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It’s Time to Say Goodbye to the Personal Check

When almost any kind of payment can be done electronically, why are banks still giving out checkbooks?

Dutch Small, a publicist from Houston, has a habit of misplacing his wallet on drunken nights out. That’s why he loves his checkbook. When his credit cards are gone (until, of course, replacements arrive in the mail), he pays via personal check at places like Target, Walmart, Kroger and Nordstrom. “Not a single cashier knew what to do with it, but after calling a manager, they figured it out,” he says. “I hope they will not be phased out until I’ve fully grown up, or I’ll always have to wait until Monday to buy my Cup O’ Noodles!”

With 87 percent of American adults using the internet, more and more things we once did on paper are now done electronically. Snail mail went from a necessity to a sweet, old-fashioned gesture to an annoyance. You can register for health insurance, sign business contracts and pay your bills online, and many do. Still, plenty of banks continue to provide us with personal checks, and plenty of businesses still accept them.

In 1979, a full 86 percent of non-cash payments in the U.S. were made by check, declining to 77 percent by 1995, 59 percent by 2000, and 33 percent by 2006. It continues to drop. The number of checks written in the U.S. dropped by 5.3 billion between 2006 and 2009.

“It wasn’t that unusual 20 years ago to be standing behind somebody in a grocery line and see them take out their checkbook,” says Priya Raghubir, Dean Abraham L. Gitlow Professor of Business at New York University. “[Now], I cannot recall when I last saw that.”

This is largely due to the rise of electronic payments, Raghubir says. People who owe their friends and family money can now turn to apps like PayPal and Venmo. Even many businesses have been taking payments through PayPal and are starting to use Venmo, either under the table or through its new feature for businesses.

While the use of checks has gone down overall, many Americans still keep them handy — primarily for paying landlords and people offering private services. Joseph Cadabes, an accounting clerk who also uses checks to make donations, says he prefers paying people like the piano tuner and the house cleaner with checks so he doesn’t have to worry about getting money out of the bank.

And many service providers themselves prefer receiving checks. Susan Shapiro, a New York-based author and private writing teacher, asks her students to pay by check because she wants a physical record of the transactions and doesn’t want to give out her financial information or have payment services take a cut of her pay. Garnet Henderson, a personal trainer in New York, also mainly takes checks, though she’s started using Venmo and Chase QuickPay. They’re quicker than PayPal (although Venmo was purchased by PayPal in 2014) and have no transaction fee. Most importantly, they don’t require you to carry around change.

But many small businesses are still accustomed to checks. Creative Corner, an art and music studio in West Hempstead, NY, only takes checks and cash to avoid dealing with “all the overhead from credit card companies,” according to manager Nichole Baldino. Diane Ryan-Nida, owner of Premier Designs Jewelry in Texas, takes cards but prefers checks because they require no transaction fee and don’t carry the risk of identity theft like card-swiping does.

Pauline Campos, a writer in Maine who frequently misplaces her debit card, uses checks at her local gas station and ice cream shop. Since she doesn’t live near her bank, she can’t always get her hands on cash, and she can sometimes get cash back after paying with checks.

It’s no accident that all these people live in the U.S. As it turns out, checks are American as apple pie and bald eagles. Americans are just now slowly adapting to the credit card chips many Europeans have used for over a decade now, writes The Guardian. Meanwhile, Europeans have the opposite problem: “On this side of the pond, we’ve been slow to adopt direct deposit and wire transfers.”

L. Randall Wray, a professor of economics at Bard College, suggests Americans are particularly reliant on checks because they don’t trust banks to take out automatic payments: “Americans have a troubled history with their banks, dating back more than a hundred years.” A Harris Poll/Feedzai study from earlier this year found that “just 1 in 4 respondents said they trusted banking sites the most with their information,” reports CNBC.

And you can add checks to the growing list of things people abroad don’t quite understand about Americans. “For the last 5 years or more, writing a check/cheque in Western Europe has been seen as a laughably old fashioned, extremely unsafe, very slow and totally stupid thing to do,” writes a user on Quora.

“I am from Austria and here (Austria, Germany, Switzerland) checks play practically no role in daily life. I haven’t actually held a single check in my hands in my entire life,” writes another on a StackExchange message board.

The answers range from America’s “less innovative financial sector” to “being old fashioned,” but more interestingly, a few people mention that small businesses often like checks because they are used to the “float” that goes with them. What they mean by float is that many people don’t cash checks the minute the receive them — perhaps visiting the bank once a week to do their finances in bulk. So businesses get that extra time to keep that money in their bank account. Perhaps they write checks for money that isn’t even in there yet. (This, of course, is quickly changing with the ability to deposit checks via banking apps and smartphones.)

“Most Germans think the U.S. is hopelessly backward for using these strange little pieces of paper,” says Giulia Pines Kersthold, a journalist from Berlin.

But when you open a bank account in the United States, you’re usually given a starter book of checks, with your name and address on them. A Bank of America representative told us that though check usage has gone down over the years, they still automatically give out these booklets. There’s a rite of passage that still comes with this gift, the representation of your adulthood, or the beginning to a journey to save money for something important — a house, a car or a big trip.

Or perhaps rent — one of the main reasons Americans still use checks. But it’s handled differently in other countries. Aaron Wee, a landlord in Singapore, uses direct deposit. “It’s far easier for both parties, there’s a time stamp indicating exactly when and how much, and it gives the renter some flexibility,” he says. Wee doesn’t know anyone in Singapore who owns checks.

The Federal Reserve has predicted that the U.S. is on a similar path. “Industry observers widely predict that traditional paper processing will be phased out over the next few years,” it writes in a 2008 report. “In the not-so-distant future, all checks in the United States are likely to be processed in purely electronic form.”

Raghubir believes going paperless can save banks a lot of the money and resources currently devoted to creating and distributing checks. And people — even we hopelessly backward Americans — are forgoing checks even when that means paying a bit more. Ajay Yadav, founder and CEO of the roommate-finding app Roomi, says 90 percent of his users are paying their rent with ACH or credit cards even though both carry transaction fees. Mint.com’s consumer spending expert Kimmie Greene points out that there are apps replacing even the most common uses of checks. Sitter.me lets you pay babysitters electronically, and CheddarUp lets schools and PTAs collect money from parents.

But Raghubir doesn’t think checks will ever go entirely extinct. While it’s technically feasible to make all payments electronically and in cash, she says, some people will cling to checks out of pure habit, tradition or ease.

Besides, she adds, “I could not personally imagine going and giving a wedding gift to a friend of mine through a Venmo transfer. I would also feel embarrassed putting cash into an envelope. To me it would be odd.”