Why do we still use paper checks?
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Listener Peter Roof from Arlington, Virginia, asks:
Why are we still using checks? These pieces of paper need to be snail mailed and are subject to fraud. Why do we keep using a 17th century financial instrument in the 21st century?
Peter Roof, who writes checks maybe a couple of times a year, said he expects he’ll have to use a check when he pays the contractor working on his house.
“Many prefer checks over paying large fees to accept credit cards. I need to dig that checkbook out of the bottom of my desk drawer and practice a bumpy squiggle that serves as my signature,” he said.
While checks are used less frequently than other payment methods, some people still rely on them. Checks made up 4% of U.S. transactions in 2022. In comparison, cash accounted for over 17% of transactions and credit or charge cards were used in over 31%, according to data from the Federal Reserve Bank of Atlanta’s Survey and Diary of Consumer Payment Choice.
Why some consumers (including young people) still use checks
There are a slew of reasons explaining our continued check use. Many check writers have had lots of positive experiences with them, and it can be difficult for people, in general, to change their behavior, explained Cynthia Cryder, an associate professor of marketing at Washington University in St. Louis.
Cryder said that for those who have written checks most of their lives, other payment options might “feel unknown” or hard to understand, prompting them to distrust these methods. And people often just value physical items more than digital ones.
“Part of the reason might be that we feel like we can have more ownership over physical things, but also they just can feel more real. They're more tangible,” Cryder said.
She pointed out that, moreover, there have been news headlines about security breaches related to digital information, making digital payments seem unsafe, even though services like Apple Pay and Google Pay are more secure than credit cards.
“Google Pay or Apple Pay has your credit card number, and then they create a unique code for every transaction with the retailers,” she said.
As you might expect, check use is higher among older people, while younger people have embraced solutions from tech providers like Apple and PayPal. But these are generalizations. Bill Maurer, an anthropology professor at the University of California, Irvine, said there are also young people who still rely on checks.
He said that millennials and Gen Zers are using or going back to using cash and checks because it can help prevent overspending compared to "frictionless" digital payments, which can require only a few taps.
Payment methods such as credit cards also come with interest charges and can lead some consumers to pile up debt, while some people may also see managing online passwords as a burden or a hacking risk.
Then there’s the matter of how to transfer money if you’re making a gift. If you’re donating to a charity or, now that it’s an election year, a campaign, experts point out that paying by credit card will cost the organization, which is why cash or checks are generally preferable.
Plus, sometimes it feels like the more personal option.
“If I'm gonna send you money for your birthday, it's nicer to write a check and put it in a card and put it in the mail than it is to just Venmo you,” Maurer said.
Even if you didn’t want to, some businesses will only allow you to use checks.
“I have recently started taking care of my aging mother. And I've never written so many checks in the past 10 years as I have in the past couple of years for her because every health care provider that she sees, when there's a copay, only accepts checks,” Maurer said.
Maurer said small businesses that only accept checks and/or cash don’t have to worry about payment card industry compliance or paying a payment service provider.
“The only thing that they might have to pay for with checks is just the labor involved in accounting and taking them to the bank.”
He added that small businesses and nonprofits also like them for managing cash flow because they don’t have to part with their money immediately — you can postdate a check for a week from now, or later.
The downsides of a paper check
While there are plenty of valid reasons to use checks, our listener Peter Roof along with many experts point out that checks are subject to fraud.
Crooks can steal them and fill in a different name and amount after removing the ink. They can forge your signature on a blank check or obtain valuable information about you, such as your address, your bank account number and your bank's routing number.
The U.S. Treasury’s Financial Crimes Enforcement Network issued an alert in early 2023 warning people about check-related fraud schemes. FinCEN wrote that financial institutions filed 680,000 suspicious activity reports with the network in 2022, almost double the number of 2021. Thomson Reuters reported that fraud increased during the pandemic as the government mailed COVID-19 relief checks far and wide.
If your bank accepts a fraudulent check, Maurer said, you won’t notice it until you get your statement.
“And then there's going to be a whole procedure between you and the bank to challenge it,” he said.
To prevent fraud, the U.S. Postal Inspection Service recommends that you don't drop checks in the blue collection boxes or leave them for your letter carrier to pick up. Instead, it advises that you take them to your local post office to send off.
Despite these downsides, Maurer said it’s hard to say whether they’ll ever become obsolete or what the future holds for payment by paper.
He pointed out that in the U.K., an organization known as the Payments Council attempted to phase out checks in 2009, but the decision stirred a backlash from banks and groups that represent older people, prompting the council to reverse course.
Maurer said that since people are living longer, check-writing veterans may help to sustain the practice even longer.
“Any business that they're interacting with is gonna have to accept their preferred mode of payment,” he said.
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