OMAHA, Neb. — Some consumers may still be writing checks, but merchants increasingly are scanning those checks and converting them into electronic payments.
That, accompanied by the increasing use of credit and debit cards, may be tolling the end of check writing.
The Federal Reserve estimates that 49.5 billion checks were paid in the United States in 1995, compared with 36.6 billion in 2003.
The widespread availability of debit cards and the growing popularity of plastic are the biggest factors in the decline of check writing. From 2000 to 2003, the number of debit-card transactions nearly doubled, from 8.3 billion to 15.6 billion, and the number of credit-card transactions jumped from 15.6 billion to 19 billion.
Julie O’Neill of Omaha said she thinks her credit card is more convenient than writing a check, and all her spending is compiled on one statement at the end of the month.
When it comes time to pay bills, she turns to her computer instead of her checkbook because she can pay her bills at the last minute.
“I procrastinate, so then I can go online and not have to go through snail mail” to pay bills, she said.
Together, credit- and debit-card use accounted for 43 percent of all noncash payments in 2003, compared with 33 percent in 2000.
Richard Kesterson also favors online bill payments, and lets his bank keep track of his spending.
“I haven’t balanced my account in 10 years,” he said.
The decline in check writing, combined with the increase in electronic check processing, prompted the Federal Reserve to dramatically reduce the size of its check-processing department, whose operations are covered by the processing fees it charges for handling checks and electronic transfers. Since 2003, the Fed has closed more than half of its 45 check-processing centers, and by the end of 2008, only 18 such centers will remain operational.
At some stores that process checks electronically, such as Wal-Mart Stores Inc. and clothing retailers Gap Inc. and Banana Republic, the clerk hands the check back to the consumer with his or her receipt after scanning it and claiming an electronic payment for the store.
Converting checks to electronic payments allows merchants to get paid quicker, and it may help reduce the number of insufficient-funds checks that businesses have to deal with. Processing checks electronically also is cheaper than processing paper checks.
In 2003, about 8.9 billion converted checks were reported, accounting for about 11 percent of all noncash payments.
Consumers may not realize that many of the checks they write to utilities, mortgage companies and other businesses also are being converted to electronic payments when those companies receive the checks, said Terri Bradford, a payments researcher with the Federal Reserve Bank of Kansas City.
Some business payments might be better suited to checks than electronic payments, Ms. Bradford said. Writing a check instead of authorizing a wire transfer or making some other electronic payment may help a business better manage its cash flow because there is still some delay between when the check is written and when it is received.
“From a cash-management purpose, I imagine some businesses would still prefer checks because of the float,” she said.
Ms. Bradford said there’s no way to predict how quickly check writing will continue to be replaced by electronic payments.
Still, checks continue to be used because older consumers are comfortable with what they have used for years. And Ms. Bradford said there are still some transactions for which checks are better suited, such as paying the neighbor youth who mowed the lawn or making a contribution to the church, to have a record of charitable donations at tax time.
Joe Abboud wrote a check for his groceries at a store recently because that’s what he always does.
“I write a lot of checks,” he said.
Another grocery customer, Cheryl Carlson, said she usually writes checks to help keep track of her spending. When writing a check, she always notes the amount in her register, but she sometimes forgets to do that with her debit card.
“The only time I use my debit card is when I leave the checkbook at home,” said Ms. Carlson, who is in her 40s.
Ms. Bradford said checks might remain popular for transactions in which the payment must be guaranteed, such as at real estate closings, especially when people and small businesses are involved.
And she doesn’t expect checks to entirely vanish.
“There’s a certain segment of the population that’s going to write checks,” she said. “You probably get stuck behind them in the check-out aisle.”
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