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A Check-Free Society? Not So Fast!

Like a Favorite Old Song, Checks Remain Popular With Consumers

According to popular lore, Mark Twain once called the reports of his death greatly exaggerated. The same might have been said about radio, back when TV made its appearance. Or about snail mail, when email became inescapable. But radio and the U.S. Postal Service are still very much alive, despite the invention of new electronic ways to communicate. It is no different for the good old-fashioned paper checking account, as new electronic payment options enter the scene. While the use of electronic payments has increased in recent years, the truth is that checks are far from obsolete.

In fact, checks still remain a highly used form of payment, despite the increasing popularity of debit cards. According to an ongoing web-based survey conducted by Harland Clarke since January 2004, nearly three in 10 customers say that checks are their overall preferred method of payment, a close second-place to the 34 percent who now prefer debit cards. Overall, checks are preferred to cash by a margin of two to one, and are preferred to credit cards by a margin of nearly three to one.

Despite Soaring Debit Card Use, Checks Remain In Demand

Of course, there is no doubt that electronic payments, especially via debit card, are on the upswing. A paper released in February 2006 by the Federal Reserve System notes that the share of payments made electronically—via credit card, debit card and direct payments—doubled from 25 percent in 1995 to more than 50 percent in 2002.1

Indeed, overall, checks and credit cards are losing ground, while debit cards are gaining ground. In 2007, Harland Clarke’s survey found that 31 percent of customers used checks to pay for retail purchases, down from 42 percent in 2004. Credit card use dipped from 18 percent to 16 percent over the same two-year period. But debit cards jumped in popularity for retail purchases, from 31 percent in 2004 to 41 percent this year.

Check Use ChartHowever, check-writing is still very much in the picture. More than two-thirds of respondents (67 percent) write 10 or more checks per month. A greater share of respondents (more than a quarter) said they write 20 or more checks per month, compared to those who said they write either 15-19 checks, 10-14 checks, 5-9 checks, or fewer than 5 checks per month. A majority (53 percent) said their check-writing has either increased (23 percent) or remained the same (30 percent) during the past five years, while less than half (44 percent) said they’ve written fewer checks. Similarly, more than two-thirds of customers think the number of checks they write per month will not change in the upcoming year, a percentage that has remained consistent since the survey was implemented nearly four years ago.

Checks Often Pay for Utilities

In all likelihood, a lot of checks are being written to utility companies. The vast majority of respondents (an average of 68 percent from 2004 to 2007) said they pay for utilities—such as electric, gas, cable and water—by check. While writing checks to utility companies has declined slightly from 2004 to 2007, from 75 percent to 61  percent, it remains more than four times as prevalent as the next most popular way to pay for utilities—automatic electronic payment—which does not seem to have caught on with most people. Automatic electronic payments to utility companies have increased only slightly from 2004 to 2007, from 13 percent to 15 percent. Another 14 percent go online to pay their utilities.

The Typical Check Writer

Customers who say they have been writing more checks in the past five years, or who expect to write more checks in the coming year, tended to be younger and have a lower household income than the average check customer in this survey.2

Yet according to a Survey of Consumer Finances by the Federal Reserve, it is younger people who are most likely to use debit cards. Nearly two-thirds (62 percent) of users are younger than age 35, and there are steadily fewer debit card users in each subsequently older age group, down to only 16 percent of those 75 or older.3

The profile of a typical respondent who said her check writing had increased was a 45-year-old female with a household income of more than $62,000, who prefers to pay by check. Those who think they will write more checks in the coming year are slightly younger (44).

As for those who say they write fewer checks, the typical respondent was a middle-aged female (49) with a household income of nearly $70,000, who prefers not to pay by check. Those who think they will write fewer checks in the coming year are, on average, of similar age but have an even higher income (more than $72,000).

Check Writing and Geography:
Checks remain preferred payment method on national map

According to an article in the Spring 2005 Federal Reserve Bulletin,4 people in the Midwest write the most checks annually per capita (144), while those on the West Coast wrote the fewest checks (110). The value of checks per capita was also lowest in the West, and highest in the Northeast. The authors speculate that the high value of checks written in the Northeast may be due to a special type of corporate checking account—the controlled-disbursement account—that is concentrated in this region.

While the use of electronic payments has increased in recent years, the truth is that checks are far from obsolete.

Perhaps not surprisingly, the reverse is true for debit cards, which are used more in the West, where there are 79 such payments annually per capita, compared with 51 in the Northeast, which has the lowest use of debit cards. The authors postulate that financial institutions in the West got a head-start in offering debit cards, compared with other parts of the country, and that fees charged to cardholders are less prevalent there.

The same article notes that checks are more popular in rural areas than in the city. The proportion of checks written in rural areas (versus ACH, debit and ATM transactions) was 60 percent, compared with only 49 percent in urban centers. It is worth noting, again, that checks, whether written in a big city skyscraper or down on the farm, were still two to three times more popular than the next most used payment option, debit cards. The value of check payments exceeded the combined value of debit and credit cards, ACH, and electronic transfers.

Most Popular Place to Buy Checks

Three-fourths of respondents queried by Harland Clarke this year purchase checks from their financial institution, but a growing number (close to 20 percent) are now purchasing checks via direct mail, continuing what has become a growing trend the past few years. Those who purchase checks from their financial institution overwhelmingly said they did so because they have been purchasing checks this way for some time with some saying they felt their credit union or bank offered a more secure source and product. Those who purchase checks via direct mail also have been doing so for some time and tend to find this method less expensive.

Let Harland Clarke help you stay current on evolving demographics in payments. To learn more about account holder payment options, please contact us at: www.harlandclarke.com/contactus.


1 Klee, Elizabeth. “Families’ Use of Payment Instruments During a Decade of Change in the U.S. Payment System” Board of Governors of the Federal Reserve System. Feb 16, 2006

2 The average Harland Clarke respondent was a 48-year-old female with a household income of $65,000, whose household comprised two adults, two children, and two checking accounts. Nearly one-third lived in the Midwest. Slightly more than a quarter lived on the East Coast. One in five lived in the South and 14 percent on the West Coast.

3 Klee, Elizabeth. “Families’ Use of Payment Instruments During a Decade of Change in the U.S. Payment System” Board of Governors of the Federal Reserve System. Feb 16, 2006. Figure 2(a) “ Debit Card Use: Age of head, 2001”

4 “Trends in the Use of Payment Instruments in the United States,” Federal Reserve Bulletin, Spring 2005