Cash is King? Well…perhaps not

With some retailers refusing to accept cash from its loyal customers – fearing it may carry the Covid virus, the question has to be ‘can they legally do this?’ Are retailers legally allowed to decline notes and coins? In short, the answer appears to be ‘yes’ they can. And ‘no’ you can’t do anything about it.

A spokesperson for the Reserve Bank of New Zealand (RBNZ), the outfit that creates the legal tender that makes up 2% of our money supply, says there is no legal requirement for businesses or retailers to accept cash – as long as they set this requirement out up front.

“Although we certainly urge businesses offering essential products or services to accept cash from people who have no other way to pay,” said the spokesperson. “The term ‘legal tender’ can be confusing. In short, cash must be accepted for the payment of taxes, or settlement of debt where different means of payment were not contracted when incurring the debt.”

You can read all about it on the Reserve Bank’s website here.

The RBNZ spokesperson also said in their written reply that the changing use, preferences and policies around cash use in New Zealand is something the Reserve Bank has been “working on” for a few years.

“Last year (2019) we did a lot of engagement and consultations with social, business and public sector organizations to confirm what’s going on; and we are closely monitoring trends should cash become difficult to obtain or have accepted for those that rely on it,” said the RBNZ spokesperson.

“In short, we see the trend to a less cash society, as consumers head more for electronic solutions and banks and retailers look to manage cash related costs, and we want to be sure that people who rely on cash are not disadvantaged by that.” (The RBNZ has a paper on that too – here.)

Incidentally, the Reserve Bank’s Statement of Intent 2020 notes the following: “As cash use declines, and the per-unit cost of providing it rises, the cash system is increasingly coming under pressure as those that bear the costs are faced with growing commercial incentives to reduce their cash networks and services.

“We will undertake a fundamental redesign of the cash system to ensure that the new system is flexible and supports the efficient use of infrastructure. We will measure our success by the Bank’s ability to meet the public’s demand for cash. This new system will allow us to manage and oversee cash and the cash system to ensure the Bank is equipped to respond to consumers’ demands and commercial banks’ declining incentive to distribute and store cash.

“We will establish a data and information repository to collate, analyse and share cash system information including usage, acceptance, system volumes, and costs.

“We recognise cash’s position within the wider payments system and will ensure that the Bank keeps pace with developments in payments systems, and financial technology more broadly…”


Steve Hart is a writer and podcaster.