Hunton Retail Law Resource

Retail stores and businesses are generally free to develop their own policies regarding acceptance or non-acceptance of certain forms of payment. For years, many small businesses have refused credit card payments entirely or credit card payments for transactions under a certain amount due to high transaction costs. Smaller retailers may also refuse certain brands of credit cards. However, a different trend has emerged in recent years as an increasing number of retailers are refusing to accept cash and instead accepting only credit/debit and smartphone payments.

Why would a retailer ever refuse cash? Businesses have put forth several reasons for turning down cash, including that a lack of cash on hand reduces time transporting money to and from banks, eliminates cash register theft from employees, and lowers the chances of being robbed. If your cash has ever been turned down at a no-cash establishment, you may wonder – is this legal?

In almost every state, the answer is yes. Federal law states that 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. However, federal law does not require acceptance of cash nor does it ban retailers from imposing restrictions or limitations on acceptance of cash, thereby leaving it up to states.

Massachusetts is currently the only state that requires “retail establishments” to accept cash as payment. Other states and cities have proposed similar legislation that would prohibit retailers from banning cash – one justification being that refusing cash payment is discriminatory against the undocumented, lower income populations and young people, all of whom may not have bank accounts or access to credit cards. If more establishments refuse to accept cash, more states may introduce legislation like the Massachusetts law. However, Massachusetts only prohibits “retail establishments” from refusing to accept cash. Would a parking garage that only accepts credit card payments violate the law? It is unclear. Furthermore, the Massachusetts statute does not impose any penalties for retail establishments that refuse to accept cash, making its actual enforceability dubious. While the trend of retailers refusing to accept cash may still be in its infancy, the ramifications and legal responses are being explored by consumers and states alike.