“Isn’t That Illegal?”

I was sifting through my RSS feeds the other day when I came across this story at Consumerist.com, which talks about how Alaska Airlines will no longer accept cash as a form of payment for in-flight services, such as drinks, headphones, etc.

As it happens with every single article about forms of payment, someone in the comments section of the article asked “Isn’t it illegal not to accept cash?”

The short answer: no.

A merchant can set any rules they want as far as accepting payment goes. He can accept cash only. He can accept credit cards only. He can accept cash and credit cards. He can accept cash and Mastercard only, or cash and Visa only. He could even accept “live chickens only” as his sole form of payment, if he were so inclined.

What he cannot do is refuse cash as a form of payment for a debt, then take you to court over non-payment of the debt. If, for example, a local convenience store offered to set up a “tab” for you, then refused to take a cash payment for that tab at the end of the month, he cannot take you to court over non-payment. That’s what “legal tender” means: payment that, by law, cannot be refused in settlement of a debt. And a “sale” is not a “debt”, so yes: the merchant can absolutely refuse your cash. Or he can refuse large bills. Or he can refuse pennies.

And while we’re on the topic of credit cards and money, here are a few issues you might encounter with credit cards that may or may not be “illegal”:

Merchants requiring minimums for credit card use: According to the agreement signed between a merchant and Visa or Mastercard, the merchant cannot have a “minimum charge” policy. You might have seen signs posted in bars and take-out restaurants saying “$10 minimum charge for credit cards”. This is a blatant violation of the merchant agreement; click here to learn how to report merchants who violate this rule to Visa, Mastercard and American Express.

Merchants charging more for credit cards: According to the merchant agreement, stores cannot charge more for using a Visa, Mastercard or American Express. You might have seen signs in stores that say “3% surcharge for using credit card”. This too is a blatant violation of the merchant agreement. What merchants can do is give a “cash discount” for purchases, but this discount may apply to cash payments only; checks, gift cards, etc. do not count as “cash” in this example.

Merchants asking for ID: Merchants cannot ask for your ID when making a purchase with a credit card. Frankly, I don’t see what the big deal is with this rule. In a perfect world, I’d like to protect my privacy, but with all the thieves running around, I honestly don’t mind this “rule” so much. Especially since I’ve been to the UK, where I was asked for my ID every single time I used my Visa card.

You MUST sign your card: You might think you’re being clever by writing “See ID” on the back of your credit card. Visa and Mastercard don’t see it that way. If you don’t sign the back of your credit card, you don’t have a valid card, as far as Visa and Mastercard are concerned. The little stripe on the back of the card is for your signature only. A merchant would be well within his or her rights to refuse a card with “See ID” written on the back instead of your signature.

None of the above is “illegal”: In most states, none of the four things I just listed are “illegal” in the sense of “a criminal act that can lead to prosecution”. They are, however, violations of the merchant agreement signed between the credit card company and the merchant, or yourself and the credit card company. As such, they can be taken to court over breach of contract. But despite what the angry fat woman ahead of you in line says, it’s not “illegal” in most places for merchants to charge more for a credit card purchase.

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