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Check Staying Power

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Written by Autumn Cafiero Giusti

Cash may be king, but when it comes to making big purchases, who really carries around that much green? Online bank transfers, although now more common, are not always practical for brick-and-mortar shopping. Swiping a credit card isn't an option if you're buying from small businesses that don't accept them. That leaves the trusty paper check. Sure, the check has seen better days. But even in an increasingly paperless society, checks continue to have staying power. There were 18.3 billion paper checks paid in 2012, and checks accounted for 15 percent of noncash payments that year, according to the Federal Reserve. Plenty of consumers still rely on checks for day-to-day transactions, and many businesses accept cash or check only. Checks continue to serve a function because no payment system is perfect for every scenario, says David Walker, president and CEO of the Electronic Check Clearing House Organization, or ECCHO, in Dallas. "Checks are different, in that any one of us who has a checking account can initiate those payments to anybody else,"

Walker says. Here are five reasons you might think twice before bouncing the paper check out of your life:

1. Many Businesses Shun Plastic

Not all businesses can afford to pay the processing fees required for them to accept credit cards. Of the nation's 27 million small businesses, 55 percent do not accept credit cards, according to a survey by payments software developer Intuit Inc. of Mountain View, California. So-called "micro-merchants" such as pool cleaners, auto detail companies and art vendors don't have the volume of business to be able to invest in credit card acceptance. "It's either cash or check, and most people don't carry cash all around," says Mike Fox, vice president of sales for Group ISO Merchant Services, an Irvine, California-based payments processing company. Fox says that one-third of his merchant clients request check services. Cary Whaley of the Independent Community Bankers of America uses the example of his nephew, who runs a successful dog-walking business. Paper checks are the easiest way for customers to pay because they can leave an envelope in the mailbox or on the kitchen table. "For those very small businesses, it makes all the difference in the world," says Whaley, vice president of payments and technology policy for the Washington, D.C.-based advocacy group. But it's not just the small mom and pop shops that turn away credit cards. The same holds true for some larger businesses and institutions such as K-12 schools, medical offices and building contractors, which can demand large sums for tuition payments or home repairs.

2. Ease of Person-to-Person Payments

Technology has brought about a host of new ways for one person to pay another directly, with Internet-based PayPal, Square and Popmoney among them. But these methods have yet to become the go-to payment option for splitting a dinner bill, for example, or sending money to a relative as a gift. "They're not ubiquitous, and checks are. If you're in person and you have your checkbook, it's the easiest way to pay," Whaley says. Paying by check also can be convenient when you want to give money to someone who lives in another city or state and isn't close enough to accept a cash payment, Walker says.

3. You Can Save Money on Processing Fees

In some instances, writing a check can help you avoid paying credit card processing fees. Businesses pay about 2 percent to 5 percent in processing fees on every credit card transaction. By keeping the plastic in your pocket, you are helping the business keep its fees down. Some businesses will even return those savings back to customers by offering a discount to anyone who pays with cash or a paper check. And, because few people carry around enough cash to pay for all of their purchases, writing a check can be the easiest payment option. Even if businesses accept credit cards, they still prefer to have the check acceptance option to help lower their overall processing fees. "A huge portion of the merchants that come to us have interest in electronic check processing, the reason being that someone has informed them of the pricing differences," Fox says.

4. Checks Create a Paper Trail

Checks provide a built-in paper trail, documenting how much money you paid. "The check is our most information-rich payment," ECCHO's Walker says. You immediately know when someone has cashed your check, and checks provide information proving that you made a payment and that it was received. "The check is better at that than any other instrument," Walker says. On a credit card statement, if you see a transaction you don't recognize, you might end up having to do some detective work to get to the bottom of it. Card transactions list only the dollar amount of the purchase and the name of the payee, which might be a parent company with a different name. When you write a check, your bank captures a digital image of the front and back of the document. If someone calls claiming they never received a payment, you can send proof that the check was sent and the bank deposited it. "I can't do that through any other payment transaction. I need to go through multiple parties in order to get that information," Walker says. That can be especially important when making payments to government agencies, such as paying a speeding ticket. "What I really want when I pay that thing is to know that they got paid. Sometimes our government organizations are not very speedy in their documentation," Walker says.

5. You Have Control of the Payment Process

When you write a check, you are the one who gets to make the first move in the payment process. "Other payment systems are not designed for consumers to be able to easily initiate," Walker says. "I can't make a debit card payment directly to you. I'll have to go through somebody else." Even though more consumers have come to rely on online banking to stay on top of their expenses, there still can be problems related to when a payment goes out. An automatic transfer of your money might take place before you've had a chance to make sure there are sufficient funds in your account, potentially resulting in an overdraft. There also are some bills that you can't pay by automatic transfer, such as apartment rentals. You can have the bank issue a paper check to pay that bill, but many banks involve an additional party to facilitate that process. "If that party doesn't perform in a timely manner, then you can have delays," Walker says. Walker got away from online bill pay because he found that his bank wasn't issuing checks quickly enough, so he went back to writing the checks himself. "I have much more control over it if I just initiate it in paper form," he says.

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