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The "Legal Tender" myth


old man emu
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Those of us who have grown up before the age of the credit/debit card and other associated electronic payment methods often hold the belief that it is illegal to refuse to accept currency notes or coins (in reasonable amounts) to satisfy a debt. We rankle at having to use plastic for trivial purchases under, say $5 to $10. Surely, if the Government mints coins and prints currency notes (which bear the wording "Legal Tender"), then it must be illegal for a creditor to refuse them. But this is a myth.

 

A business can publish the terms and conditions for payment, and in those terms rule out the acceptance of coins and printed currency. The conditions would also have to include options for payment by non physical means. We have long seen signs that say that cheques are not accepted, and we accept that because we understand the concept of the rubber cheque. But since good ol' COVID19 many businesses have altered their terms and conditions of trade to allow them to refuse accepting physical items in payment.

 

Service Stations have these conditions displayed at the their front doors - a pretty silly location since the customer has already taken delivery of goods (petrol) before going to pay and before being able to see the sign. One soon learns, however. Today I went to the library to pick up a book on interlibrary loan. The fee was $2, but my coin was not accepted. But I did not want to use my debit card that was in my wallet. My financial institution allows a certain number of free "tap'n'go" transactions per month before it starts charging a fee. Likewise there is a limited number of free EFTPOS transactions allowed per month. You can see that over a period of a month, those limits are going to be passed if every single transaction has to be "on the plastic". Fortunately I was told I could pay later.

 

And then there is the cost of using the plastic. As part of its terms of trade, ALDI charges a fee for the use of cards. But if places will not accept coins and printed currency, who is going to carry large amounts of cash (remember a weekly grocery shop can be over $250) just for one shop. Businesses are permitted to charge a fee, equal to the processing cost, on electronic transactions. With, say conservatively, 10 million Australians making these small transactions every day, a fee of a dollar here, fifty cents there is a great little earner for the Banks, since the actual cost of maintaining the electronic databases for financial transactions probably sits close to a cent or two per transaction.

 

According to research by market analyst East & Partners, cash payments across Australian businesses could fall below 2 per cent by 2022, creating a virtually cashless society. The Commonwealth Bank of Australia, on the other hand, has taken a more conservative approach, predicting that Australia will be cashless by 2026. In light of recent events, this change may occur sooner than expected. 

 

I suggest that people exchange $188.65 in credit to obtain one of each printed note and  minted coin in uncirculated condition and put them aside as family heirlooms for the generations to come. Perhaps by 2030, or earlier, these things will no longer be produced.

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I hardly ever carry cash. I've had 85c in coin in my pocket for over a month. If I need cash, eg the pizza shop charges $2 for using EFTOS, then I buy some groceries at Woolies and get the required cash out of the checkout. I pay my bills by Bpay and pay over the counter by tap'n'go.

 

Currency does carry a lot of unwanted stuff. I will always remember being a bank teller in the 60's. One business customer was a fish shop. When they banked their takings, it stunk to high heaven. If currency can carry fish odour, imagine what germs it can carry and spread.

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Just to correct you on one thing, OME, the vendor always has to accept physical legal tender... It's just the means he accepts the transfer from you to him can be stipulated. So, when you move money electronically from one account to the other. you are transferring ownerhip of physcial currently you own (or have right to use).

 

I can't think of the last time I used cash. maybea few coins for car parking not too long ago.. I have had the same £5 note in my wallet for about 6 months - even the moths have moved out... These days, swiping the card (or phone or watch) for a 35p transaction is not unusual. Almost eveyone in the local convenience store lets out a collective sigh when a biddie pulls out her purse and starts counting notes and coins.

 

Of course, payment companies don't charge the consumer and extra fee; and vendors are prohibited by law for charging a transaction fee. So the price you see is what you pay...

 

Although, swiping a card/phone/watch does have a drawback if one is out having a few drinks with mates.. Those few drinks can add up pretty quickly if all you do is swipe the card and don't see the cash exiting your wallet/account.. Suddenly, you've spent th dinner money without knowing it.

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1 hour ago, Jerry_Atrick said:

Just to correct you on one thing, OME, the vendor always has to accept physical legal tender. Of course, payment companies don't charge the consumer and extra fee; and vendors are prohibited by law for charging a transaction fee. So the price you see is what you pay...

That might be the case in the British Utopia, but out in the Antipodes the opposite is the rule.

 

1 hour ago, Jerry_Atrick said:

Almost eveyone in the local convenience store lets out a collective sigh when a biddie pulls out her purse and starts counting notes and coins.

Hmmm! Convenience shop checkout - the place where Karens congregate 

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22 minutes ago, old man emu said:

That might be the case in the British Utopia, but out in the Antipodes the opposite is the rule.

Yes, but it is to enlighten you to take action against your financial oppressors... 😉

 

22 minutes ago, old man emu said:

Hmmm! Convenience shop checkout - the place where Karens congregate 

Hmmm.. another quaint ritual from the colonies, eh? :amazon:

 

 

Edited by Jerry_Atrick
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Yep, cash is dying out far faster than predicted, but we’d be crazy to rely totally on electronic transfers. I carried the same notes all thru COVID, until I needed them when the system was down.
Now that relations with the Middle Kingdom are frigid, expect more hacking events and Denial of Service outages.

 

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I was in WA years ago and needed something from a plumbing supply shop. The internet was down and I could not buy it. They did not even know the price they were asking and would not accept the notes I offered which was a fair price, probably more than they were asking.

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Yes, I've been in the same situation where the transaction system went down and they couldn't accept cash either, as they had no facilities for cash handling. This is often done to prevent petty theft, many pubs lose a lot to employee pilfering.

 

One of the things that annoys me is the charges laid on you by the likes of auction houses, who charge a 1% "handling fee" for taking cash!! That should surely be illegal, but they get away with it.

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I can't understand why banks or vendors charge for electronic transactions - the cost is so much less for them than handling cash.. In the old (and current days), you pay a shop cash, they have to count it, manually reconcile to the till, take it all - often at great risk of being robbed - to the bank; or use secure transport like Armourguard - which is additional cost.Of secure transport companies get involved, that is obviously a cost and needs a further reconciliation. Then  it gets to the bank where someone has to count it and handle it/store it... ank branches only keep a certainamount of cash so they have to ship any excess (or if they are down, they have to have it shipped in). Then, of course, the damaged notes and coins have to be transported for destruction and replacements minted.

 

Compare this to leaving the curerncy in the vaults and having a record of ownership. Oddly, with the advent of bitcoin (well, blockchain technologies), it is even cheaper than it was to securely manage the electronic transfer of ownership. All you are doing is moving a few electrons around and using a bit of disk space. Yes, you need teams to manage and support the electronic systems, and individually, they are expensive. But as a collective cost, it is far cheaper than the old manual cash way.

 

The main problem, as above,  is when the tech fails or servicing some of the more remote regions. It can be addressed as the amount of information that can be stored on the cards these days is a lot.. For example, when I first came to the UK, my debit card had £100 printed on it.. It was the amount that the bank would guarantee to the vendor if I wrote a cheque or had to use the card for manual payment. That has since gone, however, a scard scanner can, without reference back to the banks' central systems work out how much your balance was last and how much you have since spent.. and what should be left.. You could also put a limit of offline transactions based on the cardholder's financial capacity, etc. The scanner can add to the transactions on the card (or fail the transaction because of the limit), store the transactions and when the connections come back up, the transactions are fired to the payment provider/bank.  There are different ways of handling it... Just needs to be thought through...

 

If I were a bank, I would be charging for handling cash and making electronic transactions free...

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I would say it is because Australia has weak regulators, and this was borne out by the Royal Commission.. where it was found the NAB drafted public responses by ASIC to complaints or issued consultations, or something similar... You wouldn't believe it. The UK had the Financial Serviuces Authority, which was directed by Labour Treasurer at the time, Gordon Brown, to use light-touch regulation - and that is one of the reasons why we had the financial crisis in 2007/2008 hurt so much here... Thankfully, the EU financial regulator, although went overboard with the conduct regulations, were not having a bar of this light touch stuff anymore. Unfortunately, in that light-touch era, the UK regulator lost of lot ofskilled and experienced regulatory staff who knew where to look.

 

If you tighten up the regulators so they are accountable for doing their job properly, mandate in banking law the necessity to treat the customer fairly and act in their best interests (which is law here since the crisis), and have the guts to clamp down on their unfair practices, as well as have an ombudsman/person with teeth, these practices will go away...

 

Because of the importance of credit records, I proposed a law change that an institution neglecting their duties of accurate notification to the credit agencies that has a detrimental impact on a consumer's credit record is to be automatically held to pay £5,000 compensation to that consumer and that value should index with a financial services profitabiilty index, not CPI or other price indexes... It was met with ferocious objections and never made it to a formal submission, but it would mean they would clean up their act...

Edited by Jerry_Atrick
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Spacey, if you have access to a computer and an email address, you can access your credit score at several websites quite easily, without the need for a drivers licence number.

 

All that is needed is your date of birth, and two forms of ID, such as a copy of a birth certificate, a passport number, or a medicare card number.

 

Other acceptable forms of ID such as Veterans cards or other verifiable Govt-issued cards are likely to be acceptable, if you explain you don't hold a drivers licence.

 

https://www.finder.com.au/free-credit-report

Edited by onetrack
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