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I hear this claim every now and then. That US currency is legal tender and that it is illegal to not accept it.

The most recent example of this was on an old episode of 30 Rock: The head and the hair.

I was not able to find a clip online, however I did find this transcript.

Cashier: No $100s, Small bills.

Liz: Oh, I knew this was gonna happen.

Cashier: Store policy.

Liz: Yeah, Well, That's an illegal policy. You have to take this.

Cashier: No, I don't

Gray: Yeah sir you do, it says "legal tender for all debts, public and private."

Cashier: Does it say anything about $100 for a bottle of water?

Gray: You can't decide what money you'll accept. That's illegal.

Is this claim accurate?

Joshxtothe4
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  • I'm currently reading the Russian translation of [It's not About the Coffee](http://books.google.ru/books/about/It_s_not_about_the_coffee.html?id=XQRnbGQ-iQAC&redir_esc=y) and there one of the Starbucks top bosses says that until some moment they refused to accept 100 dollar bills and at some moment they decided that it was inconvenient for their customers and so they changed the policy. I can't believe it is possible that Starbucks would do such thing if it was illegal - they would be sued in no time. – sharptooth Jan 27 '12 at 13:54
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    [Amusingly, in Australia, coins are not necessarily legal tender, depending on the amount presented!](http://www.rba.gov.au/banknotes/legal-framework/index.html) – Peter K. Jan 27 '12 at 15:50
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    @PeterK. Very interesting! It's a great way to prevent wheelbarrows of pocket change being given as payment out of spite. – Sonny Ordell Jan 27 '12 at 16:04
  • If this claim was true, then all vending machines would have to accept all denominations of currency. – Sam I Am Jan 27 '12 at 16:39
  • Interestingly, in Europe many establishments and services have no-cash policies, instead accepting electronic payments only (usually not retail shops though). – vartec Jan 27 '12 at 16:54
  • @SamIAm I think machines would be exempt as they can't enter into a contract... – Sonny Ordell Jan 27 '12 at 17:02
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    Also see this question: http://money.stackexchange.com/questions/482/it-is-legal-for-a-retailer-store-or-other-business-to-refuse-50-100-bills-or – Ian Clelland Jan 27 '12 at 17:43
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    @PeterK: the legal tender laws in the UK are also weird - Bank of England notes are only legal tender in England and Wales, while Scottish and Northern Irish notes aren't legal tender anywhere (see [here](http://www.bankofengland.co.uk/banknotes/about/faqs.htm#15)). – James Jan 27 '12 at 18:49
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    @James - I know - not even in Scotland :-) – Rory Alsop Jan 27 '12 at 19:41
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    No. It's worth looking up what 'legal tender' actually means. It's a technical term relating to debt. Unless that transaction involving water also involved a debt then the term is simply irrelevant in that context. –  Jan 27 '12 at 23:57
  • @PeterK. same is true in many countries, for precisely the reason fiven by Sonny. – jwenting Jan 30 '12 at 06:59
  • @PeterK The same in Canada. I'm wondering if a question on how these laws work in Canada would be too close to this one? – Canageek May 11 '12 at 13:32
  • There is also an issue of offering too much. In most circumstances, there is no legal obligation to provide change. – Henry Sep 17 '12 at 07:05
  • The US could simply issue electronic currency and solve the problem. After the Metric system goes in to common use, of course. –  Nov 20 '15 at 22:49

3 Answers3

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This is one of the more irritating claims I hear repeated. It's not specific to the US either.

The answer is no, merchants have no obligation to accept money for a purchase.

The simple reason is that US currency is only legal tender for debts. It is illegal to refuse legal tender for a debt. When you make a purchase at a store, there is no debt.

Rather, you and the merchant are agreeing to enter into a (very brief) contract. If the merchant doesn't agree to the terms of that contract, i.e. the currency denominations someone wants to pay with, he has no obligation to enter into that contract.

This is based on Federal law which states that legal tender must be accepted for all debts. There is no law stating that legal tender must be accepted for other purposes.

The U.S. Treasury states quite clearly:

There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. 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. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

Coinage Act of 1965, Section 31 U.S.C. 5103

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. Foreign gold or silver coins are not legal tender for debts.

Sonny Ordell
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    How does it work when you pay afterward, like at a restaurant (as you have already eaten the food so there is no possibility to cancel the sale)? – Random832 Jan 27 '12 at 15:08
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    @Random832 It's my understanding that in that case, they would have to specify their payment policies before hand. In practice I don't think too many people go to restaurants and try to pay with small change. Accepting larger denominations is not as much of an issue. – Sonny Ordell Jan 27 '12 at 15:13
  • @SonnyOrdell: I would have thought it was the other way around: giving change on a large note depletes their reserves of change, putting them at risk of running out. Getting lots of small change only means whoever carries the cash to bank has a heavier weight, but means they'll have plenty of change available. – Jivlain Jan 27 '12 at 15:29
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    @Jivlain I wouldn't think so, but I guess it would depend on what kind of business they are doing. On a typical day if someone wants to pay with a $100 bill they should have enough $20 bills to give change without running out of change. That's assuming that people paying with large bills is an uncommon occurrence. – Sonny Ordell Jan 27 '12 at 15:34
  • @Random832 good question, I wonder if it is the customer's responsibility to understand the terms of the contract before consuming the good. – DQdlM Jan 27 '12 at 15:36
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    @Jivlain I don't think the main reason many businesses ban $50/100 bills is that they'd deplete their ability to make change for future customers. Minimizing losses from counterfeiters is the dominant concern. – Dan Is Fiddling By Firelight Jan 27 '12 at 15:39
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    Also, some stores have a policy of not keeping large amounts of cash in the register to remove the incentive for robberies. (The cashier must deposit excess cash into a safe he cannot open). – BlueWhale Jan 27 '12 at 15:46
  • @DQdlM I think the common interpretation under contract law is that if the restaurant did not make it clear before they entered into a contract what they would accept as payment, then they must accept anything as the customer would be settling a debt. In practice it just isn't much of an issue. – Sonny Ordell Jan 27 '12 at 15:48
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    It's also worth noting that in those cases where "legal tender" has real meaning (payment of a debt in court), not all denominations will be considered legal tender for all amounts in some jurisdictions (no paying them a truckload of pennies out of spite) and also, you cannot demand change and must give exact payment (so in the 30 Rock episode, if they insisted the shop-keep could have taken then whole $100 for the bottle). – Jon Hanna Jan 27 '12 at 15:59
  • @JonHanna That's a great point I failed to mention. It's exactly the reason you're not entitled to change on some bus lines for example. – Sonny Ordell Jan 27 '12 at 16:02
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    @DanNeely - Many convenience stores in the US banned them after a rash of counterfeit 50 and 100's were accepted. You could go in buy a 50 cent candy bar leave with 99.50 in real money and leave the fake bill. That is much less of an issue today with new anti counterfeit and detection techniques. – Chad Jan 27 '12 at 17:31
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    @Chad relatedly, in the UK there are notes produced by the Bank of England that are legal tender, and others produced by individual banks in Scotland, Northern Ireland, and the Channel Islands that are not (strictly promissory notes from the bank in question). However, at one point there were so many Bank of England forgeries in Northern Ireland (it's not like explosives grown on trees...) that many shops refused the legal-tender notes but would take the non-legal-tender notes. – Jon Hanna Jan 27 '12 at 17:56
  • @JonHanna that's correct. Trying to use Scottish money in England was a nightmare. It was impossible to exchange it outside of the UK. – Sonny Ordell Jan 28 '12 at 01:25
  • In your given example, there would be an alternative solution - accept the $100, and then not provide change. Simply write down a note saying that change is limited to $19 or less, hang it up and tell the customer if they want to pay 80 for a bottle of water, its fine with them. And then if they accept, give the money an extra going over... – jmoreno Jan 29 '12 at 02:49
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    In restaurants, unless there is a clearly specified contract (there isn't), then there is a debt and legal tender would be sufficient to pay it. In fact, that's one of the few cases where the legal tender laws actually apply in practice – Richard Gadsden Jul 01 '12 at 17:07
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    `It is illegal to refuse legal tender for a debt.` >> I think it is important to call out that refusing currency for a debt is **not illegal** in the sense that you will be fined or imprisoned. If legal currency was refused, a judge can (and most likely will) wipe the dept clean. –  Jul 11 '12 at 15:39
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    In the EUR-zone a contract about acceptable payments is very easily established: by the ticket machine saying which coins it accepts, or "no change is given" or by a note at the restaurant door or more commonly at the gas station that they do not accept denomination > 100 EUR. EUR-law says that no one besides central banks has to accept more than 50 coins for one payment. – cbeleites unhappy with SX Oct 14 '12 at 17:51
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    Interestingly, in Poland you can't refuse the sale on arbitrary basis. You may have no change, the cash register can be broken, or the wares may be restricted (say, liquor for minors) but otherwise, if it's on display with a price, given that amount of money you are obligated to sell it. This is a part of anti-discrimination laws. The likely origin is shops that refused to service Jews before IIWW. – SF. Jan 03 '13 at 11:14
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    Even if refusing the currency is illegal, the converse would also be true, and you couldn't refuse $99.50 in pennies as change. – Chris Cudmore Jan 17 '13 at 18:06
  • In Poland, and in other countries, refusing a sale on the basis that giving tons of change has a huge risk of "cleaning" forged money, and is mighty inconvenient if the store has no change left, isn't refusing "on an arbitrary basis". – gnasher729 Sep 29 '14 at 07:12
  • @gnasher729 that sounds ridiculous. I don't think anyone would try to "clean" money by converting it to coin. Do you have a reference? – Sonny Ordell Oct 01 '14 at 01:02
  • @SonnyOrdell I'm not sure gnasher meant the number of "change bills". It might mean the amount of money. For instance, in the US, say you give me a 100$ bill to pay for a 1$ water. I might worry that you are trying to "clean" your counterfeit bill by making me pay you 99$ in change. In this case, the amount of change is a large amount in dollars, compared to the cost of the purchased item. – Patrick M Nov 22 '14 at 18:45
  • @PatrickM OK, I still don't see that as a valid reason to refuse a sale. It is a very inefficient way to 'clean' money, and I don't think that would happen often enough to warrant it being the basis of refusing a sale. – Sonny Ordell Dec 04 '14 at 01:14
  • How does this relate to public debts, like parking tickets and the such? If I wanted to pay a $1,000 USD littering fine, would I be able to do so in pennies out of spite? – Anoplexian Oct 19 '17 at 15:36
  • I think whether or not there is a debt really depends. For example, if you entered a restaurant, finished your meal, then you are asked to pay, and you only have $100 bills. Do you think now you are in debt of the restaurant or not? – High GPA Jun 01 '22 at 23:11
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Just want to point out that while Sonny Ordell said that it is not specific to the U.S... here in Canada, we have a law regarding what has legal tender or not and in what context.

Under the Canadian Currency Act (R.S.C., 1985, c. C-52), there is a limit to the value of a transaction for which one can use only coins to pay for a product or service: A payment in coins referred to in subsection (1) is a legal tender for no more than the following amounts for the following denominations of coins:

  1. forty dollars if the denomination is two dollars or greater but does not exceed ten dollars; (20 two dollar coins (toonies))
  2. twenty-five dollars if the denomination is one dollar; (25 one dollar coins (loonies))
  3. ten dollars if the denomination is ten cents or greater but less than one dollar; (100 dimes)
  4. five dollars if the denomination is five cents; and (100 nickels)
  5. twenty-five cents if the denomination is one cent. (25 pennies)

source: http://laws-lois.justice.gc.ca/eng/acts/C-52/page-1.html

Faust
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    This is old, but I have to comment, I would of been sooooo screwed by this in college! Roommate and I once went to wal-mart and bought our groceries in the self checkout line with nothing but our change, mostly because that's all we had at the moment. If I recall correctly my purchase was something like $22 in mixed coinage (quarters, dimes, nickles, pennies). And I wish I could say this happened only once! – Ryan Oct 17 '16 at 18:15
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While the accepted answer is accurate for US currency, different laws exist in different countries. In Norway, cash is considered legal tender and a merchant is therefore required to always accept it. The only limitations are that the merchant can deny more than 25 coins of a single unit, and can deny damaged or torn money. This is regulated by the §14 of the central banking law and §38 of the financial agreement law.

§ 14 states that the coins and bills of the Norwegian Bank are legal tender in Norway.

§ 38 states that a consumer always has the right to perform a payment using legal tender with the payment receiver.

Lstor
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  • I would reckon that in Norway there is no legal obligation to accept US currency, which the question is about. :) – Kit Sunde Jul 09 '12 at 03:12
  • I don't read Norwegian, but it seems very clear from § 1 that this law applies to financial contracts, ie debts, not to merchants. – Evan Harper Aug 21 '12 at 18:34
  • It is correct that the financial agreement law mostly applies to financial institutions, with some exceptions regulated by the law itself, e.g. § 9. I am not a lawyer, but the way I understand it, § 14 of the central banking law in itself is sufficient to force a merchant to accept cash. For an informal discussion, again in Norwegian, see http://www.desk.no/b/150/kan-ruter-nekte-a-ta-imot-500-kroner-for-trikkebilletten/. (@jcelden, John Christian Elden, is one of Norway's best lawyers.) – Lstor Aug 22 '12 at 12:33
  • You are not a lawyer, and the question is whether (1) the merchant has to accept you as a customer, and what was only mentioned in passing, whether (2) the merchant has to give you large amounts of change for a small purchase. Fear of being handed fake money, and the inconvenience of their till emptied of cash. – gnasher729 Sep 29 '14 at 07:09
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    @gnasher729 What an amazingly unconstructive comment. My occupation does not affect the correctness of my answer. The answer highlights that countries other than the US might have different legislation, since Sonny Ordell states that his answer is "not specific to the US". "Legal tender" means, at least here in Norway, that the merchant can't deny you as a customer based on how you want to pay. In other words, my answer answers the original question (but for a different country). Please try to understand before making unconstructive, ad-hominem and simply wrong comments in the future. – Lstor Sep 29 '14 at 10:32