Research and Statistics

Credit card use spurs decline in check writing


The convenience and speed of credit card use has spurred a decline in check writing.

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The popularity of credit card payments means that fewer and fewer American consumers write checks nowadays.

Around 49.5 billion checks were paid in the U.S. during 1995, with that number slumping to 36.6 billion checks in 2003, according to the most recent data from the Federal Reserve. Meanwhile, credit card transactions leapt from 15.6 billion in 2000 to 19 billion in 2003, while debit card transactions surged from 8.3 billion to 15.6 billion over that time period.

Combined, credit card and debit card use made up 43 percent of all noncash payments in 2003, versus 33 percent of noncash payments in 2000.

Based on anecdotal evidence, U.S. consumers find their credit cards to simply be more convenient than their checkbooks. Among the benefits of credit cards highlighted by consumers is the itemized spending list that comes in the form a monthly credit card statement. Additionally, when it comes to bill paying, they cite the speed of paying by credit card and debit card over the Internet.

Plus, a check doesn’t give the shopper anything back, like a reward credit card, or airline miles, like an airline credit card.

Even when consumers do take out their checkbooks, the checks they write are increasingly being scanned and converted by merchants into electronic payments. In 2003, the approximately 8.9 billion converted checks reported made up about 11 percent of all noncash payments.

The Federal Reserve lumps checks that get converted into electronic payments in with the latter group, as do paychecks that are electronically deposited into employees’ bank accounts.

By converting checks to electronic payments, merchants get paid faster. It also can help lower the amount of insufficient funds checks encountered by businesses.  At some retailers, the cashier scans the check and returns it to the shopper with their receipt — logging the check as an electronic payment in the store’s system.

Meanwhile, the Federal Reserve Board of Kansas City notes consumers may be unaware that many of the checks they write to utilities, mortgage companies, and other businesses also get turned into electronic payments by the companies that receive them.

With the rise in credit card and debit card payments, along with the advance in electronic check processing, causing a fall in traditional check writing, the Federal Reserve has significantly cut back its check-processing department. The Fed has shut over half of its 45 check processing centers since 2003, with just 18 expected to remain by the end of 2008.

Even so, with some transactions better suited to checks, the checkbook is not predicted to go the way of the dodo bird. Also, the delay between when a check is written and when it is received can help a business better manage its cash flow.

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