Checks are the Rocky of the payments world. Even when faced with numerous payment competitors, checks keep hanging in there, again and again. They get little respect but almost every adult has a checking account. Their demise has been predicted for years, yet checks continue to be a popular, versatile and affordable way to pay for merchants, consumers and businesses.
Here are 10 reasons that checks are not going away anytime soon:
1. Consumers like payment choice. Payment options at the point of sale used to consist of cash, check or charge. Today? Think about credit card, debit card, check, money order, travelers check, prepaid card, PayPal, Google Wallet or mobile. According to a Federal Reserve report on Consumer Payment Choices the average card user has 1.3 debit cards, 3.7 credit cards and 2.3 prepaid cards. Even with all of these options available, check use is second only to debit as the most commonly used non-cash payment transaction.
2. Consumers want payment flexibility. Take a look at the resurgence of layaway programs this holiday season. We want to buy now but pay a little later and we don't want to apply for credit. Credit cards come with long-term debt and interest. Enter check guarantee programs such as Hold Check or Multiple Check. These check payment services allow consumers to stretch out payment over a period of time, with no interest or late fees.
3. Checks are affordable to accept and process. Class action lawsuits against the credit card companies over fees charged to merchants have dominated the headlines recently. Check acceptance at the point-of-sale does not incur interchange fees. Fees are charged for guarantee and verification services, but those fees are half of typical merchant credit card processing fees.
4. Consumers don't carry large amounts of cash. What's in your wallet? It's probably not much cash. Consumers carry, on average, less than $100. Checks are a safer alternative than carrying large amounts of cash and are widely accepted for purchases and payments.
5. Spending habits differ among generations. Check use is higher among the baby boomer generation than among twenty year olds. Most businesses need to cater to customers in a variety of age groups. Keep in mind that as consumers age, their needs change. The college freshman using his phone to buy sushi today may be purchasing a gourmet range with Multiple Check in the future.
6. Businesses usually pay other businesses by check. Almost all B2B payments are check based. As a business owner you probably pay your vendors by check. You probably have businesses as customers, too. Coffee shops, lumber yards, car dealers, and a multitude of business types serve business customers. Businesses like the control and financial management that paying by check gives them.
7. Checks provide merchants with payment protections that credit cards and debits do not. Checks have immediate finality of payment and merchants are protected by both the Uniform Commercial Code and banking law. ACH transactions are governed by Regulation E., a consumer protection statute giving consumers sixty days to dispute an item. Customers have months to dispute credit card transactions, too.
8. Checks provide a record of payment. Many of us remember getting a stack of cancelled checks in our bank statement each month. After a quick look they'd be stuffed in a shoebox and occasionally it would be necessary to take one out, photocopy it and use it to prove payment. Now images are stored by the bank and made available online. You can easily see where, when, how much and to whom the check payment was made out to. Even better, no more shoe boxes or cancelled checks floating around.
9. Sometimes it's more convenient to write a check. Ok, we're not talking about the grocery store line, but there are times when writing a check is a whole lot better than using a debit card or cash. Paying the plumber, the babysitter, the landlord or writing a check for a donation are great examples of times that a check works best. Checks provide a receipt and are widely used for P2P (person-to-person) transactions.
10. We still write a ton of them. According to the Federal Reserve over 90 percent of US adult consumers have a checking account. Only about 70 percent have credit cards according to the same study. Over 20 billion checks are written each year for over 30 trillion dollars. Yes, trillions! Checks remain a pervasive way to pay for consumers and businesses. Billions of check transactions are not going to disappear very soon.
Check services, check use and check transaction processing have undergone huge transformations in the past 20 years. Checks are efficient, comfortable, affordable and safe and no other single payment method has been able to replace them. For more information on checks and check services, contact us for a free guide.