Why do so many businesses still use paper checks? - Clover Blog (2024)

FAQs

Why do companies still use paper checks? ›

Some vendors or suppliers may not yet be set up to receive electronic payments, making paper checks a necessary option for business-to-business transactions. For some companies, using paper checks feels like a tangible representation of stability and reliability.

The most common transactions involving checks are for rent, utilities, taxes and other payments to the government, payments to contractors, gifts to charities, payments for healthcare, and education expenses such as tuition payments. Many people also still use checks instead of cash to give monetary gifts.

But contrary to a 2023 Washington Post report, checks aren't entirely dead. While the volume of checks written each year has fallen from 50 billion in 1995, it was still at 11.2 billion in 2021.

According to the report, 75% of organizations still use paper checks, despite their high costs and inefficiencies. The manual processing involved with checks results in slower transactions, increased potential for errors and longer DSO, adversely impacting a company's cash flow and financial stability.

In 2024, check writers skew older and are likely at the margins of the banking community, according to Anchin. Americans over the age of 55 are the most likely to write checks every month, GoBankingRates also found.

Cons of Paper Checks

Paper checks can be easily misplaced, stolen and even damaged if you're not careful with them. If a paper check is lost, then the employer and employee must replace the check, costing both parties additional time. In some cases, replacing a lost check comes at an extra fee for the employee.

Paper checks accounted for just 3.8% of consumer transactions in 2022, according to data from the Federal Reserve Bank of Atlanta. However, there are still some situations when you may want to use paper checks.

Gap, Old Navy, Athleta. Several years ago, Gap banned checks as a payment method. It now accepts cash, credit or debit cards, store gift cards, Apple Pay, PayPal and AfterPay. The policy also applies to Old Navy and Athleta.

Making the transition: What are the paper check alternatives? There are several digital alternatives to paper checks, including: ACH payments (or eCheck payment) Credit card payments.

According to the Philadelphia Fed Study, the number of paper checks is steadily declining every year. There were 28 billion checks processed in 2009 and has been dropping 1.2 billion per year since then. At this pace, the paper check will be extinct by 2026.

How to get rid of paper checks? ›

The easiest and most efficient way to get rid of your checks is to shred them. If you have a motorized shredder at home, you can easily shred many checks at once. Some banks or local businesses also offer shredding services if you don't have one handy.

Target said it was phasing out checks because not many customers use them. It's a fair point: Check usage has fallen dramatically around the world in recent decades.

Many businesses do not accept cards.

That is especially true with micro-merchants, such as landscapers and pool cleaners, who do not have the volume to justify payment processing costs. With some bills such as rent to a landlord, a check is the only way to make a payment.

Reduce the number of checks you send and utilize card or digital payment methods instead. Consider using Zelle ^® when sending money to family or friends, for example. Use your bank to send checks on your behalf. If you do have to pay for something via check, see if your bank offers a bill pay service.

Alternatives to Mailing a Check

A wire transfer will get funds to a specific account quickly. If that's overkill, there are numerous ways to send money online for a small fee or for free. Examples include Venmo, PayPal, Cash App, and others.

Retailers like Target have their reasons for banishing checks. Usage is a big one: Checks represent only 3 percent of transactions, according to Bankrate data. Fraud is another: In recent years there's been a resurgence of check fraud, with merchants a common target.

Focusing on the annual number of checks per capita, the United States is leading all the countries with, on average, 30.1 checks per person in 2021, followed by France and Canada with, respectively, 16.31 and 8.43. Countries such as Indonesia and South Africa have a negligible number of checks per capita.

Question: Why do employers use paper checks as method of disbursing employee pay? Multiple Choice Paying employees by check ensures that every employee receives timely pay. Paying employees by check allows the employer flexibility with its bank accounts. Paying employees by check fosters easy payroll review.