The ACH payment processing network had a record year of growth in 2020. $61.9 trillion in payments were processed last year, which is an increase of 10.8% from 2019.
We’ve talked previously about why ACH processing is on the rise, and it’s no secret that credit and debit cards, Venmo, PayPal, and ACH are all faster and safer than using checks, in most cases. So why are people and businesses still writing checks?
Here are a few reasons why people still use checks, along with a few reasons you should ditch the checkbook and find another payment method.
Checks Are Traceable & Great for Bigger Payments
The average value of credit card transactions is $57, and most payments over this amount – especially large monthly payments like mortgage, rent, and utilities – are often paid via check or automatic electronic payment.
Moneycrashers explains that checks also have a “level of traceability that you can’t get from money orders, cashier’s checks, automatic bill pay systems, or cash.” When you mail a paper check, you get a tracking method from wherever you are mailing the check. And once your check clears, your bank keeps a record of the canceled check. This traceability is often a huge benefit especially for bigger payment amounts, should any disputes arise.
No Minimum Purchase Requirements
One of the most annoying things about having and using a credit card is that many businesses, to combat rising credit card processing fees, often have a minimum purchase requirement of up to $10. While it seems like a tiny amount, if you happen to be in a store or gas station and you just want a single item, wasting the time and money to meet that minimum is frustrating.
With checks, there are no minimum purchase requirements, which ultimately ends up saving you money.
Avoid Extra Fees
Much like minimum purchase requirements, some businesses charge a flat fee for all credit card transactions. Small businesses often incur substantial expenses when processing credit card transactions. Instituting an extra charge per credit card transaction is an alternative way to offset those expenses.
You Can Send Other Information with Checks
If you have to send a check – especially as a business – one advantage is that you can also send brochures, notes, or other branding media with your payment. For example, if you are submitting a single large payment for a group of different items or services, you can send a note or reminder along with the check.
Using Checks as a Habit or Preference
As crazy as it sounds, a 2019 study showed that a full 10% of U.S. adults do not use the internet.
Lack of internet access and habitual preferences are powerful drivers for the continued use of paper checks in the United States. Grandparents may prefer sending birthday cards with checks in them rather than sending cash or store-specific gift cards. Or maybe the landscaping business you hired has been in business for 45 years and they prefer handling checks.
There are many preference-based reasons why people continue to regularly use checks.
Reason Not To Use Checks: Time
There are some great reasons not to use checks as well. Time is one of the biggest ones.
Sending, processing, and depositing or cashing checks is one of the slowest payment methods. Checks do not have to be cashed right away, so if you send a check for rent to your landlord and he forgets to cash it, it still looks like that money is available for use in your account. And even if the check is cashed immediately, it still typically takes a few days for that information to be entered and then relayed to the participating accounts.
If you are looking to drop a quick payment, checks are not the way to go.
Reason Not To Use Checks: Fraud
In 2018, check fraud accounted for 47% of “industry deposit account fraud losses.” In comparison, only 9% of losses “were attributable to electronic banking transactions, including bill pay, P2P transfers, wire, and ACH transactions.”
Checks contain a lot of personal information, and a check or checkbook can be lost or stolen fairly easily. There’s no password protection or two-factor authentication required when you use a check.
Every type of payment is subject to fraud, and it’s up to you to make the best decisions for your personal and business payments.
From Checks to Mobile Payments, ReliaFund Has the Simple Solution
Whether you are processing checks, credit cards, ACH, or recurring payments, ReliaFund’s Electronic Payment Services payment processing platform can help simplify things with our 100% in-house, end-to-end platform that streamlines payments across online and mobile.
Contact us to learn more.