

Why do we use checks? - btilly
http://bentilly.blogspot.com/2009/10/why-do-we-use-checks.html

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dpcan
Send my banking info to a potential customer? Ask them to GO to their Bank and
send me the money I request? This is a problem solver how? Sounds frustrating
and awful.

The benefits of checks are huge:

1) They take time to process, so if you have to move money around, you can
give someone a check and then go put the money in that account.

2) You control when the vendor gets paid. If you give someone a credit card
number, they can just charge you. With a check, they have to ask ME for money,
and I decide when or if I'm going to pay.

3) Signed, written, record.

4) NO FEES attached for the vendor. I LOVE getting paid by check because I
don't have to give 5-10% away to some bank.

~~~
patio11
I am going to teach you something. It is important: please pay attention.

Pull out one of your checks. Can you locate your name on it? Good. You'll see
two groups of numbers on the bottom of it. The first group of numbers,
typically, is your ABA routing number. That tells me where you bank. The
second number is your bank account number at that bank.

These three pieces of information are all I need to debit your bank account.
There are a variety of ways to do it -- the simplest method is printing a
"demand draft", which is essentially a check drawn against your account but
printed on my printer. In place of signature it says "Authorized By Account
Holder". (Signed, written, record!)

Every person who has ever held a check -- ANY CHECK -- from you in their
hands, regardless of what is written on it, can debit your account at will.
Every waiter, every grocery store clerk, every person involved in the
processing chain.

Many people think checks are magically more secure than credit cards. Those
people are not well acquainted with payment processing.

~~~
jhancock
You are correct on the technical side. On the legal side, there is clear
support to protect fraudulent use of a written check. If you go to your local
police station and try to file a criminal report on someone abusing your Visa
or PayPal account, your most likely going to get puzzled looks as to what to
do.

The laws are so strong that they have been co-opted in a seedy way to support
the "payday check" industry. You write a post-dated check and if the money is
not in the account by that date and the check bounces, the payday company uses
your local sheriff's office to arrest you. This is a terrible abuse of public
services but shows how strong the laws are.

~~~
generalk
There are similar laws for credit fraud, of course, so the stated benefit of
"I don't have to give someone my details!" is confusing.

In any kind of "pull" system where I have to give someone else credentials to
access my account, there's going to be the potential for fraud. A "push"
system, where you have the ability to deposit into an account but not withdraw
from it, sounds much more secure.

~~~
jhancock
I agree, the stated benefit of I don't have to give my details, is not just
confusing but plain wrong. Checks leak as much if not more information. I was
replying the parent post of why checks do have some value.

The laws for check fraud are different than credit fraud and the like. In most
cases (each U.S. state is different), check fraud laws are old and quite
strict. These laws have statutory obligations to fulfill to enable criminal
prosecution. These requirements in turn force law enforcement and banks to
take action. This may not always happen, but there is a framework for pushing
it to happen.

------
unwind
Too bad the article didn't answer the question very convincingly. I'm in
Europe (Sweden), at age 34 I think I've handled exactly one check. Most bills
are, of course, paid through Internet banking nowadays, although the bills
still use the giro system. You just send the giro payment instruction
electronically rather than on paper.

~~~
electromagnetic
I'm from the UK, I've never written a check and never saw anyone write a check
until I came to Canada. Chip and Pin was fully implemented in the UK in 2004,
we're just getting it here in Canada in late 2009 and it's certainly not
implemented well with some places swiping only, some using the chip only and
some use the pay-pass system up to $80.

Not to mention debit is barely accepted online through the Interac service.
Back in the UK debit is accepted everywhere online and when it's not (usually
only certain cards, IE non visa/mastercard debits) it's such an annoyance that
I've actually called the company and bitched at them (yes I'm talking about
you expedia.co.uk).

Since I've come to Canada, everyone seems to get paid in checks (archaic),
lots of people use checks for transferring money and for payment of large
purchases. It just appears as though the country is lazy to adapt, and I'm not
even blaming this on the ineptitude of Harper and the previous administrations
protecting their monopolies from outside competition and inside advancements.

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uptown
We use checks because it's the only transaction-fee-free way (aside from cash)
to exchange money. Anything else for person-to-person transfers winds up
taking a 2%-4% processing fee out of the equation. Until that changes, check
usage will continue.

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bediger
Isn't the use of checks in the USA partly path dependent? They worked fine as
long as humans were in the check processing loop.

Right now, businesses in the USA like to use them because they have lower
transaction costs than credit cards. The US government does all the check-
clearing for free, as I understand it, while Visa/MasterCard/Amex/Discover all
charge upwards of 1.75% of all transactions to shuffle all the (notiontal)
money around.

~~~
btilly
The transaction costs is a key point in the inertia of the system. I have 2
bank accounts in 2 different banks. If I walk into one bank and want to
deposit money in the other I am charged $25. OTOH I can write a check for a
trivial amount of overhead.

In reality there is a considerable overhead to processing checks. And banks
recover it in various ways, including reducing the amount of interest on
checking accounts. Similarly every business uses tracking systems for every
payment made and received so that they can catch and flag any checks that are
cashed which they did not write. This is also not free. But by and large these
are so much taken for granted that people aren't even aware of this overhead.

------
pavel_lishin
I'm guessing the reason is that checks are simple, and you are in control of
when and to who you give your money. The risk of your money being stolen is
small enough that we generally don't worry about it, at least when dealing
with things like paying the bills through the mail or paying for groceries
(damn you, old woman in line.)

~~~
stcredzero
Never underestimate the power of _cultural inertia_. I think this is one of
the big reasons checks are still widely used in the US. There is considerable
inertia in the legal system, for example.

This is also the reason why there is an iPhone app that can submit checks
using a _photograph_ of the check. Many banks process checks by using their
digital images, because it's cheaper. To save money, they spent the money on
lawyers to make this kosher legally. The iPhone app just plugs into this
process.

[http://www.mysanantonio.com/business/local/USAA_Federal_Savi...](http://www.mysanantonio.com/business/local/USAA_Federal_Savings_to_launch_deposit_app.html)

~~~
RK
_Never underestimate the power of cultural inertia._

This affects Europe too with payments. I was just in Germany again recently. I
was staying in a short-term apartment and instead of being able to pay at the
reception by credit card, I had to go to the local bank, get cash from the
ATM, then fill out a giro transfer form and hand it to the bank employee, who
processed it by hand. Then I had to go back over to the reception at the
apartment and hand them the receipt so they'd know they had been paid before I
left. Although Germany has greatly increased its acceptance of credit cards,
etc, this kind of thing is incredible frustrating when you run into it.

------
generalk
Why, indeed? Paper checks are a security hole and an inconvenience wrapped
into a handy slip of paper!

The main advantage of the Giro Transfer method (it seems) is that it's a PUSH
rather than a PULL.

With credit cards or checks, I give you full run of my account to pull funds
when you like. Feel free to request as much money as you like, and if there's
a problem, I've got to fight to prove that it wasn't an authorized request.

With a push request, I have account info for you, but all I can do is put
money in. You never get to pull money indiscriminately. Sounds like a big win
to me.

------
dennmart
The only reason I use checks is to pay my rent. I live in the second floor of
a two-story house, where the landlord lives downstairs. He doesn't own any
other property, so I'm his only tenant, and he has no electronic methods of
receiving money, just cash or checks. Paying with checks is more convenient
and secure for me, since walking around New York City with more than $1000 in
cash is really not a wise thing to do.

I'm sure my case can't be the only situation where checks are more useful, or
the only method of payment.

------
brazzy
Checks? How quaintly backwards those US of A are in some things...

Checks have been phased out in most of the rest of the world at least 20 years
ago.

~~~
axod
I heard some of them also still use pagers! ;)

One of the big scams when Cheques were still in use in the UK was that banks
would take 7 working days or so to 'clear' the cheque. There was no technical
need for it, but it made them quite a bit of cash in interest since it was
neither in the source account or the destination, the bank could "use" it for
7 days.

Many places in the UK refuse to accept cheques now. Which is good. Nothing
worse than waiting for students to pay for their drinks at the bar by cheque
:)

On the down side, AFAIK the change to chip+pin meant the burden of proof also
changed - with signature forgeries it was up to banks to prove it was you who
signed it. Now it's up to us to prove we didn't tell anyone our 4 digit pin.

~~~
jlees
You can't pay for goods with cheques in the UK but they're still _reasonably_
common. I still handle them when:

* my grandmother sends me Christmas money

* I get an expense refund from the University

* my flatmates refund me bills

* I need to send money off with a postal form (recently renewed my driving licence and had to unearth my chequebook to do so)

* I need to withdraw cash from my business account (there is no card associated with the account because RBS are incompetent morons)

* I put a deposit down on a new (rented) flat, or have to pay rent which didn't come out of my bank account as usual due to some wanker committing card fraud and pushing me over my overdraft limit

I think that's it, but still definitely in use around these parts, just not
for 'everyday' transactions. And if my flatmates/family were more tech savvy,
that'd all be done via online banking. However, the push vs pull argument does
weaken when you consider Normal People -- they are so trained against 'giving
out bank details', that if I wanted to send money to one of my flatmates, he
would _prefer_ a cheque over giving me his sort code and account number...

~~~
pbhjpbhj
You sure can pay for goods with cheques in the UK, many places won't accept
them but it's not illegal or anything it's just company policy.

On the "not giving out details front", a little tale. I went for pizza on
Sunday. The guy at teh counter asked this lady for a name (so he could call
her when the pizza was ready) she responds "I don't give out my details" and
was quite determined not to give the guy a name to attach to her order. I
proffered that he should just call "Bob" when her pizza was ready - he
shrugged and completed the transaction ... sadly I didn't get chance to hear
her verbally abusing him for calling her "Bob" when her order was done.

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imgabe
I think the fact that checks worked (and continue to work) for decades says a
lot about how, generally, most people are pretty honest. Sure there's some
fraud, but it wasn't on a level that made the whole system untenable, like
almost happened to PayPal.

It's not like credit cards or other forms of transferring money are immune to
fraud either.

------
diN0bot
this is ridiculous. checks are useful for people to pay each other in sums
larger than cash. i almost never have cash on me (speaking of handing someone
paper that represents a value...).

i pay rent with checks, therapy and house bills. utilities are paid
automatically from my coop's bank account, but normal people don't have credit
card processers. the EASIEST thing is to write a check.

what do people do elsewhere? log on to Amazon or Paypal and send money to each
other with a fee? Use an ATM to get hundreds of dollars and give each other
cash?

i seroiusly couldn't tell if half the comments here were sarcastic or serious.
most of the world is NOT as tech savy as this small niche. i personally don't
have a smart phone or sms plan, and soe of the people i live with don't have a
personal computer (when they want to finish an experiment after dinner they go
back to the lab).

~~~
AndrewDucker
I use internet banking. Which costs me nothing. Log on to my bank's website,
give it a branch number and acct number for the recipient, and a value - hit
pay.

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petervandijck
I never EVER use checks except when in the USA. It's like cellphones: you guys
are just way behind (except that with cellphones you caught up with the
iPhone).

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toretore
I remember my mom being one of the very last people I knew to insist on using
checks instead of a credit/debit card, and that was more than 10 years ago.

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trezor
We don't. I'm 31 and I can't remember ever using a check. Heck, I hardly keep
cash around. Why should I? Checks are for electronically impaired people. Need
to pay? Use a credit-card. Need to transfer money? Use internet banking.
Which, by the way, these days is accessible on your cellphone.

No fees (unless you are willingly using a the worst bank around) and a million
times more secure than both checks and cash.

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ilyak
We don't and they're completely unheard of.

~~~
monos
> giro transfer

that's what we do in EU. never wrote a single check. i'm 28.

~~~
blue1
actually I think it depends on the state. Until recently, cheques were much
more used (and cheaper) than bank transfers in Italy and AFAIK even more in
France.

Online banking changed this.

