The Fall of the Checkbook


The numbers confirm what most Americans already know: the checkbook is going out of style.

The Federal Reserve Payments Study, which analyzes trends in non-cash payments in the United States, shows that the use of checks has steadily declined over the past decade. In 2000, checks made up 57% of all non-cash payments; as of 2006, the last year on record, that number had plummeted to just 33%. Debit cards, meanwhile, have established themselves as the preferred alternative to cash.

Nowhere is this trend more apparent than at the checkout counter, where consumers are increasingly recognizing the benefits of leaving the checkbook at home. “We have seen a decline in the percentage of retail transactions using checks,” says Mallory Duncan, Senior Vice President of the National Retail Federation. The organization’s numbers bear this out: in a survey of holiday shoppers conducted by the NRF last November, just 4% of respondents expected to use checks as their primary method of payment, down from just under 13% in 2002.

As with many consumer trends, it comes down to a simple matter of convenience. It’s much quicker to swipe a card than it is to fill out a check, as anyone who’s ever been stuck behind a check writer in the grocery store line can attest. It’s also a lot easier to stick a debit card in your wallet than it is to carry around an unwieldy checkbook everywhere you go. Furthermore, the expected rise of mobile payments – using your smartphone to pay for purchases at stores – will offer yet another payment method that is vastly more convenient than pulling out the checkbook. While it’s primarily used only in Japan and parts of Europe, a pilot program involving Visa, Bank of America, Wells Fargo, and US Bancorp will be testing the technology through the end of the year.

When you further consider the security issues associated with handing out your routing and account numbers for every transaction, it’s easy to see why checks are becoming less popular for retail purchases.

Not everyone is ready to herald the checkbook’s demise, however. “Checks aren’t going to go away,” says Nessa Feddis, Vice President and Senior Counsel for the American Bankers Association. “Some people can’t manage a debit card, or simply don’t want one.”

So who are these checkbook loyalists? As one might expect, they tend to be older. That NRF holiday survey found that 9.8% of shoppers over the age of 65 intended to use checks for most of their holiday purchases, versus a miniscule 0.3% of 18- to 24-year-olds. It’s a generational trend that suggests that personal checks are indeed an endangered species -- in the checkout aisle, anyway.

Still, Feddis is right that checks aren’t about to disappear altogether. Even as online banking makes it possible to pay most bills without digging out the checkbook, people still tend to cut an old-fashioned check to pay the rent. They’re also useful for settling personal debts to friends or for one-time payments like school field trips. And as Duncan notes, retailers will almost always prefer to process a check than pay a swipe fee on a credit card payment, which typically cost the merchant around 2% of the purchase price.

Perhaps the best case for checks, though, is that they keep consumers honest. “Some people don’t want a debit card because they know they’ll be undisciplined in their spending,” explains Feddis. By contrast, for many people paying with checks leads to more responsible spending habits, because they write down every transaction and ideally keep a balanced checkbook.

Compared to debit cards, checks are a slow and tedious way of spending money. But for those looking to reign in their spending habits, that’s exactly the point. 

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