Stop using paper checks.
That is quite a bold statement, but should you? After all, checks have been a part of the global payments system for hundreds of years, dating back to the 1600’s in the United States alone. But recent advances within the payments industry have rendered paper checks nearly obsolete. Plus, considering that all of your information is printed on a paper check – name, address, account number and even sometimes your phone number – they can be a fraudster’s dream. In fact, the Automated Clearing House (ACH), which is the system the United States uses to move money in and out of accounts, recommends people stop using paper checks altogether. In an article on Fusion.com, author Felix Salmon details two scenarios in which money was very easily removed from checking accounts, without raising any red flags from the banks. The first involved a young woman whose account was cleared out by a man who got her routing number and checking account numbers, and the second was an experiment by Salmon himself, in which he has a coworker see if she could pay a bill with funds from his account. She did, with no questions asked.
According to a statement from the National Automated Clearing House Association (NACHA) to Fusion.com, the organization said the smartest thing for consumers to do to protect the money in their accounts is to ditch paper checks entirely. “The most effective way for consumers to safeguard bank account numbers is to stop using paper checks,” NACHA told Fusion.com. “Since money transferred electronically passes through fewer hands than a paper check, electronic payments can be a safer option for consumers.” In fact, some experts believe that check writing and cashing will be obsolete within just a few years. According to a Business Insider article by Owen Thomas, the number of paper checks is dropping by about 1.8 billion a year, a rate which, if it holds steady, should mean paper checks will meet their end in 2026.
Eliminating paper checks is also more cost effective – the average cost of a paper check transaction is $3.00, versus an average of $0.26 and $0.50 for an ACH transaction and $1.50 for a payment card transaction. Combine that with the results of an Association for Financial Professionals (AFP) survey that says increased efficiency (reducing time spent writing, mailing, collecting and reconciling paper checks) would be the primary reason for making the switch from paper to electronic payments for 88 percent of responding companies, it’s no wonder the paper check is looking at the end of its life.
But there are those who still believe paper checks serve a purpose in today’s increasingly electronic payments space. A 2014 Banks.com article says checking accounts are used by nine out of 10 American households, but of course many of those checking accounts are tied to debit cards, which are often tied to MasterCard or Visa and used like credit cards when making purchases. According to the Federal Reserve, there were 18.3 billion paper checks paid in 2012, and checks made up 15 percent of non-cash payments that year. Many consumers still rely on paper checks for day-to-day transactions, and there are still businesses that operate on a cash or check basis – they do not accept credit cards or NFC payments. David Walker, president and CEO of the Electronic Check Clearing House Organization in Dallas said, “Checks are different, in that any one of us who has a checking account can initiate those payments to anybody else.” As not everyone has credit cards or access to NFC payments, this is an important point.
So, does all of this mean you should ditch your paper checks and go wholly electronic? The answer is probably no, as they still serve a purpose in some scenarios. For example, if there was a widespread power or phone system outage, or if the internet was to go down for an extended period of time, cash and checks would likely be the only way to pay for goods and services. For this reason alone, checks are not likely to disappear from our payment options completely, as they will have their place, but those who use them need to be smart about how to do so safely. For day to day transactions, you should probably choose another payment method first, but when all else fails, despite the efforts of some organizations, the humble check is still ready, willing and able.