Are paper checks going extinct?

Saying “the check is in the mail” has become more turn of phrase than promise of a real activity.

Americans are increasingly turning away from paper checks, according to the Federal Reserve. The Fed says that checks were used for about 15 percent of non-cash transactions in 2012, down from nearly 50 percent in 2003, thanks to a rise in debt card purchases.

But, as our story today points out, checks aren’t about to go extinct. They’re still one of the most accepted ways of making payments, and the ease of tracking check payments has helped keep them around. Data from the Federal Reserve indicates consumers still prefer them for certain types of transactions – especially large ones.

How Would You Like to Pay?

Here’s a look at how people handled non-cash payments:

2003 2012
Average Value Rate of Use Average. Value Rate of Use
Credit Card $89 23% $94 21%
Debit Card $40 19% $39 38%
Prepaid Card $26 1% $24 7%
Automated Clearing House $2,754 11% $2,186 18%
Paper Checks $1,103 46% $1,420 15%

Source: Federal Reserve System

The average check written in 2012 was for $1,420, according to a 2013 Fed report. That’s a whopping 15 times the value of the average credit card transaction and 36 times the value of the average debit card swipe during the same year.

Impact of banking apps

The Federal Reserve report also shows that a new trend — mobile banking — has given our antiquated paper checks a foothold for the future. Using paper checks, bank customers can quickly transfer and deposit money with their phone and tablet apps.

“Paper check writing continues to persist as a significant portion of noncash payments, but interbank processing and clearing of these checks are virtually all electronic,” the study said.

You may remember a 2011 Chase commercial that introduced the phone-as-bank-teller concept to the world. It showed newlyweds using the bank’s mobile app to deposit checks from family and well-wishers at their wedding. It’s so easy to do, the spot suggests, they haven’t even bothered to change out of their dress and tux.

For a 4-year-old commercial, it’s still spot on. I can’t think of a wedding I’ve attended where I didn’t tuck a check into the card.

Why I use checks

I, for one, still have most of the checks I ordered when I switched to my current bank seven years ago. I almost exclusively use them for certain things: the co-pay at the doctor’s office, for example, or bills that I can’t pay online without also adding a processing fee. I also use checks when giving money as a gift.

At this rate, I won’t need to reorder checks for a very long time. When that day comes, I’ll order more. Using checks helps me avoid the processing fees that utility companies charge for online payments.

The vendor my apartment’s management company uses to collect rent online charges more than $20 for each payment made online with a credit card and adds on $2 for direct deposit payments made online from checking or savings accounts.

What do you use checks for and why?