Don’t worry if stores aren’t accepting cash…

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Five pound note

You could always suggest Pokémon cards as a form of payment – say the Bank of England – if the store is willing, of course

By Dr Monica Vessio, Associate Lecturer, FBL; Research Associate Centre for Banking Law, University of Johannesburg

Through the ages, money has taken various forms, from feathers, cowrie shells, gold and silver to cash and bank deposits. While most of the money in the UK is held electronically as deposits (96%), a small proportion (4%) is still held in physical form as cash (banknotes and coins). Despite the relatively low percentage of cash compared to bank deposits, cash continues to be important. There are over 70 billion pounds of notes in circulation.

Most recently, and because of the Covid-19 pandemic, many store holders are refusing to accept cash. The immediate question that arises is – but cash is legal tender, so are stores not obliged to accept this form of payment?

According to the Bank of England, a shop owner can choose what form of payment they are prepared to accept. If you want to pay for a pack of gum with a £50 note, it is perfectly legal for them to refuse to accept this payment type. It is, apparently, entirely, a matter of discretion. If your local corner shop decided to only accept payments in Pokémon cards, the Bank of England says that would be within their right to.

Legal tender takes on a narrow technical meaning and means that if you offer to fully pay off a debt to someone in legal tender, they cannot sue you for failing to repay.

As to what is classed as legal tender varies, depending where you are in the UK. In England and Wales, Royal Mint Coins and Bank of England notes are legal tender, while in Scotland and Northern Ireland it is only Royal Mint coins and not banknotes. There are further restrictions when using small coins. For example, 1p and 2p coins only count as legal tender for any amount up to 20p. Cheques, debit cards and contactless are not legal tender. Bank of England notes stop being legal tender, once withdrawn, but don’t worry the Bank of England will give plenty of warning before they retire any notes.

Kiyotaki & Wright (1993) tell us that the most important function of money is probably its role as a medium of exchange. While, Wicksell (1906) explained that a medium of exchange means “an object which is taken in exchange, not on its own account, . . . not to be consumed by the receiver or to be employed in technical production, but to be exchanged for something else within a longer or shorter period of time.” Thus, if you could talk a store into accepting Pokémon cards in exchange for bread and milk or other “essential” items, you would not be paying in legal tender but certainly a legal and valid transaction will have occurred.