After oversleeping one morning, you stop at a cafe for some coffee and a muffin on the way to work. You take your food up to the counter and hand over a $10 bill, but instead of opening the register to get your change, the clerk says, “Sorry, we don’t accept cash.”
There are places all over the country in which this scenario could happen. There have always been some retailers, such as discount grocery stores, that don’t accept credit cards. Now, at the other end of the spectrum, an increasing number of stores and restaurants are accepting cards and digital payments while refusing to take cash.
For many retailers, it’s a precaution to limit the spread of germs during the coronavirus pandemic. But considering all the advantages going cashless can have for businesses, there’s a good chance the trend could stick around.
That won’t affect most consumers since most people pay with their cards anyway. But it’s bad news for the minority who prefer cash — and even worse news for the smaller minority who don’t have a card.
Why Some Stores Refuse Cash
Even before COVID-19, some specialty stores and upscale eateries had tried going completely cashless.
For instance, when Amazon first opened its experimental Amazon Go stores in Seattle, Chicago, and San Francisco, there were no checkouts at all. Instead, anything you carried out of the store was automatically scanned and charged to your Amazon account.
In 2018, Slate reported that the cashless trend also attracted several fast-casual restaurants — places that offer fancier food than Burger King or Subway but with equally quick service.
When the coronavirus outbreak hit, this trend accelerated. A study by payment processing company Square found that between March 1 and April 23 of 2020, the number of its users in the United States that were “essentially cashless” rose from 8% to 31%. In Canada, Australia, and Great Britain, cashless payments rose even more sharply.
For businesses, going cash-free offers several significant advantages:
- Fewer Germs. When businesses reopened after the first wave of COVID-19 closures, many chose to limit the use of germ-laden bills and coins. Takumi Hirose, a Tokyo stationery shop owner interviewed by Square, explains he’s moving toward a cashless model because so many customers now see cash as “unclean and unwelcome.”
- Reduced Risk of Robbery. Any business that handles lots of cash every day is at risk of being robbed. David Friedman, proprietor of the Chicago-based Epic Burger chain, told the Los Angeles Times he decided to go cash-free after his restaurants suffered a total of six armed robberies and burglaries over eight years.
- No Counterfeit Bills. In addition to thefts, stores and restaurants often lose money when customers pay with counterfeit bills. Friedman said his restaurants handled “dozens and dozens” of fake bills in the years before going cashless. Eliminating cash closes off that avenue of fraud.
- Less Employee Theft. After a cash purchase, it’s easy for an unscrupulous worker to keep the cash and not ring up the sale, a practice known as “skimming.” Employees can also ring up a smaller purchase — say, $5 for a $10 sale — and pocket the difference. Skimming is a tough crime for employers to detect, but getting rid of cash eliminates it.
- Faster Service. Cash is a relatively cumbersome method of payment. The total sale is seldom a round dollar amount, so either the customer or the clerk has to spend time fumbling with bills and coins to hand over the right change. Card-based transactions are much quicker. According to The New York Times, when the salad chain Sweetgreen made six of its locations cash-free, employees at those locations could process 5% to 15% more transactions per hour than their colleagues at stores that took cash.
- Simpler Equipment. If a business doesn’t take cash, it doesn’t need a bulky cash register with separate slots for bills and coins. Machines that only process credit cards are smaller, sleeker, and less expensive.
- Less Expense. Handling cash costs businesses money because many banks charge fees for cash deposits, especially if coins are involved. If a business handles enough cash to require armored cars to pick it up, that’s an even bigger expense.
- Fewer Banking Hassles. Making cash deposits is also time-consuming. A manager has to spend time counting the money, preparing the deposit, and taking it to the bank — time they could be spending with customers or helping workers.
The Problem With Cashless Stores
For many customers, having their favorite store go cash-free doesn’t make much difference.
Leo Kremer, owner of the Dos Toros chain, told The New York Times the vast majority of his customers were paying with their cards already. He says even customers who prefer to use cash have no problem with the change for the most part.
However, while cash isn’t the most popular way to pay these days, it’s far from dead.
A 2019 survey by the Federal Reserve Bank of Atlanta found that consumers use cash for about 1 in 5 transactions they make. Cash remains the third-most-popular method of making payments after debit cards and credit cards.
Consumers use cash for a variety of reasons. Some people carry cash only for special situations during which you can’t easily pay with a card, such as paying tolls. Some find it easier to control their spending when they pay with cash rather than credit cards.
Younger consumers may prefer cash because they don’t have credit cards or bank accounts of their own yet, and older ones sometimes prefer it simply because they’re used to it.
But “unbanked” consumers have the strongest reason to use cash. Unbanked people have no checking or savings accounts in their household. A 2019 survey by the Federal Deposit Insurance Corp. (FDIC) found that 5.4% of all U.S. households — more than 7 million households in total — were unbanked.
The No. 1 reason these consumers gave for not having a bank account was that they don’t have enough money to open one. Nearly half of unbanked consumers said this was one reason they don’t use banks, and more than one-quarter said it was the primary reason.
Being unbanked is most common among consumers with lower income or unstable income, people with less education, people of color, and working-age people with disabilities.
For these consumers, stores that don’t accept cash are a big problem because they leave them with no way to shop. In effect, these stores are discriminating against poorer consumers.
Of course, people in this group are unlikely to be dining at the kind of upscale eateries that are most likely to be cashless. But if the trend spreads to more mainstream chains, it could effectively shut these lower-income consumers out.
Why Going Cashless Is Legal
Some customers at cash-free chains find the new policy confusing. They occasionally try to argue that it’s not even legal, pointing to the line on paper money that reads, “This note is legal tender for all debts public and private.” And those aren’t just empty words. There’s a federal law, 31 USC Section 5103, to back it up.
However, the key word in that law is “debts.” Technically, you only owe a debt if you’ve already made a purchase and haven’t paid for it yet. But if you go into a convenience store to buy a cup of coffee, you haven’t bought the coffee until you’ve paid for it.
That means you don’t owe a debt, and it’s up to the store to decide whether to accept your cash as a form of payment.
The Treasury Department confirms this interpretation of the law on its website, saying, “Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.”
That means buses can require exact change, convenience stores can refuse large bills, and eateries like Epic Burger can refuse to accept cash altogether.
However, if you’ve already bought something — for instance, if you’ve pumped yourself a tankful of gas and gone into the shop to pay for it — that’s a different situation. Then, the owner must accept your cash because you’re technically paying a debt.
If you think about it, there are already multiple situations in which it’s not possible to use paper money. For example, people seldom complain about parking meters that only take small change or tokens or online sellers who only accept credit card payments.
Likewise, there was little outcry when most airlines stopped accepting cash for in-flight purchases of food and drinks around 2010. (One man tried suing Continental Airlines over the policy, but as The Consumerist reports, his case was thrown out of court.)
Really, the only reason cash-free stores and restaurants seem odd to most shoppers is that we’re not used to them. But if this trend catches on more widely, attitudes will change along with store policies. Before long, cash-free stores could seem normal unless something happens to halt the trend.
What to Do About Cash-Free Stores
Going cashless clearly offers some significant benefits for stores, but it also clearly poses a big problem for some consumers. If you’re one of them, there are three things you can do about it.
1. Complain to the Store
Business owners want to keep their customers happy, and that’s especially true for service-based businesses like restaurants. Owners are likely to change their no-cash policies if they hear from enough customers who are upset about them.
For example, Thomas Nguyen, owner of the Houston-area restaurant chain Peli Peli, told the Los Angeles Times he changed his mind about going cashless after getting daily complaints about it.
David Silverglide, co-owner of the Split Bread sandwich shop chain in San Francisco, told The New York Times he changed his cash-free system after two years for the same reason.
In March 2019, Sweetgreen announced it would transition all its locations back to accepting cash after facing a severe backlash for excluding unbanked customers. And that same year, even Amazon announced it would switch to accepting cash at all Amazon Go stores.
Other restaurants have stayed cashless, but they’ve looked for other ways to accommodate customers who prefer to use cash.
For instance, Denyelle Bruno, president of the salad chain Tender Greens, told the Los Angeles Times that if customers fail to notice the no-cash signs and have no other way to pay, the restaurant simply gives them their food for free.
2. Seek Out Banking Alternatives
Since cash-free stores are primarily a problem for unbanked people, another way to approach the issue is to help them access other forms of payment.
According to the FDIC report, many unbanked people rely on reloadable prepaid cards, such as the Bluebird American Express card from Walmart. About 28% of unbanked households said they had used a prepaid card in 2019.
According to Consumer Reports, prepaid cards are easy to use. You can use them to make purchases just like a credit card or debit card, so they should pose no problem at cash-free stores.
However, Consumer Reports warns that some of these cards come with high fees, so customers should compare cards carefully before choosing one.
Another option for customers is cash gift cards. These cards have the logo of a major credit card, such as Visa or Mastercard, and you can use them anywhere they accept those credit cards. However, these cards also charge fees.
For instance, Gift Card Granny reports that all Visa gift cards charge a one-time fee when you buy them, which can be anywhere from 1% to 30% of their value. Most also charge inactivity fees for cards that remain unused for a year or more.
3. Try to Change State Laws
Although federal law allows businesses to refuse cash payments, individual states and cities can pass laws banning the practice.
Massachusetts has had such a law on the books since 1978. However, the law doesn’t establish any penalties for businesses that violate it, and according to Boston magazine, it’s not really enforced anyway.
However, as cashless payments have grown more common, so have laws requiring businesses to accept cash. According to NPR, Philadelphia, San Francisco, and New Jersey all passed laws banning cashless businesses in 2019.
Unlike the one in Massachusetts, these laws come with penalties. In San Francisco, a store that violates the cashless ban more than once would face a fine of $1,000. In New Jersey, businesses would pay $2,500 for a first offense, $5,000 for a second offense, and still steeper penalties for additional violations.
Passing laws to force businesses to take cash is a realistic option, but it’s also a slow one. New Jersey’s law banning cashless retailers was first proposed in June 2018 and wasn’t enacted until the following March.
Complaining to the store and helping customers find other ways to pay seem like more promising approaches for the short term.
It would be nice if stores could find a middle ground on this issue, an approach that would let them enjoy the benefits of going cash-free without excluding unbanked customers.
One possible compromise could be to allow cash payments at only one register, similar to the one cash lane at a highway exit where all the other lanes require E-ZPass. That way, shoppers would have the option of paying in cash, but the long lines at that one register would give them an incentive to use their cards if possible.
With such an approach, stores would still have to handle some cash, but only occasionally. It could cut way down on the amount of time needed to count cash and make deposits, and stores would only need one cash register with an actual cash drawer. The risk of robbery would also be smaller because stores would have less cash on hand.
It’s not a perfect solution, but it could offer stores some of the benefits of going cashless without the downsides for their customers.