In the newest segment of their “I’ve Always Wondered” series, which addresses questions many of us have about the economy and spending habits, Marketplace tackles the question: "Why do we still use paper checks?"
For insight, they consulted experts.
There are a slew of reasons explaining our continued check use. Many check writers have had lots of positive experiences with them, and it can be difficult for people, in general, to change their behavior, explained Cynthia Cryder, an associate professor of marketing at Washington University in St. Louis.
Cryder said that for those who have written checks most of their lives, other payment options might “feel unknown” or hard to understand, prompting them to distrust these methods. And people often just value physical items more than digital ones.
“Part of the reason might be that we feel like we can have more ownership over physical things, but also they just can feel more real. They're more tangible,” Cryder said.
While check usage has declined significantly compared to other payment methods like credit/debit cards and cash, paper checks are still very much in use.
Source: Federal Reserve Bank of Atlanta
A New Generation of Check Consumers
It might seem obvious to assume that young people don't use checks at all, but that would be an incorrect assessment:
As you might expect, check use is higher among older people, while younger people have embraced solutions from tech providers like Apple and PayPal. But these are generalizations. Bill Maurer, an anthropology professor at the University of California, Irvine, said there are also young people who still rely on checks.
He said that millennials and Gen Zers are using or going back to using cash and checks because it can help prevent overspending compared to "frictionless" digital payments, which can require only a few taps.
There are also practical considerations:
Payment methods such as credit cards also come with interest charges and can lead some consumers to pile up debt, while some people may also see managing online passwords as a burden or a hacking risk.
Then there’s the matter of how to transfer money if you’re making a gift. If you’re donating to a charity or, now that it’s an election year, a campaign, experts point out that paying by credit card will cost the organization, which is why cash or checks are generally preferable.
And, let's not forget the desire for a "personal touch":
“If I'm gonna send you money for your birthday, it's nicer to write a check and put it in a card and put it in the mail than it is to just Venmo you,” Maurer said.
Maurer went on to say that, since people are living longer, check-writing veterans may help to sustain the practice even further into the future.
More Reasons Why Consumers AND Businesses Utilize Checks
There are several other reasons consumers still utilize checks -- including paying rent, where JP Morgan Chase reports that 78% of renters still pay by check.
However, we would be remiss not to mention that checks remain a preferred payment method for businesses -- as PYMNTS.com reports that 81% of Businesses Still Pay Other Firms Via Paper Checks. Businesses benefit from the "gap" between when the check is drafted and when it clears at the payee's bank, as well as the presence of a paper-trail for their payments -- reducing the amount of internal fraud.
With an estimated 11B checks still written each year, it will be important for financial institution to continue to invest in technologies like AI and machine learning to streamline check payment processing, automating the process and ensuring that their clients -- both consumer and businesses -- are able to utilize the payment method they are most comfortable with.