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Why I still write paper checks

Back in the good ol' days, there used to be lots of advantages to using paper checks. Now, not so much.

By MSN Money Partner Mar 9, 2011 11:05AM

This post comes from Philip Brewer at partner blog Wise Bread.


I know plenty of people who write essentially no paper checks anymore. I know students who pay everything with debit cards. Others manage their financial lives with electronic payments. I do neither. I get by with a mix of cash, credit cards and paper checks.

Now it's really just a matter of inertia. I used to have some reasons for doing things this way, but they've all been superseded by events.



It used to be that writing checks produced float -- the time between you handing over your check and your bank debiting your account. Back in the early 1980s, when interest rates spiked up over 14% and paper checks had to be flown back and forth across the country to be presented at your bank for payment, float was a big deal.


Even for ordinary people it could be a big deal. Let's say your mortgage payment was $1,000. If you had your mortgage at an East Coast bank and you paid it with a check drawn on your West Coast money market fund, it could easily take five business days for your check to clear.

At 14%, you'd be earning 38 cents a day, so the float could make you $1.92 (even $2.68 when the weekend lined up right and you got seven days of float). That's $2 a month of free money, just from the float on one bill. Multiplied across all your bills and 12 months, float could easily add up to $100 a year.


For businesses, it was a much bigger deal. If you could increase your float by one day, you could add $140,000 straight to your bottom line for each $1 million worth of payments you made per day. There were consulting firms to help you locate the right bank for your checking account (that is, the bank that was most remote from whomever you made payments to).


Nowadays, of course, it makes little difference. Between Check 21 and the various kinds of Automated Clearing House check truncation, checks usually clear almost immediately. You're lucky to get two days of float. Plus, interest rates are near zero, so there's really no point.



There was a time, long ago, when the only way to get money out of a checking account was to present a check for payment. Even the account holder did it that way: He came into the bank with a check made out to "cash" and presented it for payment.


Those were the good ol' days. The only way a thief could steal money from your account was to forge a check -- either modify a real check or else print checks with your account number and then forge your signature on them. Checks were printed on "safety paper" to make such forgeries more difficult to do and easier to detect.


You got the actual paper check returned to you after the bank had paid it -- with the word "paid" stamped across the front. That served as proof of payment. If the check was a forgery, you had the evidence. (It was also kind of interesting, because you could see all the endorsements on the back. You could tell if someone had just deposited the check into their own account or signed it over to someone else. You could also see all the banks it had passed through on its way to your bank.)


For a time, when ACH debits were just starting to take off, I made a point of never authorizing an automatic debit to my account. I figured it would make it easier to deal with a theft of that sort -- I wouldn't have to argue about whether a particular transaction was or was not authorized because I could just make a blanket statement: No automatic debits were authorized.


Nowadays, of course, practically every transaction that hits your checking account is an automatic debit of some sort -- even the ones that you initiate by writing a paper check. There's no way to prevent it; if you could, it would just make your checking account worthless.


Errors, and fixing them

I was actually an early adopter of electronic banking back in the early 1980s. There wasn't an "automated clearing house" in those days. Any kind of automated payment needed to be negotiated individually by your bank and whomever you were trying to pay. The same was true of direct deposits.


I ran into a number of errors in those days, including a direct-deposit failure that delayed my paycheck for several days. My roommate at the time had a mortgage payment go similarly astray, causing more than a little stress. Perhaps it was a reaction to those early errors that prompted me to just stick with paper checks.


Nowadays the automatic systems are probably more reliable than the paper systems, and there are actually pretty good rules to protect you from errors and unauthorized transactions (although only if you check your statement and tell the bank if there are any).


I'm not the only luddite

I suppose there are plenty of other people who still write paper checks out of simple inertia. But there's one group that has a real financial interest in paper checks: the companies that print checks. One of them, Deluxe Corp., has started an ad campaign called "Stand Up for Your Right to Write Checks," complete with a mildly amusing video.


The video shows someone paying with a check at a convenience store counter. Even I don't try to do that anymore. I did continue to write checks at the grocery store long after I'd quit using them at other stores, but I finally switched to credit cards about three years ago. (I long ago quit carrying a checkbook around with me, because the only place I ever write checks is at my desk.)


Still, the general message -- that the payer ought to have the choice of how he pays -- is one that resonates with me. Any business that sends me a bill is going to get paid by check. If they can't deal with that, they're not going to get my business.


How about you guys? Anybody else out there still paying their bills with paper checks?


More from Wise Bread and MSN Money: 

Mar 9, 2011 1:35PM

I agree and also write a check for my utilities and credit card payments, however in person I always use my debit card. I like the fact that it provides a job for someone to open and record my payments. Perhaps I'm at least helping save that persons livelyhood.

Dec 21, 2011 2:02PM
I don't know how it works in all countries but in Canada almost everyone pay either cash, debit or credit when shopping at a store.

Checks are still commonly used for other situation though (such as rent, bill payments, donation, gift, church, doctor fees/missed appointment, paychecks, snow removal, lunch money, car fix, newspaper, babysitting, void for direct deposit...)

Here are a few advantage:

1-) Using checks help creating jobs. Mailman, stamps=governmental tax, envelope company, the person who processes the bill payment, the person at the bank who process your check, the check printing company, etc

2-) Especially when you give money to somebody, a check gives you a certain written proof. Your name and signature are on it as well as the other person name (and his signature when the check is endorsed). It tells the reason of the transaction if you write it on the "note" or "memo" line.
Any episode of Judge Judy can tell you that there's nothing better than written documents when issues occurs.

3-) can be post-dated and it gives you time to call your bank to cancel the check before it gets process if you see something wrong in the transaction.

4-) Most financial institution allow view your check online and save it on a USB key for future reference.

5-) You can still pay your bills in case of a computer bug.


Cost more money, takes a long time to process, not safe if somebody steal your checkbook, stressful if you're not sure if you have enough money in your bank account, you don't know when the person or company will deposit the check, doesn't give points or miles (it gives you rewards if you pay your bills with debit/credit), no online transaction, only in one currency, takes place in your wallet.
Apr 23, 2011 10:39AM

It certainly appears to be efficient to have automatic deposit of a pay check, then automatic payments made.  Until something happens that is out of your personal control.  What happens to you if a site goes down or a system?  When it's up and running you get charged for a late payment.  Then you call and get a menu that takes 42 minutes to go thorough.  And an additional 90 minutes waiting to talk to a live representative in a country you didn't know existed.  This is considered progress.  My question would be, For who(m)?


I use paper checks, credit card, and cash.  For me, this is comfortable and gives me some control over what is mine in the first place.

Mar 9, 2011 10:59PM

All my payments are either paper check or cash.  If a store electronically converts checks at the check-out, my purchases are cash-only.  And that means they lose a lot of my business.  All this electronic tom-foolery is for the birds.  The old way worked best and it never should have changed.

Mar 10, 2011 4:05AM
I still use a paper check to pay my rent because the property management charges $10 to pay by e-check and $40 to pay by credit/debit. Everything else is usually by debit or credit. 

My debit card number was stolen in January, so I had to go back to using only checks for a week or so while I waited for a new one to arrive. To my astonishment, I discovered that my husband didn't know you could make a check out to yourself for cash! 
Mar 10, 2011 5:09AM

It is very tough to get mortgage refinance these days especially major banks. It is not a secret every one knows, what is the solution? Check our your local guys or check online for 123 mortgage refi they should be able to find a solution for you.

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