CHECK CHECK-UP More reasons why checks are here to stay
Putting things in perspective,
Cummins Allison points out that although electronic banking has become
increasingly popular in recent years, checks remain a common and highly used
method of payment in the United States. A 2010 Federal Reserve Payments Study
estimates that there are still 24.4 billion checks written in the United States
annually. In fact, checks written from person to person increased by 3% per
year between 2006 and 2009.1
While the use of credit cards and
electronic payments has grown in popularity, many consumers and businesses are
not ready to abandon the use of checks. In some cases, paper checks offer
certain benefits that electronic payments cannot, such as:
· Security in transaction-Some consumers remain
hesitant to adopt electronic payment methods due to security concerns and
uncertainty around who will have access to their personal banking information.
For many, especially older generations, a tangible check offers a sense of security
in the financial exchange between two parties. Checks also offer a paper trail
that can easily be followed, and if a check is lost or an incorrect payment is
made, banks can prevent the check from being cashed.
· Careful spending habits-Checks promote careful
and conscious spending habits by encouraging consumers to balance their
checkbook. According to SuperValue Checks, credit cards can motivate consumers
to spend as much as 30% more on purchases than if they paid with cash or check.
Actively writing a check and balancing a checkbook helps consumers recognize
the amount they are spending, whereas charging items on a credit card can lead
to impulsive spending.
· Business and personal transactions-Checks remain
a widely used and accepted form of payment, particularly in the business world.
According to the Federal Reserve, from 2006 to 2009, business-written checks
increased from 41.9% to 46.9%. Checks written by businesses accounted for 82.8%
of the total check value. Paper checks are also frequently given as gifts since
they can be used anywhere and at anytime, compared to cash that can easily get
lost and gift cards that limit where they can be used.
· Cost-effective payment method-Electronic payment
forms may be growing in popularity, but traditional payment methods remain
highly cost-effective. Both cash and checks still play a critical role in the
national payment system. This is demonstrated by the fact that nearly $1
trillion in U.S. currency circulated last year. Economists Jeremy Gerst and
Daniel Wilson articulate unique benefits of cash, such as its appeal as a
back-up store of value, which makes it likely for currency to continue to play
an important role in the U.S. payment system. Cash and checks go hand-in-hand,
as checks are a way to carry around large amounts of cash without the risk of
actually handling the currency, while purchasers find carrying currency more
preferable to writing out checks.
Despite the recent decline in their
use, paper checks remain an integral part of today's commerce. In fact, the
2010 Federal Reserve Payments Study also revealed that there were 27.8 billion
checks written in the United States in 2009 that had a total value of $32.4
trillion and an average of $1,165 per check. Consumers and businesses still
using paper checks benefit from the security and flexibility provided by this
traditional payment method. At the same, these businesses can take advantage of
today's check processing technology that can process deposits quickly and
accurately, providing even greater speed and service for consumers and
businesses using checks, and the retailers, business, and financial
institutions they work with.
[This article was posted on November 8, 2012, on the website of ABA
Banking Journal, www.ababj.com.]