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Cash vs. credit: Businesses face several considerations

While customers may prefer to pay for items in cash, there is no federal requirement that private businesses accept it, according to The Federal Reserve. However, four states have passed legislation requiring states accept cash payment, and there are valid reasons to consider doing so, even during a pandemic, said Nexsen Pruet attorney Yolanda Davis.

The states that have passed such laws — Massachusetts, New Jersey, Rhode Island and Connecticut — are “thinking about the 8.4 million households who don’t have bank accounts, or the household that is made up of working-class Americans that don’t have credit cards,” said Davis, an associate in Nexsen Pruet’s corporate and tax practice group based out of the firm’s Charlotte office.

“It’s kind of making sure that those households are still able to pay for things, that they have the tender for their debts or any charges that are due,” she said.

Carrie Palmer, a Nexsen Preut member attorney based out of Charleston and head of the firm’s General Counsel 360 legal team, said cashless businesses have been in vogue since before the COVID-10 health crisis. Credit-only transactions can make on-premise security monitoring simpler and faster, with retail employees not having to wait for customers to fumble for change, she said.

“The point-of-sale system is a way to track revenue to make sure that the revenue-based compensation is being accurately calculated, and certainly that’s easier when you’re dealing in all electronic transactions,” Palmer said. “There can be a lot of different reasons for it.”

The issue of payment options has come in sharper focus recently, however, as a coin shortage caused by the pandemic has led many businesses to post signs asking customers to use exact change or another form of payment. The Federal Reserve began rationing coins in June, while last month, the U.S. Mint encouraged consumers to spend, deposit or exchange coins for currency.

“Until coin circulation patterns return to normal, it may be more difficult for retailers and small businesses to accept cash payments,” the Mint said in a statement. “For millions of Americans, cash is the only form of payment, and cash transactions rely on coins to make change.”

“People staying home, ordering in — whether it’s groceries or food or other things for delivery, using online payment apps, things like that — means that there’s less cash in circulation,” Palmer said. “People that have coin jars at home that they take to a grocery store, a bank, once a month and turn into green money or deposit into their bank accounts — they’re not doing those things right now. So there really is a shortage of cash in the system.

“Nobody believes that we’re running out of cash or that anything sinister is going on. It’s just one of those satellite issues that is occurring as a result of the lockdowns.”

Also crippling crash transactions are fears that coronavirus can survive on paper money. A March study cited in an article by The Associated Press found that the virus can live in the air for several hours and on some surfaces for two to three days, but the tests conducted by U.S. government and others scientists did not find instances of infection through breathing air or touching contaminated surfaces.

Palmer teamed with Davis to write a legal article addressing the issue of cashless payments, noting Atlanta’s Mercedes Benz Stadium as an example of a business recently going cashless but providing options such as cash-to-card kiosks.

“Businesses may want to look at things like that,” Palmer said. “But if that’s too much expense for a business, you can get prepaid cards, cash cards, gift cards. Obviously, you have competing needs here. You have what’s called the unbanked, or the credit-free part of society, and then you’ve got all these other [business] considerations, whether it’s for security or minimizing expense associated with transacting in cash.”

In the article, Davis and Palmer advise best-practice measures including posting signs informing customers of a no-cash policy.

“By making the required payment method known in advance, (i.e., posting a sign on the front door or on a menu) if a customer proceeds in requesting a service or consuming a product, the customer also agrees to the payment term,” they wrote in the article.

The article also cites examples of local ordinances in South Carolina, which it notes are “sparse.” In Myrtle Beach, local laws require gas stations to receive full payment in advance by options including cash or credit card, while in Charleston, every vehicle storage facility within city limits must accept major credit cards in addition to cash.

“Neither North nor South Carolina has legislation regarding cashless payments or payment policies, leaving private businesses free to create payment policies without restriction,” according to the article, which also points out that while states do not have to alert customers of cashless policies, N.C. Attorney General Josh Stein has called doing so “the right thing to do.”

The article concludes: “Without specific legislative guidance, developing and publicizing payment policies should be carefully considered.”

“Businesses are going to have to make a decision about who they serve,” Palmer said. “Certainly there are some businesses that this (payment issue) may impact less of the population, and there are some businesses that it may impact more. They’re going to have to make a specific determination as to the population that their business serves.”