Woah There! Can a Business Refuse Cash?

In this day and age, people are pushing cash to the side and paying with plastic. In fact, one study found that 80% of people prefer to use card payments over cash. But, just because plastic is dominating does not mean cash is obsolete. Many people still prefer to pay with cash. And in some cases, it can be easier to deal with cash than cards. But, can a business refuse cash? Is it legal to only accept credit cards and other non-cash payment options? Read on to get the scoop.

Can a business refuse cash?

Maybe you’ve noticed some small businesses in your area posting signs about not accepting cash. Or, maybe you’re thinking about going cashless yourself.

Whatever the case may be, you’re likely wondering, Is it legal to not accept cash? Well, let’s find out.

According to Section 31 U.S.C. 5103 entitled “Legal Tender,” “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.”

So … what exactly does that mean, and what does it have to do with accepting cash? In layman’s terms, it means that U.S. currency is accepted as legal tender and that cash holds the same value across the country.

It also means that cash is a legal tender for all public and private debts. Federal law makes U.S. currency a legal tender for paying debts. And as a small business owner, you must accept dollars for your products or services. However, it doesn’t mean it has to be paper dollars. You can accept electronic dollars as payment, too.

Can a business refuse to accept cash under federal law?

According to the Federal Reserve System, there is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services.

The Federal Reserve System also states that businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.

In short, there is no federal law that requires private businesses to accept cash payments from customers.

The bottom line is this:

No federal law requires private businesses to accept cash You can accept payments in whatever form you’d like Is it legal to not accept cash according to state laws?

Your state or locality may require your business to accept cash payments. State laws on cash acceptance policies trump federal rules.

If your state has a law requiring you to accept cash payments, you must follow the rules. If you fail to comply with your state or local cash acceptance rules, you could face penalties and fees.

Some states limit restrictions businesses can impose. For example, many states require private impound lots to accept cash from individuals trying to retrieve their vehicles.

Check with your state or locality before refusing cash at your small business.

Refusing cash during COVID-19

Because cash passes between so many hands, it’s no secret that businesses big and small have been leery about accepting cash during COVID-19.

Many businesses are refusing cash during COVID-19 as a precaution to protect both employees and customers. And, some businesses aren’t accepting cash due to the nationwide coin shortage.

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