Hi, I’m Yves. Having never used a check to pay for retail purchases, I must admit to feeling nostalgic for the practice. In fact, even back in the Stone Age of my youth, I wondered why stores accepted checks at all, since there was no quick and easy way to ensure that a check wouldn’t bounce unless the customer was known and trusted.
But this article serves as an excuse to address another side of the war on cash, what could be rephrased as the war on non-electronic payments (though, to be fair, the authors below are urging retailers to use cash as an alternative to checks, and are not advocating electronic or card payments).
The author of this blog likes to use checks to pay for certain business expenses because it’s easy for an accountant to determine which vendors or contractors received the money. Bank and credit card statements have too many mystery or poorly explained items that take time to sort through.
But banks have been really pushing customers to give up checks lately. A friend of mine had an experience that made it really seem to make sense: Apparently someone got hold of images of checks, created loads of fake checks, and ran them through Chase Bank to steal about $20,000 from an account. What’s amazing is how poor the bank’s security was (and the culprit was clearly an insider who knew how to get around the triggers). The checks were all under $200, most were the exact same amount, and the check numbers were outside the range of any checks printed on that account. Oh, and many of the checks were clearing every day for days before anyone realized what was going on.
Chase eventually recovered most of the funds, but (rightly) closed the consumers’ accounts and prevented them from accessing the remaining funds in the accounts for what I would assume was an uncomfortably long time (the customers were wealthy, but the compromised accounts were major transactional accounts, and the loss was not easy to avoid). The customers also had to go to the branch in person (I can’t remember how many times) to open new accounts and move the seized funds over.
I recently opened a small business account with Citi and was given a stern lecture not to use checks due to the risk of account fraud and encouraged to use ACH, but the amount of setup was woefully disproportionate to the fact that I only have 10-12 people to pay this way. Apparently their “small business” clients are much larger than me and have accounts payable people who use these systems a lot and are familiar with this bloatware and remember how to operate it even when not in use. I don’t write checks often enough to justify the time cost of such a cumbersome, feature-packed system.
Jay L. Zagorski, Associate Professor of Markets, Public Policy, and Law, Boston University; conversation
Can I pay by check? A growing number of stores across the U.S. are no longer accepting checks. Major retailer Target Stop accepting checks On July 15, 2024, 10 years ago at the supermarketchain Whole Foods and Aldi This payment method will no longer be accepted.
Target has announced it will phase out paper checks. Not many customers use itThat’s a valid point. Cheque use has fallen dramatically around the world in recent decades.
but, Business School Professor As someone who studies how people pay for goods and services, I suspect Target has another, implicit motivation: Customers are starting to switch, after all. I moved away from checking a few years ago.What’s new today is Check fraud.
A brief history of checks
The check was present A paper check simply tells a bank how much money to transfer between accounts. Today, these instructions are written in a From a few days It could take days or weeks, which is why stores are encouraging customers to pay with debit cards, which function like checks. Withdraw money from your account immediately.
Just a few decades ago, checks were a big part of the U.S. economy. The Federal Reserve, the U.S. central bank, In 2000, the company processed 17 billion checks annually.Compare that to 3 billion today.
Although the Federal Reserve Banks do not process all checks, e.g. Cheques issued between accounts at the same bank Checks that don’t go through the Fed illustrate the overall downward trend: In 2000, the average American wrote about 60 Fed-clearing checks a year; today, that number is about nine.
Up until 20 years ago, all checks had to be physically returned to the person who wrote them after they were processed so that the writer could verify that the amount written on the check matched the amount debited from the account. Years ago, I paid all my bills with checks, and every month my bank would send me a fat envelope full of canceled checks that I’d never opened.
The government maintained a special fleet of planes that delivered cancelled checks every night to physically return all checks. Cheques from around the country. after that, In 2004, new laws allowed banks to send photos to customers. It saves me the trouble of checking in and I don’t have to travel by plane.
Who is still writing checks in 2024?
The Federal Reserve may be processing 80% fewer checks than it did in the early 2000s, but its data shows that the average person still writes at least nine checks a year. So who is writing all those checks? The answer includes many people who deny they’ve ever written a check.
Let me explain. Nowadays, many people are Online bill payment servicesMany of these payments are made electronically, Payments to small businesses and individuals have been completed The bank will issue the check on your behalf.
And there are still people writing Checks to landlords, contractors, charities, and government agencies. many People still give checks For weddings, births, and other special occasions. Companies still write checks to other companies When paying bills.
Why stores hate checks
Checks are still used, albeit less frequently than in the past, so why are companies like Target, Whole Foods and Aldi refusing them? A key part of the story is: Check fraud is rampant In the United States
The U.S. Treasury Department has a division dedicated to fighting financial crimes. Financial Crimes Enforcement Networkor FinCen for short. FinCen is aReporting Suspicious ActivityIt reports “fraudulent activity” related to bank activity, ranging from money laundering to loan fraud. FinCen reports that the number of check fraud cases is It has exploded since 2020, nearly doubling from 2021 to 2022..
One of The biggest place this fraud occurs is through checks. At the register. As the Atlanta Fed points out, “Anyone with graphics software and a quality printer can easily create a counterfeit check..”
When check fraud occurs, a store suffers a double blow: First, it loses merchandise that it cannot sell to a legitimate customer, and second, unlike shoplifting, it takes a bigger financial hit because most banks charge a fee. Merchants And that Check Preparer If a counterfeit check is presented, the Federal Reserve Bank There are high fees for returns Uncollectible check.
Target Latest Included in the annual report The company cited theft as a problem, saying it “experienced continued high inventory shrink as a percentage of sales compared to historical levels.” In plain English, that means more people are stealing from Target than before.
The rise in check fraud means Target’s recent announcement is likely to be replicated soon by other chains in the future. Only stores like Costcotakes photos of all its members and keeps track of addresses for all its customers so it can issue checks.
When check fraud occurs, retailers often raise prices to make up for their losses, so curbing check fraud would lower prices, benefiting all honest consumers.
And for stores worried about increasing checks, Debit and Credit card fraudThe answer is simple: encourage your customers to use cash. Paper money is safe and once handed over, any retailer knows the transaction has been paid for. bill There are real benefits.
