Can shops refuse cash? Here’s what you need to know

While cash was once king, the UK is becoming an increasingly cashless society in which card payments are dominant. According to the British Retail Consortium (BRC), cash usage represented just 19% of transactions in 2023.

It is for shops to decide whether they adopt a card only approach to payments, but what are the restrictions surrounding cash? This article will explore the UK laws regarding in-store cash payments, the pros and cons of accepting cash as a small business, and what the future of cash payments in shops looks like.

What are UK’s laws on cash payments in shops?

Lots of people argue that paying with cash should be accepted everywhere, but this isn’t always the case. Ultimately, it is up to each business to decide whether to accept payments by cash, card or both – to be clear, it is completely legal for a shop to refuse cash payments.

There is a common misconception that cash should be accepted as it is ‘legal tender’ – but the Bank of England has noted that this definition isn’t relevant in everyday life. Instead, the term ‘legal tender’ is more applicable to situations like a court-ordered debt repayment, when cash couldn’t be refused as a payment method.

It is for businesses like shops to determine the best payment method for their operation, considering the pros and cons of restricting payments versus accepting any payment method.

What are the benefits of accepting cash payments in shops?

Some small businesses still like to accept cash, and that’s completely okay – remember, it’s for each business owner to decide which payment method or methods best suit their operation style.

Some of the perks of accepting cash in shops include:

• Saving money on card processing fees, which can range from 0.5% to 3.5% of each transaction, depending on the payment processor
• Allowing customers to choose which payment method works best for them
• Giving customers a different way to pay if a technology glitch limits card payments

Accepting card payments requires small businesses to handle customers’ electronic payment data, which is highly sensitive and confidential – this means they must invest in security that protects this data. This isn’t a necessary investment for cash payments.

What are the cons of accepting cash payments in shops?

Many shops have moved to a card-only approach to accepting payment. This is often for two key reasons:

Cash management costs

Many customers are unaware of the admin involved for businesses that accept cash. The term cash management simply refers to all of the tasks related to handling physical cash – and there are many.

As well as being time consuming, there can be additional cost implications for business handling cash. In addition to the fees imposed by some banks for accepting cash, small business owners also have to consider the security implications, staff training involved, and insurance costs related to handling cash – and don’t forget, cash needs to be taken to the bank too, creating another question surrounding the transportation of large sums of money.

The risk of robberies

Many of us will have noticed signs in shop windows noting that they don’t keep cash in store overnight, or perhaps at all – this is to deter potential thieves.

Removing cash altogether from a shop’s operation makes it much harder for criminals to rob a business – or even for untrustworthy staff to steal from the business. Counterfeit notes can be a significant issue too – so if you don’t accept cash, you eliminate the risk of being paid in counterfeit notes.

How do other countries approach cash payments in shops?

We’ve established that card payments significantly outweigh cash in the UK – but how do other countries compare?

It’s a mixed bag. In Spain, cash is still one of the most popular payment methods in-store. In 2023, 65% of the population had used cash on a daily basis and for 60% of the country, cash continues to be the main or most common means of payment for purchases in physical shops.

Interestingly, 7.8% of the Spanish population only uses cash to make purchases – with that figure rising to 15.2% for over 65s.

Elsewhere, the use of cash continues to decline – notably in Denmark. Though cash transactions are declining year on year here, one in eight still prefer to use cash as a means of payment in stores – and more than half of all cash payments in physical trade in 2023 were made in grocery stores.

Unlike the UK, Denmark’s ‘cash obligation’ states that businesses in physical trade are obliged to accept cash unless they are covered by the exceptions in the Danish Payments Act – such exceptions include self-service environments like unstaffed petrol stations and temporary events such as markets.

To find out more about the global landscape of cash payments, check out our list of the countries closest to going cashless.

What is the future of paying with cash in shops?

As shown, the approaches to accepting cash payments vary from country to country – and this is evidence that there is no one-size-fits-all solution as to whether or not to use cash in-store.

In the UK, the number of people shopping with cash actually rose in 2023 for the first time in a decade, but card payments remain the most popular method.

Looking ahead, banking trade body UK Finance expects debit cards to become increasingly popular and cash usage to fall.

However, the trade body says the rate of decline in cash use is expected to slow as use is concentrated among those who strongly prefer to use cash – notably those who have been hit particularly hard by the cost of living crisis, and find using cash an easier way to keep track of spending versus card payments, as well as older generations who are more familiar with cash.

Final thoughts

There are a huge number of variables to consider when deciding whether or not to offer cash payments to your customers in-store. Key benefits of accepting cash include allowing customers to choose their payment method and saving money on processing fees, but the downsides include security risks and cash management costs.

It’s important to note that there is no right or wrong answer to this conundrum, so take the time to consider your customer base and their preferences, and whether accepting cash will bring sales that outweigh the associated costs and admin.

Kirstie Pickering - business journalist

Kirstie is a freelance journalist writing in the tech, startup and business spaces for publications including Sifted, UKTN and Maddyness UK. She also works closely with agencies to develop content for startup and scaleup clients.