Is Cash No Longer Legal Tender?

An anonymous reader asks: "I attend the University of Illinois at Chicago. Last semester my housing arrangements went smoothly. I put down my application fee, and my deposit just fine, got a room for the semester and life went on. This semester, because there was supposedly a large number of students who did not check into their rooms last semester, we were required to make a $100 prepayment, in addition to the application fee and deposit. No problem, I think, I see the university is trying to make a quick buck off people who don't follow through with their plans. Now I do NOT have a checking account, a credit card, or anything. I don't trust the banks, or the credit card companies, so I am one of the few people who do EVERYTHING in cash. However, they refused to take the cash. Is it legal for a state-owned university, let alone any business to not take legal tender?" The housing department also will not charge my university account (so I can pay the bursar or whoever I need to) in cash, and they want a check or money order. Nowhere in their letter did they say that. I fear out of technicality I am going to loose my housing since I cannot get them their money on time because they do not take cash.

What can I do?"

Comments

buy a money order.

[the unbeliever]

Just go get a money order from the post office or even a convenience store.

Doing everything in cash, imo, is sort of retarded. I don't particularly trust banks either, but when inconvenience impacts me regularly, I make concessions.

Re:buy a money order.

[DavidTC]

Ah, you're confusing cashier's checks and certified checks. All cashier's checks are certified, but all certified checks are not cashier's. Certified checks and money orders are 'normal checks', just on accounts that are untouchable by the owners. Banks have basically stopped writing certified checks, because there isn't a lot of point...if something needs assurances of funds, that now is normally done by a electronic transfer.

A cashier's check, OTOH, is written on the bank itself, not on an account in the bank. (Well, technically, they're written on an account owned by the bank, but whatever. The bank must honor it no matter what.) Certified checks and money orders have an account 'in your name' (Or, in the case of money orders, a bearer account for the possession of the receipt.) with the money behind them, although it's an account you can't actually touch. Cashier's checks do not. They aren't backed by, even if it's just in some theoretical sense, 'your' money in 'your' account.

They are most often issued in situations like you said, where a financial institution wants to give money to someone 'in your name', but not in any way that you can legally claim ownership of the money while in transfer. This is almost always because the financial institution is give you some sort of loan to pay off someone.

Or, for a nicer POV, they do it to let you avoid the tax liability that being given that much money, even if you then immediately handing it to someone else, could incur. It was never legally yours, and thus you do not have to pay taxes on it.

Let's say that you need to pay James 250 dollars to buy his TV, but can't, so I've offered to pay it for you and you can pay me back. A cashier's check is like I write a check for James, and give it to you to pass along, getting your TV in exchange...you don't pay taxes on that. (You wouldn't anyway, but whatever.) The money went from me to James, and later money is going to go from you to me. Two money transfers. You physically possessed the actual check, but not the money behind it.

OTOH, a certified check is is if I put the money in an (somehow legally untouchable by you) account in your name, write out a check on that account and have you sign it, and have you give that to James. You would legally own that money for a short period of time. When you factor in your repayment to me, that's three money transfer, me to you, you to James, and you to me, so more possible taxes, and a place for you to screw with the transfer while the money is legally yours.

(Notice when I was talking about taxes, I was talking about income and whatnot, not sales.)

Here you go...

[HaeMaker]

The more you know.

Re:Payment of Debt

[TheWanderingHermit]

Legal Tender means it can be accepted as a payment of debt.

While it's not in the US, Ottawa will no longer accept cash when used to pay for taxes.

Also, in the U.S. there is no law requiring anyone accept cash as payment. I know Heinlein thought otherwise in some statements in "Time Enough for Love," but it's not true. For a little more, read this. As someone else pointed out, the legal tender issue will only work for paying debts incurred, not ones about to be incurred.

Re:In some cases....

[HaeMaker]

You are correct sir. See US Treasury site:

http://www.treas.gov/education/faq/currency/legal- tender.shtml

Only creditors have to take legal tender, so if you pay first, they can place restrictions on form of payment.

Re:It's Your Choice

[nagora]

These days credit is more and more important. If you don't have it, many places won't give you a chance to get it because you have no credit record.

The funny thing is, I don't want it. Credit is really just newspeak for "debt". The only debt I ever want to have, and I don't really want it very much, is a mortgage. Credit cards are useful occassionally - my fiancee and I use hers maybe three times a year - but I'd much rather use my debit card. Aside from anything else, my debit card doesn't pretend to be giving me something.

As for borrowing: get a loan from a bank. Borrowing on a credit card is madness, interest-wise.

TWW

Re:Very good question.

[antifoidulus]

If you exchange money at the airport you are doing it wrong. Horrible, HORRIBLE rates. Find an ATM, or if you must exchange some money for local transport to the city(because you can't find/don't trust an airport ATM), just exchange enough to get to the city, then hit up an ATM. They almost always give better rates than you can get with a travelers check or cash.

Re:It's Your Choice

[MrAngryForNoReason]

The only debt I ever want to have, and I don't really want it very much, is a mortgage

The problem with this is that it can be very difficult to get a mortgage if you have no credit history. Unless you have borrowed money in the past and paid it back on time banks have no way to gauge whether you are likely to pay your mortgage. It is only by borrowing every increasing amounts of money and paying it back reliably that you can increase your credit rating.

Just to add a bit of anecdotal evidence: My sister has never had a credit card or used an overdraft facility, she viewed this as being financially responsible. When she came to apply for a loan to cover a year studying abroad she was refused on the basis that she had no credit history.

Re:It's Your Choice

[UbuntuDupe]

Yes, I had the same experience when applying for a mortgage. Apparently, when they tell you that you need a solid history of honoring your obligations, they don't mean crap like rent, insurance, utilities, cable bill, etc. You have to have a credit card.

Does it matter that I saved 1/3 of my gross for two years? Does it matter that I paid every bill on time for about three? Does it matter that the mortgage would be less than 1/6 of my gross even at a high interest rate? No, no, and no. I've even been turned down for department store credit cards. Reason: "didn't get a credit card at a young enough age."

(I've since gotten my credit unions to issue me cards.)

What's odd is, my credit history would be substantially longer, and my credit MUCH better if I had done *exactly* the same things as I did before, but moved some purchases I'd make anyway, onto a credit card. Or if my parents had added me as an authorized user at 16 and refused to actually let me use the card. (They're closing the latter loophole ... finally.)

Remember: "no credit" is much, much worse than "bad credit".

Really BAD Idea

[Slashdot Parent]

I Am A Landlord.

What you describe is extremely counterproductive for landlords. Where to begin?

1. As a landlord, you don't pay much tax on your buildings. Because you're only paying tax on your profits, and expenses are astronomical in the rental industry, and you are allowed to depreciate your property for tax purposes, often landlords will show a tax LOSS (or a modest profit), even while turning plenty of profit. Even if you underreport your income, you won't decrease your tax liability by much or anything at all.
   
   Example. Many landlords like a unit to cash flow $100/mo after expenses (mortgage, taxes, insurance, repairs, maintenance, advertising, vacancy, collections, credit loss, etc.) That $100/mo can easily be swallowed up by depreciating the building. Of course, depreciating the building will lower your cost basis and increase your capital gain when you sell the property, but google "1031" for more information on how to fix that little snag.
   
2. When you are applying for a loan or attempting to sell a building, you want to show that building to be operating as profitably as possible. Non-residential real estate is priced based on a multiple of the building's earnings (as opposed to comps), so if you are only declaring 50% or 75% of your rental receipts, you have just decreased the value of your building! Also, you will make it much harder to get a loan because banks want to see earnings. And yes, they absolutely do look at your tax returns.
   
3. When deciding where to be, erm.., creative on your taxes, always remember the following maxim: If you're caught overdeducting, you pay a fine. If you underreport income, you go to jail.
   
4. You open yourself up to fair housing problems. Picture this: a tenant doesn't pay his rent, so you evict. Nothing fancy there. But let's say that this nonpaying tenant is black, and wants to mess with you because he's mad that you evicted him (or he really feels discriminated against. Doesn't matter.).
   
   He calls some infomercial contingency-fee lawyer, sues you for fair housing violations, and during discovery, finds out that ALL of your tenants are underpaying. By 25-50%! But a quick glance at the court records reveals that you did not evict all of them. Why did you single out this one tenant, hmm? Oh, you are in for a costly court battle, settlement, and/or judgment now. Unless you are prepared to testify under oath that you belong in jail for underreporting your income. (And prepared to pay your attorney $10,000.00 for the privilege)
   

Bottom line, this is really the wrong industry to underreport your income in. This is why, even with all of the shady landlords out there, you never see landlords being busted for underreporting.

Re:Very good question.

[SydShamino]

The post office will provide you with a money order for a reasonable fee, and there's no place in the country that will refuse a postal money order.

Re:In some cases....

[Brian Gordon]

Well that's pretty ridiculous- if you had to pay a $100,000 penalty and you tried to pay it in ones, the judge would just make up a different excuse not to accept it. The reason it's not written on the penny is because there's not enough room on the penny and besides it's laws that back currency, not the writing on the currency itself.