Why Do People Still Use Paper Checks?

The days of waiting impatiently behind someone writing a check at the supermarket register are mostly gone, but billions of checks still change hands every year in the United States.

In the days of electronic payments, checks can seem outdated. But they’re still routinely used for payments to businesses and landlords because they can be less expensive, more convenient, and more predictable than modern day digital alternatives.

Checks are Cheap and Convenient

Whenever you make a purchase by credit or debit card, the merchant gets charged a fee by the various financial institutions involved in the transaction, generally a small percentage of the total price. For big national chains, those fees may not have much impact, but for small businesses with lower margins, they can start to add up. And some small businesses, like one-person landscaping businesses, landlords with a handful of properties for rent, or even the independent corner grocery may not want to even invest the time or effort to set up credit card processing equipment and software.

But consumers would feel uncomfortable paying their rent or services like pool cleaning in cash, and many small businesses wouldn’t be thrilled about having that much cash on hand. And sure, there are plenty of online payment options, but they generally require everyone involved to set up an account, and they can have fees of their own or complex policies about when funds are available. Small time landlords and tenants, for example, aren’t going to feel comfortable asking each other to set up new online accounts and learn the intricacies of a particular digital payment system.

Other countries with banking systems that have standardized processes for inexpensive electronic, person-to-person payments have switched from checks to a greater extent than the U.S., but the American system is still a patchwork of bank-provided payment systems and third party online providers.

But anyone with a bank account can write and deposit checks for free or at most a nominal fee, transferring funds from any bank to any other bank. Many banks even allow customers to deposit checks simply by snapping photos of them, and some will even write out and mail checks on behalf of their customers. And while not all consumers have checking accounts, they can still generally obtain prepaid money orders and visit check cashing stores, allowing at least limited use of the check system. Online payment systems, on the other hand, often require a checking account in order to transfer or withdraw funds.

Checks Are Predictable

Americans young and old generally just have a good sense of how checks work, without having to ask banks for help or consult online manuals. They can use checks to make payments assured that their own bank will keep track of when they’re deposited, effectively an automatic receipt. They can stop payment on a check before it's deposited. They also know that funds will reside in their own bank accounts until the check is deposited – meaning a few extras days to earn interest or make sure accounts are comfortably funded.

They can deposit or cash checks from friends, relatives or business associates at their usual financial institutions without a great deal of thought – and they can refuse to accept payment simply by refusing to cash or out-and-out returning a check.

By contrast, every online payment system has its own system for logging transactions, handling refunds and stopped payments, and refusing unwanted transfers. They’re not necessarily flawed, but they still take time to learn beyond the time it takes to write out a check, or drop off a stack of checks at the bank.

Of course, millions of American workers have switched from receiving paychecks to receiving direct deposit, and have switched from writing out monthly checks to utilities and credit card companies to using online payments. Should equally convenient and predictable systems appear to cover payments to individuals and small businesses, the personal check may finally reach its expiration date.