It's come up a lot lately, and I know a lot of new members aren't going to want to search through pages of threads to find an answer before posting a question for the 100th time this week...
Is it rude to have a cash bar? Yes.
Why? Because your wedding reception is a thank you gift to your guests for attending your wedding, and no one should be expected to pay for any part of their own thank you gift.
But, I can't afford to pay for all of my guests to drink! There is no rule that says you have to provide alcohol at your wedding reception. Yes, many people like to drink, but you are planning this thank you gift for your guests and you should plan what you can afford and host it graciously. If that means you serve a simple dinner and non-alcoholic beverages, that's okay. Just make sure that whatever you do serve is not paid for by your guests.
But, if people want to drink, shouldn't I accommodate them and allow them to get a drink on their own dime? No. Firstly, your guests should not be so rude as to expect anything specific at your reception, other than a meal (if it is a mealtime) or some refreshment (if it is a non-mealtime), so while I understand your desire to make them happy, this is not something that should even come up. If you are hosting your reception properly, your guests should not need to supplement what is provided with anything additional. We all need to be able to act like adults and expect other adults to act like adults.
But, everyone I know had a cash bar! Why shouldn't I? It it's normal, it can't be rude! We almost all know at least one couple that has done this. You shouldn't because you know better and it's so avoidable. Just because something is common, does not mean it is not rude. Tradition or commonness is not a good reason to be rude.
Okay, how about we have an open bar for cocktail hour and then switch to a cash bar? Or continue hosting beer and wine but switch to cash for hard liquor? This isn't a good idea. You want to avoid cash bars, as we already know, and you also want to avoid changing what is available and confusing your guests/making them uncomfortable. You want to avoid this because, remember, you are hosting this party as a thank you gift to your guests. Their comfort should be of the utmost importance to you.
But, I had a last minute change of circumstances and now I can't afford to host what I originally planned - surely my guests will understand! It sucks when plans change - when someone has an unexpected medical bill, a death in the family, a major car repair, anything that can set you back financially is an unneeded stress, especially when you are in the home stretch of wedding preparations. But take heart - what your guests will definitely understand is if you opt not to serve alcohol at your wedding due to a last minute change in financial circumstances. And if a guest holds this against you, the guest is being rude, not you.
But, it's not my job to get my guests drunk! I don't even like drunk people! Then have a dry wedding. Having a cash bar will not keep people from getting drunk. Just stop by a regular bar sometime for confirmation. Having a cash bar for this reason is insulting to your guests and a very poor excuse.
But, if I can't afford to host an open bar all night and I am not comfortable having a dry wedding, what other options are there? Luckily, there are other options. How many of these are available to you depends on your venue, so consider this at the very beginning when you are researching venues. If you are locked into a venue and have a change in financial circumstances, do everything in your power to get your venue to adjust accordingly. The options available to you are: hosted beer and wine all night, open bar without top shelf liquor, limited bar with specific options (say, a couple of beers, a couple of wines, and a couple of signature drinks or specific liquors with mixers). Whatever you choose, make sure it works for your venue and make sure there is signage posted on the bar with the available drink options so that your guests do not have to guess what is available.
Like I said, I'm not forcing anyone to buy a drink - it's up to my guests whether they want to open their wallets at my wedding! I know you aren't forcing anyone to spend money, but the problem is that it really isn't fair to flash something nice in front of your guests at their thank you party that you aren't actually offering. It's somewhat of a tease. Also, in a way, you're inadvertently making it so that your richer guests with more expendable income will be able to potentially have a better time at your wedding than the others. You really should give all of your guests equal treatment which stops happening when certain features of your wedding cost money.
Okay, I hear you, but I still think my reasons are special/circumstances make it okay/you don't know anything about me/etc. Listen, no one here can stop you from doing as you please. We're not the wedding police. We're just here trying to give and receive the best advice possible so that we all have great weddings and our guests have a great time and leave happy. What you do it ultimately up to you. There's no reason to try to justify rude behavior - if you insist on having a cash bar, so be it. But consider the advice above - it was written by someone who has no reason to lie to you.
(ETA an additional line of reasoning and response by suggest of @allispain)