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Some years ago, a friend of mine visited a US city, and went to a supermarket. Upon trying to pay with his credit card, the transaction failed, and the cashier asked if he could write out a check instead. My friend replied "check?" in a bit confused tone. The cashier replied, "well, maybe someday you will get those in your country too".

The thing is though, checks has been practically extinct in Norway, and surrounding countries, for as long as I have activly used my bank account, closing in on 20 years. We manage our accounts online. Absolutely every bank have online options, and the vast majority of all transactions happen through the internet. Lately mobile transactions though smart phones has become popular too.

How come the US still use checks in such a large scale, when there are so many modern solutions that seemingly are so much better?

jumps4fun
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3 Answers3

19

Check use is declining here too, but it still has some practical advantages over electronic means:

  1. It does not require the receiving party to provide any account number to the paying party (directly or indirectly). The receiving party does not even have to have a bank account at all, since a check can be cashed at the bank on which its drawn.
  2. The receiving party can frequently deposit a check with no fees. For the most part businesses taking payments electronically pay for the service. Many small "mom & pop" businesses don't want to pay or cannot afford to pay those fees.
  3. It works (as in the example you gave in the question) when electronic transactions fail, precisely because it is low-tech.
  4. Even online transactions sometimes get converted to check in the end. I can use "online bill pay" for almost any transaction (including to pay back a friend where no real "bill" exists), but the bank sends a physical check to many such parties (especially if it goes to a friend who isn't going to be registered in the bank's system).
  5. It's a matter of opinion whether the electronic transactions are "better." I certainly find them to be more convenient in many cases, but people used to the old system still like it, and it generally works, so there's no specific reason to kill it.
  6. For some specific purpose like paying taxes, you get slightly better treatment paying by check because most transactions are credited based on the postmark on the physical mail but get debited from your account based on when the check clears the banking system. That only buys you about a week, but for some people that week might be worth the "hassle" of writing a physical check.
  7. Relative to cash, the check is safer and creates a self-documenting transaction because the cleared check is a legal record of the transaction. (Obviously electronic transactions also share these features.)
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Because it makes money for all parties, and because the general public is reluctant to any change.

  • people pay (sometimes) the bank to get checks printed
  • people pay a store for envelopes
  • people pay USPS for mailing the check
  • people pay (sometimes) for depositing the check

Who should have an interest to change that? People. And they have no say in it.

You can actually do a lot without paper checks nowadays (I only use one per year for car taxes, as they do not accept anything else), but many people shake their heads about even online banking and would never trust it.

Aganju
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In a system where electronic payment is well developed you can consider the following 2 scenarios:

  1. A person pays by cheque
  2. A person pays by card

Now let us zoom in.

1. What happens when you pay by cheque

  • A cheque is physically created, and arrives at your home
  • The check is physically transferred to the seller
  • The check is digitized for processing

2. What happens when you pay by card

  • You use your card
  • The transaction is electronically verified

Regardless of what costs are actually charged, it should not be hard to see which system is most (real cost) efficient once electronical payments are well developed.

And so, the conclusion is not hard to reach:

The electronic payment system is not yet well developed in all of the US.

Community
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Dennis
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