAL RETAIL ESTABLISHMENT CREDIT ACCOUNT CREATION FORM, proposing to send a monthly bill to his non-existent address, or non-existent email.
The US has over 6 million unbanked which are not necessarily poor. Some choose to be unbanked. I'm developing an app and network to help with this problem, It allows businesses to become ATMs where you not only withdraw cash but some could accept to reload an E-wallet which in turn would allow you to buy things online without a bank account. (maybe later we would launch a physical card) - DO you think it will work ?
Nope. Businesses can and do already reload value cards (including prepaid debit cards) which allow (among other things) buying online without a bank account, and it hasn't solved the problem.
Sure your one proposed hyperbolic alternative is significantly worse than cash. That doesn't mean that there doesn't exist an alternative that is better or not significantly worse than cash.
If we made access to prepaid debit cards dead simple (i.e. going to a bank and getting a debit card for the equivalent amount of cash) easy for small amounts, then they would not only get access to the cashless shops in town but they'd also be better served online and could access cheaper goods through online retailers.
This gives the individual an easy way to get around it without penalizing small businesses. Larger businesses likely all take in cash without issue.
Maybe there should always be a way to open a bank account, even without a home address? If you don't have a bank account, you get excluded from a lot of options that might solve your homelessness anyway. It seems to me that being able to open a bank account should be a fundamental right of some sort.
There are lots of catches like this that make life difficult to the poor and vulnerable in our modern society. Most of these catches are some status obtained and managed through privatized means with little-to-no oversight that are becoming more and more fundamental functions of daily life as they are abstract processes to follow leading to obtaining necessities: food, housing, healthcare, etc.
The vast majority are never exposed to these institutional barriers because they are financially above those barriers but for working poor, poverty stricken, etc. these are daily challenges to deal with with little or no recourse of action.
Take paying utilities as an example. For most it's as trivial as logging on your phone one time and setting up the account with auto recurring payments on a credit card--then setup auto payment of your credit card from a checking account where you have some portion of income automatically transferred to.
For others, they have to carefully pick and choose when and what to pay and make sure they can pay cash, check, etc. There's all the additional overhead too: traveling to a valid payment location or the post office for stamps to mail things in, cognative load/stress for keeping track of the schedule or putting it down on a calendar, etc. That's just paying utilities. Plenty of other processes have all sorts of other headaches.
In most locations in modern society, owning and maintaining a vehicle is a necessity when factoring all alternatives (aside from moving), yet vehicle ownership considered a privilege.
This list goes on and on. It's no wonder many Americans are not happy.
Does cash make it harder to operate? That sounds backwards to me. Traditionally, small businesses love cash. The open secret is that no small business reports 100% of their cash income to the government.
I've had small business owners tell me that literally no small business could survive if it had to pay all the taxes they technically owed. There are some near me which offer significant discounts for paying cash.
Yes, perhaps I was too subtle but the point of my comment was that (from what I have heard) virtually all small B&M businesses evade taxes when they're starting out.
I don't think it's coincidence that all the cashless businesses I've seen are for higher-end (and presumably higher-margin) products. Customers buying a $15 sandwich don't care about cash transactions because the difference between $15 and $17 is meaningless to them. They never pay cash anyway.
Cash is legal tender and should be required to be accepted at all businesses. Electronic payments have overhead, too, so I don't accept that as an argument.
Electronic payments are a privacy concern for me. It's a big data collection source and it fuels companies like Axciom who built extremely detailed consumer dossiers on everyone.
Health insurance premiums tied to purchases? A teenager buying condoms who doesn't want their parents to know? Denied employment because you've purchased nicotine?
> Cash is legal tender and should be required to be accepted at all businesses.
They're legal tender for debts. If they don't want to sell you something because you can't agree mutually acceptable payment terms then there is no debt.
All this concern about the unbanked/underbanked could be more effectively channeled into making banking more accessible IMO. As an example, the city could provide a free reloadable prepaid card to people who qualify as underbanked (based on some combination of income and residential address).
Does this bill mean car dealerships (more popular in the outer boroughs than most people think) and jewelry shops will no longer be able to refuse briefcases full of cash as payment?
> As an example, the city could provide a free reloadable prepaid card to people who qualify as underbanked (based on some combination of income and residential address).
Then you still have the people who are underbanked for some reason but don't qualify as underbanked under that criteria. The only reliable way to do it would be to provide it to everyone, no questions asked (you can't even require proof of identity or residence, otherwise you'd still have the homeless people who lost their documents and can't get new ones). In the end, that reloadable prepaid card becomes a more complicated, less reliable form of physical cash.
Hasn’t this already been resolved in NYC by the MetroCard? (Which is going away in a few years, last I heard, but it’s a prepaid card that everyone has access to.)
Its not all about cash vs non-cash. It can also be about privacy. You might not want some embarrasing item on your bank statement for a number of reasons.
I would love a reloadable prepaid anonymous card i could use instead of my own in my everyday life. I would probably use only that if i could find one. There is no such option afaik where i live though. And we are transitioning very fast to cashless. ( Norway )
As someone who in the past year has only used cash to pay for illicit substances, I was quite surprised by the title. Why punish business owners for choosing a more efficient and safe payment method? But having read the article, well, I see it differently. I did not know that cash still played such an indispensable role in the lives of many vulnerable groups in the U.S..
Does anyone have more info on what is meant by "alternative financial services"? I'm guessing they're not referring to bitcoin...
> I did not know that cash still played such an indispensable role in the lives of many vulnerable groups in the U.S..
I'm not even close to "a vulnerable group", but I still use cash for convenience. It's faster than card, most places don't have phone-based payments (I don't use them anyway, never felt worthwhile), and I don't clutter up my bank statements with daily purchases (lunch, groceries, etc).
Cashless stores is something we see a lot in Amsterdam. I always thought that they probably loose a lot of clients, both because of lack of cash and also because they only accept the "pin" card which is, afaik, a Netherlands-only type of debit card.
But at the same time it's also probably safer and less management with accounting done automatically.
According to Wikipedia, the PIN domestic payment network was discontinued in 2012 in favor of Maestro and V-pay debit cards.
The main problem with this is that many countries, even within the EU, don't really issue Maestro and V-pay cards, but rather proper MasterCard and Visa (debit) cards. In my experience it wasn't an issue in Amsterdam. In Brussels on the other hand, I came across a couple places where I could only use my Maestro card.
That said, the unbanked/underbanked population is probably a lot smaller than in the US.
Those pin card are Maestro "compatible" I guess. The card works where Maestro is accepted, but not all Maestro cards work on those PIN systems.
source: I live in Amsterdam and have a Pin card, a US debit Mastercard, a US Credit Mastercard, a dutch debut maestro and a dutch credit mastercard. Only the pin works on those PIN systems
I've been in Amsterdam twice last year, and I was able to pay everywhere with Apple Pay backed by a Visa card (well, almost anywhere, one store required a physical card, and I am not 100% sure Visa would have worked because I used a Maestro debit card there). So apparently most merchants don't limit it anymore - would not make much sense anyway since the EU mandated credit card interchange fees to be below 0,3%. That basically made supporting credit cards almost as cheap as the national payment schemes.
Honestly this seems like progressive posturing that's all too eager to pass prohibitions than actually address the root of issues they're concerned about.
I'd love to see big-picture legislation (like GDPR is for privacy) which could take a bite out of all the tiny cuts of financial mini-hardship that poor people face every day. I just have no idea what it'd look like. Maybe there's nothing better we can do than 100 little laws like this one.
I encourage everyone to try living one day like they're down to their last $20 and have to buy some things they need (pretend you don't have a wallet full of plastic cards and a phone full of passwords). Nearly every time you go to buy something, you'll encounter a situation where you could save money in the long run if only you had a little more to spend today.
Why's that funny? It's not like it exposes some hypocrisy or moral duplicity. They'd rather not accept cash because it's bulky, dirty, slow, and expensive to handle. But if they can't accept anything else for a large number of customers for some reason they will go back to it.
It is hypocrisy to a certain extent. Cash only works because people accept it. It depends upon enough people accepting it, because only then enough of physical cash will circulate in order to make maintaining all the infrastructure (printing it, putting ATMs up, offering cash handling for merchants etc.) cost-effective enough for it to be done.
If suddenly 95% of cash acceptance was dropped, a lot of that infrastructure will vanish, forcing the remaining 5% to drop cash acceptance as well...a death spiral, ultimately ending with the elimination of cash and thus also the elimination of the very fallback that these stores mentioned by the OP relied upon.
Consider the cost of accepting cash an insurance premium against technical failures in the electronic payment networks and your POS systems.
Why the sarcasm? Here in Ireland a major bank was down for several days because contractor of bank located in India screwed up a production deployment or something, resulting in hundreds of thousands of transactions having to be manually reconciled.
In that time people had no access to their money, no tap and pay, chip and pin etc, nothing.
That was quite a lesson in importance of cash, another lesson was about a dozen years ago when all the banks here went to the wall and had to be nationalised in order prevent bank runs.
Ireland famously survived a six month lock out by nearly every bank in the seventies, with no harm to the economy.
Pubs were local guides to credit worthiness, larger shops cashed cheques so businesses could pay staff (an era when many were still paid in cash), so cash could go round the system again, and cheques were countersigned and passed on dozens and dozens of times -- effectively becoming variable size bank notes.
It's a fascinating story, and quite remarkable how little effect no banking had.
Doesn't sound like there was "no harm to the economy" though, except in the broader sense. A quote from an Irish building contractor cited in the article: "I employ only 10 people. If it hadn’t been for the bank strike I’d be hiring 30. I’d say I’ve lost up to £20,000 over it ... One of my problems is finding the money to pay the wages. I run round from Wednesday to Friday to scrape them up, and in that time I can do no other work."
Oh sure, I've no doubt there were individuals and some businesses quite badly affected, but look back at the overall growth, national and regional statistics and the periods with strikes or lock-outs are simply undetectable if not highlighted for you. Sales and growth figures weren't noticeably harmed. No doubt if you were new to an area, didn't yet have a local or just weren't a pub goer, you might have had more trouble than most.
The article also notes the steady stream of people going down to the local department store and other larger shops once a week, to cash their wages, or a wages cheque to pay their factory workers. Pubs were accumulating cashed cheques from regulars and some making smaller loans.
The real surprise for me is how smoothly they coped, and how little fall out there seemed to be when banks reopened. Though of course there were some of the millions of cheques doing the rounds that did bounce. I've seen far less about knock on effects after reopening like that, but it's usually described in a way that makes it seem "far less than you would expect".
PS OP, in the 1700s you'd probably issue a writ of payment and the shopkeeper would add the purchase to your tab, which you'd pay off in full at a later date.
Unless you were a total stranger to that establishment, then you'd probably be paying at the time of purchase.
Sarcasm, nah, just ordinary common-or-garden comedy. Also a literary reference. Anyone?
All seriousness aside, if a business wants to be cashless, that’s a business decision, not religion. If the system goes down, they can dogmatically refuse to function, or they can place a large can on the counter and get on with it.
NYC is home to an industry that stands to benefit from a cashless economy and home to a government that never seems to turn down an increase in their ability to put people under a metaphorical microscope. I would have predicted they would be one of the first places to ban cash and one of the last to mandate businesses accept cash.
I'm really happy to see consumer protection winning out over private interest for money and state interest for power but damn is that a curve ball in this day and age.
Q. Is it legal for a business in the United States to refuse cash as a form of payment?
A. Section 31 U.S.C. 5103, entitled "Legal tender," 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 is 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 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.
Link: https://www.federalreserve.gov/faqs/currency_12772.htm