Cash or Credit? It’s Expensive to Be Poor: How Cashless Businesses Perpetuate Cycles of Homelessness

by Parker Herren, Associate Member, University of Cincinnati Law Review Vol. 92

I. Introduction

In 1690 the Massachusetts Bay Colony began issuing paper notes to fund military expeditions.¹ Other colonies quickly followed in their footsteps, and thus, paper currency in the United States was born.² Nearly two hundred years later, in 1863, Congress established the national banking system, and appointed the Department of Treasury to oversee the issuance of bank notes.³ Over the next several decades, paper currency expanded exponentially.⁴

Following World War II, a boom in consumer spending caused banks to look for more options for the everyday financial needs of Americans.⁵ In 1950, the Diners Club Card was invented, which is now believed to be the first credit card ever.⁶ Credit card companies quickly emerged and gained capital by charging their members fees.⁷ Today, approximately 82% of American adults have at least one credit card.⁸

The emergence of credit cards has led many individuals to forgo carrying cash on hand. In fact, cash usage has been on the decline for several decades.⁹ In 2018, cash accounted for 26% of all payments, and credit cards followed closely with 23%.¹⁰ However, by the end of 2020, cash usage had fallen to 19%, with credit cards rising to 28%.¹¹ Electronic payments allow for increased transaction speeds and convenience, with many customers being able to pay with just the tap of their phone.¹² Additionally, electronic payments can reduce transaction costs for both consumers and businesses.¹³

With cash no longer king, many businesses have made the decision to abandon cash as a payment method altogether.¹⁴ Following this decision, many consumers were quick to call out the discriminatory effects that cashless payment policies can have on impoverished individuals.¹⁵

This article explores how cashless businesses discriminate against individuals of low-income communities. Part II provides background on who is experiencing homelessness in America, along with the rise of cashless businesses. Part III discusses the impact that cashless businesses have on poor and homeless communities. Finally, Part IV concludes by urging for stronger legislation protecting individuals’ ability to use cash as a form of payment.

II. Background

A. Homelessness in the United States: Who is Homeless?

The United States is currently facing a severe homelessness crisis. Approximately 18 out of every 10,000 individuals experienced homelessness in 2022, amounting to a little over half a million people.¹⁶ Moreover, the plight of homelessness disproportionately effects minority communities. According to the U.S. Department of Housing and Urban Development, people of color were significantly more impacted by homelessness than white individuals.¹⁷ The numbers are even more staggering when looking at people who identify as Native Hawaiian or Pacific Islander with 121.2 out of every 10,000 individuals experiencing homelessness; a statistic that is over ten times the rate as that of white individuals (as shown in Figure 1 below).¹⁸

In addition to race, certain areas of the United States have higher rates of homelessness compared to others. Currently, Washington D.C. has the highest percentage of homelessness in America, with 66 out of every 10,000 individuals experiencing homelessness.¹⁹ Standing far behind in second is California with forty-four out of every 10,000 people.²⁰

B. Barriers to Opening Bank Accounts and the “Unbanked”

Along with race and geographic location, the homelessness crisis is further exacerbated by current banking practices. For individuals experiencing homelessness or poverty, it can often be difficult to obtain a bank account.²¹ Many banks require minimum account balances, monthly fees, and a permanent address in order to open and maintain a bank account.²² Jay Stanley, a writer for the ACLU, notes “[o]pening a bank account requires an ID, which many poor and elderly people lack, as well as other documents such as a utility bill or other proof of address, which the homeless lack, and which generally create barriers to participating in electronic payment networks.”²³ For millions of Americans, having a bank account is a luxury some simply cannot afford.²⁴

Without access to a bank account, thousands of individuals are unable to participate in the electronic payment system and economy. To make an electronic payment, both the payer and the payee must have a bank account.²⁵ These transactions can happen both on the internet, and in person.²⁶ Today, approximately nine in ten Americans use digital payments.²⁷

According to the Federal Deposit Insurance Corporation (“FDIC”), an estimated 5.9 million Americans were “unbanked” in 2021, meaning that no one in the household had a checking or a savings account at a bank or a credit union.²⁸ The most cited reason for not having a bank account was not having enough money to meet minimum balance requirements.²⁹ Additionally, minority populations were disproportionately impacted again as unbanked rates among Black and Hispanic households averaged around 8% as compared to 1.7% of White households.³⁰

C. The Increase in Cashless Businesses

In 2016, salad chain Sweetgreen announced that they would no longer be accepting cash as a form of payment.³¹ Sweetgreen cited the main reason for going cashless was to reduce transaction time, stating that “cash management takes two hours a day in each store, regardless of the amount of cash.”³² With less than 10% of all transactions being paid in cash, Sweetgreen decided to take a leap and eliminate cash as a form of payment.³³

Initially, employees at Sweetgreen locations were able to do 5-15% more transactions an hour, increasing efficiency and revenue.³⁴ However, just three years later, Sweetgreen announced they would begin accepting cash again following criticism from consumers.³⁵ In a statement made during their announcement, Sweetgreen wrote: “[u]ltimately, we have realized that while being cashless has advantages, today it is not the right solution to fulfill our mission.”³⁶

In the past decade, many retailers have made the switch to become cashless.³⁷ One of the most common reasons is due to the fact that handling cash can cost retailers money.³⁸ Businesses that accept cash must pay banks processing fees for bills and coins and pay for armored truck services to transport the money.³⁹ Additionally, by going cashless, businesses reduce their chances of being robbed.⁴⁰ These incentives have led many retailers to go cashless, despite the negative impact it may have on financially disadvantaged customers.⁴¹

However, the argument that cashless systems save the company money is not entirely true and might actually be even more expensive.⁴² When customers pay by credit card most merchants pay anywhere from 2-3% of each transaction to the credit card companies.⁴³ This so called “tax” can have detrimental effects on small businesses, and the amount that they pay in fees can sometimes be larger than their profit.⁴⁴ Not only might these cashless systems be more expensive to companies in the long run, it more importantly eliminates an entire group of consumers from their business.

Bill Maurer, the dean of social sciences at UC Irvine, points out that certain groups of individuals, like the elderly, live in predominantly cash based societies.⁴⁵ Additionally, some people with disabilities struggle with non-cash forms of payment.⁴⁶ Maurer also notes that immigrants and refugees often struggle with going cashless as well due to barriers preventing them from setting up bank accounts.⁴⁷

D. Cashless Business Bans

In response to the rise of cashless businesses and its preclusion of a large group of consumers, many jurisdictions have begun enacting laws that prohibit businesses from only accepting non-cash payments.⁴⁸ Most recently, Washington D.C passed D.C. Law 23-187 “Cashless Retailers Prohibition Amendment Act of 2020.”⁴⁹ Section 28-5402 prohibits retailers from discriminating against cash as a form of payment for goods or services, which includes refusing to accept cash as a form of payment, posting signs on the premises that cash payment is not accepted; or charging a higher price to consumers who pay cash.⁵⁰ In late 2023, nearly four years after its proposal, the law was passed and goes into effect at the start of 2025.⁵¹

Recently, other cities like Los Angeles (“L.A.”) have proposed enacting legislation similar to D.C’s. City Councilmember, Heather Hutt of L.A.s 10^th District, introduced a motion in 2023 to ban cashless retail businesses in the city.⁵² The motion states: “[n]ot accepting cash payment in the marketplace systematically excludes segments of the population that are largely low income people of color.”⁵³ The motion proposes an ordinance that allows those who lack access to other forms of payment besides cash to pay cash for goods and services.⁵⁴ The motion unanimously passed in the Los Angeles City Council but has yet to be enacted.⁵⁵

III. Discussion

A. The Future of Cashless Businesses

Printed on every United States bill is the phrase “this note is a legal tender for all debts, public and private.”⁵⁶ A legal tender refers to all U.S. coins and currency that have been issued by the government which may be used to repay debt.⁵⁷ Despite this, no federal statute requires a seller to accept cash as a form of legal tender for goods or services.⁵⁸ Many jurisdictions have challenged this, enacting their own legislation demanding businesses accept cash as a form of legal tender or face monetary damages.⁵⁹

With the rise of cashless businesses, and thus the rise of legislation against cashless businesses, it is imperative that Congress enacts federal legislation protecting consumer’s rights to use cash. Like legislation that has been enacted in jurisdictions such as Washington D.C., this legislation should prohibit retailers from refusing to accept cash as a form of payment for goods or services, except in limited circumstances.⁶⁰ This legislation would guarantee equal access and opportunity to all consumers, regardless of their financial status. Allowing businesses to refuse cash is not only discriminatory against impoverished individuals, but also contrary to the intent of the U.S. currency system.

Additionally, the decline in cash has led to decreased rates of donations to people experiencing homelessness.⁶¹ The acceptance of cash has been a long-standing history and tradition in the United States.⁶² By refusing to accept cash as a form of payment, businesses not only go against tradition, but also discriminate against individuals who do not have access to digital forms of payment. Disadvantaged individuals are unable to participate in the rapidly increasing electronic economy, and without cashless business bans, they could soon be reduced to even less options. The decreasing amount of businesses that accept cash leave the homeless and impoverished with few resources to sustain themselves on.

Federal legislation is crucial to allow for disadvantaged individuals to be able to participate in the economy at the same level of their peers. Without federal legislation, the cycle of homelessness perpetuates. Homeless and impoverished individuals deserve to be able to participate in the economy pursuant to the history and tradition of the importance of cash in our society.

IV. Conclusion

Just as quickly as the rise of cashless businesses came, they shall soon fall for the foreseeable future. It is imperative that Congress act now to protect impoverished individuals from being disproportionally affected by cashless policies. The lack of federal legislation declaring that businesses must accept cash as a legal tender is contradictory to the purpose of the United States currency system. A federal regulation mandating businesses accept cash as a legal tender for transactions is necessary for marginalized communities to have equal access to resources. Congress must act now to protect against discrimination of the unbanked and impoverished.

Cover Photo by Jp Valery on Unsplash

Parker Herren

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