Tag Archive for Cheques are here to stay!

Why Phasing Out Cheques Is Not The Answer

The Federal Government of Canada has announced that it will be phasing out the use of printed cheques completely by 2016.  The goal of the Canadian government is to save taxpayer dollars and to use tax money wisely.

While this may be effective as far as old age security benefits, Canada pension plan, child tax benefit and pension payments are concerned, this does not in any way indicate that the use of cheques itself is likely to disappear in the near future. According to the Federal Reserve, 90% of adult consumers in the US have a checking account as compared to 70% having credit cards.  Each year, more than 20 billion cheques are written for over 30 trillion dollars. There is no doubt that in the past twenty years, multiple payment options have evolved and the face of conducting financial transactions has been transformed. Nevertheless, cheques still continue to remain an efficient, secure and comfortable method of making payments.

Cheques offer many benefits to both consumers and businesses. First and foremost, cheques provide an additional payment option.  Despite the fact that consumers can use credit cards, debit cards, prepaid cards, money orders, travelers cheques, PayPal, Zoompass, Google Wallet etc., payment through cheques is still the second most commonly used method.  Secondly, cheques give consumers a little time to stretch out their payments since processing cheques takes longer than a transaction registering on your credit or debit card.  Small businesses can still utilize the float period and for personal transactions, one can always ask friends or family members to wait a few days before cashing a cheque if one is short of cash or if there has been a delay in receiving expected funds.

Cheques are also not associated with annual or monthly charges.  Any fees associated with cheques are still generally half of credit card processing fees that merchants generally charge today. Cheques are also more secure and harder to misuse since they have to be physically deposited or need to be forged in order to be misused. On the other hand, your credit card information in the wrong hands can be misused quite easily.  Identity theft is one of the most common problems associated with credit cards but most banks offer sufficient security for cheques to minimize any improper usage.  According to the Canadian Anti-Fraud Center, 11,095 fraud reports were filed by Canadian victims in 2009 for more than 10 million dollars in losses.  Additionally, there are still many instances where identity theft and fraud with credit cards go unreported.

Payments made through cheques are protected by the Uniform Commercial Code and banking law and offer greater payment protection as compared to credit cards.  Credit cards have been associated with increasing number of disputed transactions and these transactions take months to be resolved.

Cheques are still a widely accepted payment method for bill payments and purchases.  They are also a safer alternative to carrying cash.  Businesses still prefer to pay each other and their vendors through cheque.  They do this because cheques provide them more control and improve their overall financial management. Also, generating cheques through the payroll system is a straightforward process. Direct deposit on the other hand requires more steps than cheques.  Cheques are also less expensive than direct deposit.  Companies like Cheques Plus offer affordable pre-printed computer cheques to clients across Canada. They also provide custom cheques for businesses enabling them to promote their brand more effectively.

Cheques are also easier to keep record of.  Most of us do not even know how much we’ve spent on our cards until we receive our credit card bills.  On the other hand, cheques help us monitor our expenses and keep control of our finances.  While preauthorized payments may be extremely convenient, there can be times when they can cause major financial headache.  Sometimes, payments you once authorized can become perpetual and despite repeated requests, funds can continue to be deducted from your accounts.  If for some reason, you forget to put funds in your account on the date of withdrawal, not only do you face penalties from the merchant/financial institution that was withdrawing the payment but your bank also penalizes you for non-sufficient funds.  When you make a payment with a check, you are more aware of the date that you wrote it and you are more likely to ensure that the funds are there for the cheque to clear.

Cheques also work very well for certain payments such as rent payments, school fees, donations, utility bills and so on.  Person to person transactions are also more effectively handled with cheques.  People don’t go around carrying debit machines and most people do not feel comfortable handing out their credit card information to another individual, even a friend. Cheques are a much better choice and work out most effectively in such situations. Cheques Plus provides consumers with cheques that have multiple security features in order to ensure minimum risk of fraud and misuse.  They also ship these cheques for free within 24 hours.

Overall, advancement in technology may have provided consumers several options but cheques are and will continue to remain one of the most commonly used tool for making payments.

HERE TO STAY: CHECKS REMAIN AN IMPORTANT METHOD OF PAYMENT FOR U.S. CONSUMERS AND BUSINESSES

Credit: cumminsallison.com1

AUGUST 14, 2012, MT. PROSPECT, IL— Although electronic banking has become increasingly popular in recent years, checks remain a common and highly used method of payment in the United States. A 2010 Federal Reserve Payments Study estimates that there are still 24.4 billion checks written in the United States annually. In fact, checks written from person to person increased by 3 percent per year between 2006 and 2009.2
Cummins Allison, the leading innovator and provider of coin, check and currency handling solutions, understands the importance of maintaining traditional payment methods and the role they play in today’s banking industry.
Benefits of Using Checks
While the use of credit cards and electronic payments has grown in popularity, many consumers and businesses are not ready to abandon the use of checks. And in some cases, paper checks offer certain benefits that electronic payments cannot, such as:

1. Security in Transaction
Some consumers remain hesitant to adopt electronic payment methods due to security concerns and uncertainty around who will have access to their personal banking information. For many, especially older generations, a tangible check offers a sense of security in the financial exchange between two parties. Checks also offer a paper trail that can easily be followed, and if a check is lost or an incorrect payment is made, banks can prevent the check from being cashed.

2. Careful Spending Habits
Checks promote careful and conscious spending habits by encouraging consumers to balance their checkbook. According to SuperValue Checks, credit cards can motivate consumers to spend as much as 30 percent more on purchases than if they paid with cash or check. Actively writing a check and balancing a checkbook helps consumers recognize the amount they are spending, whereas charging items on a credit card can lead to impulsive spending.

3. Business and Personal Transactions
Checks remain a widely used and accepted form of payment, particularly in the business world. According to the Federal Reserve, from 2006 to 2009, business-written checks increased from 41.9 percent to 46.9 percent. Checks written by businesses accounted for 82.8 percent of the total check value. Paper checks are also frequently given as gifts since they can be used anywhere and at anytime, compared to cash that can easily get lost and gift cards that limit where they can be used.3

4. Cost-Effective Payment Method
Electronic payment forms may be growing in popularity, but traditional payment methods remain highly cost-effective. Both cash and checks still play a critical role in the national payment system. This is demonstrated by the fact that nearly $1 trillion in U.S. currency circulated last year. Economists Jeremy Gerst and Daniel Wilson articulate unique benefits of cash, such as its appeal as a back-up store of value, which makes it likely for currency to continue to play an important role in the U.S. payment system.4 Cash and checks go hand-in-hand, as checks are a way to carry around large amounts of cash without the risk of actually handling the currency, while purchasers find carrying currency more preferable to writing out checks.

Embracing Paper Check Technology
Despite the recent decline in their use, paper checks remain an integral part of today’s commerce. In fact, the 2010 Federal Reserve Payments Study also revealed that there were 27.8 billion checks written in the United States in 2009 that had a total value of $32.4 trillion and an average of $1,165 per check.5 Consumers and businesses still using paper checks benefit from the security and flexibility provided by this traditional payment method. And at the same, these businesses can take advantage of today’s check processing technology that can process deposits quickly and accurately, providing even greater speed and service for consumers and businesses using checks, and the retailers, business and financial institutions they work with.

  1. Cummins Allison is a global leader in developing technologies which count, sort and authenticate currency. The U.S.-based company has a 125 year heritage of leadership in technology and product innovation and currently serves the majority of financial institutions worldwide, as well as leading organizations in retail, casinos, law enforcement and government. The company holds more than 350 U.S. patents and has ongoing research and development (R&D) investments double the industry average. Cummins Allison is headquartered near Chicago, IL with R&D centers near San Diego, CA and Philadelphia, PA and wholly owned subsidiaries in Canada, the United Kingdom, Ireland, Germany and France. The company also has an extensive sales and service network with more than 50 offices in North America and is represented in over 70 countries.
  2. Money Crashers,www.moneycrashers.com/popular-payment-methods-federal-reserve-study/
  3. Don’t Quit Your Day Job (dqydj.net), http://dqydj.net/are-personal-checks-obsolete-why-the-future-of-payments-is-paperless
  4. FRBSF Economic Letter http://www.frbsf.org/publications/economics/letter/2011/el2011-33.html
  5. Federal Reserve System, www.frbservices.org/files/communications/pdf/research/2010_payments_study.pdf