Can You Pay Back a Debt in Pennies?

Published

June 15, 2015

Gerri Detweiler focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.

Imagine $2,064 in “nice rolls of quarters nickels and gold dollars” and then imagine trying to use that money to pay a bill. One of our readers tried to do just that. Whether he was ticked off about having to pay that debt (he did say he videotaped his attempt), or whether that was simply the cash he had on hand, he says his payment was refused.

His question to us: Can they really turn down legal tender for the payment of a bill?

The answer is normally yes. You’ve no doubt seen signs at gas stations or convenience stores saying bills larger than $20 are not accepted. It’s much the same thing. In fact, banks have been known not to accept payment in coins (or to redirect the would-be payer to a branch with a large-enough safe to accommodate the payment).

Banks have to verify and count the coins, says Nessa Feddis, senior vice president of the American Bankers Association, and it costs them money to do so. “People think that if banks have machines that count the money, then it should be free, but the machines cost money,” she said. And you have to wonder about the motivation to pay in a manner that requires a wheelbarrow.

Furthermore, there is no law that entitles people to use coins to pay their bills.

The part of law that applies to accepting money is the Coinage Act of 1965, specifically Section 31 U.S.C. 5103, entitled “Legal tender.” It says, “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.”

“This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor,” according to the U.S. Treasury website. But there is no federal requirement that a private business, a person or an organization must accept currency or coins as payment. Private businesses can develop their own policies unless there is a state law that says otherwise. “For example, a bus line may prohibit payment of fares in pennies or dollar bills,” the website says.

As cumbersome as it may be to accept payment that comes in coins, sometimes businesses do so. (If you’re going this route, it’s best to have the coins neatly rolled and to get the business’s permission.) If your payment is rejected by a creditor because it’s being made in coins, keep in mind that you may want to consider using another payment method to avoid a potential late fee and a late payment recorded on your credit report. You can check your credit scores for free on Credit.com to see if late payments are affecting your credit.