Paying With Cash? Retailers Must Take Your Dollars in These States

This story was originally posted by Stateline, an initiative of the Pew Charitable Trusts.

DENVER — After a constituent called Colorado state Rep. Alex Valdez last spring and complained that some local businesses weren’t accepting cash, the Denver Democrat started noticing cashless businesses everywhere, from restaurants to his local coffee shop.

Valdez thought refusing cash due to the COVID-19 pandemic made no sense, as merchants were still willing to touch debit and credit cards. And he feared such policies could shut out people without bank accounts, a group that’s disproportionately low-income, Black and Hispanic.

So this year Valdez sponsored a bill that would require retailers to accept cash, with a few exceptions. “We really just need to reaffirm that cash is currency,” he said.

In recent years, left-leaning leaders in cities such as New York, Philadelphia and San Francisco, as well as in the state of New Jersey, have enacted similar laws to protect unbanked customers who rely on cash. Massachusetts has required businesses to accept cash since 1978.

The idea gained traction this year, after public health measures and scattered coin shortages made it more difficult for some consumers to make cash purchases in 2020. Republican lawmakers in Idaho, Mississippi and North Dakota proposed bills that would require shops and restaurants to accept cash, and Washington, D.C.’s City Council voted on a cash transaction bill.

While the bills in Democratic-controlled Colorado and Washington, D.C., passed, the red state proposals did not. Many Republicans opposed the bills, siding with business groups that argue retailers should be free to choose how to serve their customers.

“We don’t support mandates; we believe that the business owner is entitled to accept or reject any method of payment, as they wish,” said Tony Gagliardi, Colorado state director of the National Federation of Independent Business, a trade group.

Consumers increasingly are using credit or debit cards to pay even for low-cost purchases, such as a cup of coffee, surveys show, and apps such as Venmo and Apple Pay are becoming more popular. Credit card companies—which charge retailers fees every time a customer uses a card—have encouraged businesses to stop taking cash.

Yet it’s unclear how many U.S. retailers have gone fully cashless. In a 2021 survey, 85% of sellers who accept cash and use the online payment processing service Square said they never plan to stop taking cash, according to Shelle Santana, an assistant professor at Harvard Business School who has been analyzing Square transaction data.

High-profile national chains that stopped accepting cash in recent years—such as Amazon Go stores and the fast-casual salad chain Sweetgreen—reversed their policies after facing criticism for excluding shoppers who rely on cash.

During the pandemic, the federal Centers for Disease Control and Prevention has encouraged stores to use “touchless” payment methods, such as apps, to prevent surface transmission of COVID-19. But the agency has also noted that the virus primarily spreads through the air, not by clinging to surfaces.

Supporters of cash transaction legislation say it’s still important to reaffirm the use of coins and paper money.

About 7.1 million U.S. households don’t have a bank account, according to the Federal Deposit Insurance Corporation’s latest survey in 2019. Rates are highest among low-income, Black, Hispanic and Native American households, as well as households headed by a person with disabilities, the FDIC survey shows. Nearly half of the unbanked people surveyed told the agency they can’t afford to maintain a minimum balance in an account.

By requiring businesses to accept cash, lawmakers can prevent retailers from discriminating against unbanked people, even unintentionally, said Carol Hedges, executive director of the Colorado Fiscal Institute, a Denver-based think tank.

“This seems to me to be one [policy] that’s a relatively burden-free way to make sure that we don’t accidentally, or unintentionally, create additional bias in the system,” she said.

Is Cash King?

Much of the cash transaction legislation that advanced before the pandemic was motivated by social justice concerns, as people of color are less likely to have bank accounts, debit cards or credit cards.

“Moving to cashless transactions would be quite exclusionary to already economically vulnerable populations,” said Diane Standaert, senior vice president for policy and advocacy at HOPE, a credit union and development organization based in Mississippi.

More than 1 in 5 Black Mississippians lack a bank account, Standaert said. “We see exactly who would be excluded by any move to go cashless,” she said.

Although only 5.4% of U.S. households lacked bank accounts in 2019, according to the FDIC, that share fluctuates with the state of the economy. In 2011, just after the financial crisis and Great Recession, the unbanked rate hit 8.2%.

Colorado’s unbanked rate—which was 3.3% in 2019—may have risen since then because of the recession caused by the pandemic, Valdez said. “We need to look at the long-term implications of the economic disruption,” he said. “There are an increasing number of people who won’t be able to make ends meet.”

Going cashless works for some retailers because it allows them to process payments faster, Harvard’s Santana said. Mercedes-Benz Stadium in Atlanta, for instance, stopped accepting cash in 2019 to minimize lines at concession stands. Some businesses also prefer cash because it saves them money on credit card processing fees.

There’s little data available on how many businesses went cashless during the pandemic, or how long those policies lasted.

MAD Greens, a fast-casual salad chain based in Golden, Colorado, stopped taking cash in April 2020 because of health and logistics concerns, Peggy Littleton, director of marketing, said in an email. “Cash requires extra time, effort and resources, all of which have been scarce in our industry for the past year,” she said.

The company began accepting cash again last month, Littleton said. “This was not politically motivated in any way,” she added, noting that the company hasn’t taken a position on the Colorado bill.

Square sellers processed more cashless payments last spring, during the height of COVID-19 stay-at-home orders. The jump most likely reflected a surge in online sales, Santana said, rather than a decision to refuse cash.

Many of Square’s sellers are small eateries such as coffee shops, restaurants and delis, which weren’t offering much takeout before the pandemic forced them to limit in-person service. “That wasn’t their main business model,” Santana said of takeout. “And then that became their main business model.”

Cash now comprises close to 30% of Square’s U.S. transactions, down from about 40% in March 2020. “There is this surprising resiliency of cash. It keeps hanging around,” Santana said.

Legal Tender

Lawmakers who’ve sponsored bills that would require retailers to accept cash say they were surprised to learn there isn’t a federal requirement.

“I never knew that this had to be done at the state level,” Valdez said. “I figured that the federal government had done this.”

Mississippi state Rep. Chad McMahan was so certain businesses had to accept cash that in a viral 2020 Facebook post he falsely told constituents that if their cash payments were refused, “the debt is paid in full.”

“If you are a business owner and you refuse to take cash, you are breaking the law,” McMahan, a Republican, wrote.

McMahan sponsored a bill this year that would have required businesses to accept cash, unless the seller suspects the cash is counterfeit, the buyer is contractually obligated to pay electronically, or no attendant is present because electronic devices offer 24-hour services. Under his bill, refusing cash would be a misdemeanor offense punishable with a $100 fine.

The bill died in committee. McMahan’s office did not respond to Stateline’s requests for comment.

Cashless transaction bills have been opposed by some Republicans and business leaders, who argue that businesses should be able to decide how to serve customers.

“If you are a small business owner, it should be up to you how you want to take payment,” Colorado state Sen. Rob Woodward, a Republican, told The Colorado Sun last month. “For some, they may want chicken or eggs or credit cards, what have you.”

North Dakota state Rep. Ben Koppelman, a Republican sponsor of a cash transaction bill, acknowledged in written testimony that the issue involves balancing a buyer’s rights with a seller’s rights.

“There are two traditional and fundamental conflicting freedoms here,” he wrote. In this case, the buyer’s right to pay however they choose should prevail, Koppelman argued.

But his bill was overwhelmingly rejected by the Republican-controlled state House, 70-21. Koppelman did not respond to requests for comment.

Valdez’s bill would make it a crime punishable by a $250 fine for Colorado retailers that accept payment in person to refuse cash (with some exceptions, such as when customers need to provide a credit card number to pay a security deposit). It passed the state Senate with a single GOP vote but won more Republican support in the House. Democratic Gov. Jared Polis has yet to sign the bill.

Valdez said the bill wasn’t particularly controversial. “The truth is, this is better for merchants anyway, because they don’t have to pay processing fees and the like,” he said.