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Why Do We Still Use Checks?

Posted by Joe Gargiulo on Wed, Feb 20, 2019 @ 09:45 AM

checksA recent article in Gizmodo, “I Cut the 'Big Five' Tech Giants from My Life. It Was Hell,” provided some inspiration about the old versus the new way of doing things.

Writer Kashmir Hill details her boycott of Amazon, Facebook, Google, Microsoft and Apple, and how it turned into a five-week odyssey “to answer the question of whether it’s possible to avoid tech giants.” Her experience was challenging to say the least.

Hill not only stopped using their products, she also had a technologist design a special network tool that prevented her devices from communicating with the tech giants’ servers.

checksTo summarize the lengthy tale, she was able to successfully email, share files and conduct web searches, but each workaround required a learning curve. Her replacement technologies included a Nokia phone, email by ProtonMail and Riseup, and ask.com as a search engine.

The takeaway here is that technology isn’t always as good as it sounds. In Hill’s instance, the intrusiveness of those tech giants was a primary concern and she was ultimately happier with some of their replacements.

Similarly, accepting debit and credit cards isn’t always as good as it sounds for merchants.

Plastic is useful for selling groceries, gas or electronics, but not the best choice for big-ticket items such as new cars, bedroom sets, or a “due on day of service” invoice at a veterinary hospital. In those instances, paper checks still dominate the field.

Why Are Checks Important?

The simple answer is that some businesses don't like accepting credit cards, and auto dealerships are leading the pack.

CrossCheck’s Brandes Elitch, the director of Partner Acquisitions, explains the parameters in the blog article, “Six Top Key Performance Indicators at New Car Dealerships.”

According to Elitch, “A new car dealer’s profit margin is typically less than two percent, which means they cannot afford to pay credit card interchange fees of 2.5 to 3.5 percent. In other words, why would you pay the card issuing bank the bulk of your profit?”

checksHe drives this point home in an earlier piece, “Do Dealerships Prefer Checks Over Credit Card?

“Now you can see why car dealerships are reluctant to take credit cards, particularly a rewards card, for an automobile sale and why checks are the preferred method of accepting down payments.”

To be clear, some auto dealerships accept credit card payments if buyers agree to cover the dealership’s interchange fees. Very few buyers go this route.

Why Are Checks Still Needed?

Surveys over the past few years show that many Americans — even those making six figures — would have difficulty covering emergency expenses. The reasons vary, but some people don’t save “for a rainy day” while others have simply maxed out their credit cards.

For example, a Bankrate survey (published January 2019) stated:

“Only 40 percent of Americans would pay an unexpected $1,000 expense, such as a car repair or emergency room visit, from savings. That figure is consistent with the range of 37 to 41 percent seen in surveys from 2014 through 2018.

“More than a third would need to borrow the money in some way — either with a credit card, personal loan paper checksor from family or friends. Another 14 percent would reduce spending on other things, while 10 percent would either figure out ‘something else’ or don’t know what they would do.”

Why are checks still needed?

The answer to this question is that CrossCheck has a check guarantee solution giving consumers a little extra time to pay their bills without credit or credit checks.

Why Do People Still Pay with Checks?

Meanwhile, other research underlines (1) the reliance on paper checks for making large consumer purchases; and (2) the preference by consumers and businesses for paying bills by check.

“Consumers tend to use cash and cards for lower-value transactions, and electronic payments and checks for higher-value transactions,” states “The 2017 Diary of Consumer Payment Choices,” a September 2018 report by the Federal Reserve Bank of Atlanta.

In addition, the Q3 2016 SMB Technology Adoption Index (the most recent version) states that 97 percent of small and medium-sized businesses (SMBs) responding to the survey “still rely on paper checks to make and accept B2B payments — a one percent improvement since Q1. … Yes, 97 percent.”

paper checksThe SMB index also posted that “Checks still rule — SMBs that deal with customers in person are 98 times more likely to accept checks than payment via mobile wallets.”

Furthermore, stats from an October 2018 webinar by PYMNTS.com indicate that businesses prefer paying with paper checks (specifically, 64 percent of B2B payments are made by check). The related article states:

“Someone needs to write an epic poem about the paper check. Love it or hate it (and we all say we hate it even though many of us still use it, especially for B2B payments), the payment form not only endures in these supposedly digital times, but dominates the corporate world like some past-his-prime warrior who, nevertheless, still has a lot of fight left in him.”

Are Paper Checks Going Away?

Checks continue to earn a place at the table along with credit cards and ACH payments. Each has pros and cons, but accepting checks offers a competitive advantage.

checksPaper checks help merchants widen their customer reach by offering another payment option. They are also the preferred form of B2B payments as discussed above. Finally, checks are less costly to process that credit cards: less than one percent for checks versus 2.5 to 3.5 percent for cards.

Nearly all payment forms carry risks, and eliminating risk while helping merchants increase sales is the reason CrossCheck has been so successful for over 35 years.

Check Guarantee continues to be CrossCheck’s flagship service because it offers maximum savings and minimum risk to merchants in a variety of industries and verticals.

Download our free guide to learn how Check Guarantee can help your business accept worry-free payments.

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