Check usage is definitely on a downwards trend here in the US too, but there are very important benefits to using them and I doubt they will ever become truly obsolete.
As for the benefits I just alluded to, they are in no particular order:
* Simplicity and security. You cut someone a check, it's effectively the same as handing someone a wad of cash but without the logistical, security, and social issues associated with handling wads of cash.
* Convenience. Checks are easy to use and require nothing other than a pen compared to other forms of transferring money, such as wire transfers or debit cards.
* Assurance. Cashier's checks are a special kind of check guaranteed by the underwriting bank. These are often used when large sums of money need to exchange hands with no hassle or problems (eg: real estate or vehicle purchases).
Disagree about the security. I just found out last month how unsecure the use of paper checks actually are because they expose your bank account & routing number.
I had an old checking account that was dormant and I hadn't written any paper checks against it for 10 years. What then happened was a landscape service asked me for payment for some work so I had my credit-card ready to settle the bill but they surprised me by saying they would charge extra 3% fee for processing the card. However, they said there was no fee if I paid by paper check. I didn't want to pay hundreds extra in fees so I used that dormant checking account to pay them with a paper check. They cashed my check the next day and I didn't think anything about it.
About a month later, I saw a mysterious "e-check" that subtracted money from my dormant checking account! It was not ACH; it was a generated e-check from a billing service popular with adult companies. So somebody from the landscaping company used the numbers on the bottom of my paper check to generate a fake digital check. The thief was on a website that let you pay for a subscription by creating an echeck; the web form would have fields for entering anybody's bank routing # and account #. (Example: https://solutionscout.com/payment-processing/e-check/)
When I talked to Bank of America about the fraud, I asked the customer service representative if there was any security setting that would prevent fake checks like that from deducting money from the account. He said "no". The fake e-check even had a totally bogus check # that was out of sequence with my real checks and he said their system doesn't verify the sequential #s. Literally, you're powerless to stop it and the only thing you can do is let the fake e-checks steal your money -- and then later file a fraud claim hoping to get the money back!
Paper checks are flawed with a critical security hole by letting companies generate fake e-checks. This means the more paper checks you write and release out into the world, the more of your banking surface area is exposed for you to become a victim of fraud.
For business accounts, "positive pay" and "reverse positive pay" are solutions to check fraud. With "positive pay", you upload the check number, the payee name, and the amount to your bank, if any of them don't match, such a check is rejected. With "reverse positive pay", your bank delegates the responsibility of approving any check to you.
Paper checks are useful, if you have various accounts with different banks. You can write a check for yourself to move money around.
Even mailing personal checks is not secure, as they are stolen. Even postal employees are involved in this [1].
Not sure what good that would do. I keep a few checks in a travel folder and have a couple pads of checks in different places around my house. I don't necessarily write checks in sequential order.
Yes, they're not very secure. It's also a system that generally works pretty well for a lot of people. And, yes, it's a good idea not to keep an excessively large bank balance for a variety of reasons.
>Not sure what good that would do. I keep a few checks in a travel folder and have a couple pads of checks in different places around my house. I don't necessarily write checks in sequential order.
Yes, I understand that scenario where the checks are not written in exact sequential order by the account holder -- nor are they presented to the bank for clearing in exact sequential order by people trying to cash them.
However, when the last real check I wrote is sequence #3374 and the fake e-check hitting my account is sequence #1687557289469, that's an arithmetic difference of 168 billion checks!
We're not talking about a fudge factor difference of +/- 50 in check numbering because real people write paper checks out of sequence. We're talking about basic sanity checking for fraud. E.g. Do bank account holders typically write billions of checks such that the simple subtraction of 2 different check sequence numbers is billions apart?
Here's the crazy part... The Bank of America website UI for online banking already visually warns you when it detects a out-of-sequence check # gap! It just doesn't use that existing logic to stop payment on an obviously counterfeit echeck.
The system you're envisioning whereby banks refuse payment on otherwise valid checks based on Reasons seems a lot crazier.
So a valid check is presented to my bank with sequence number N and cashed. Another valid check is presented with sequence number N+10000 and refused. So now I've got to pay a fee to the second vendor for the returned check, they probably won't accept a check from me now so I've got to pay with a credit card and there's a decent chance I'm paying 3% more for that pleasure. So the bank trying to be helpful just cost me $25-50+3% and has done nothing to prevent actual fraud from occurring - I would not be using that bank for very long!
The guy at that landscaping company already committed a bunch of felonies, it's computer fraud, bank fraud, probably one or two others. Not sure what the bank wasting its efforts trying to combat this would accomplish.
>Not sure what the bank wasting its efforts trying to combat this would accomplish.
It would prevent me from losing my money! I filed a fraud claim form that also required an affidavit with notarized signature and Bank of America still won't return the stolen money. That money is gone.
>The system you're envisioning whereby banks refuse payment on otherwise valid checks based on Reasons seems a lot crazier.
My point is that BofA computer systems already have some aspects of "suspicious activity" algorithms and heuristics in place to prevent counterfeit checks stealing funds from the account. The banks are already "wasting effort" as you put it to try and distinguish real vs fake checks. E.g. When the landscaper tried to cash my legitimate check that had my handwriting and my signature, the bank sent me a phone alert which I then had to explicitly approve. Otherwise, they would reject the check. (An example of "Reasons" as you put it.) This is what the verification alert that requires explicit approval looks like: https://imgur.com/a/62dCsBx
But the next check a month later that someone faked, with a weird sequence #, without any signature, and the "payee" to a company notoriously known for unauthorized checking account withdrawals and fraud... No alert for my approval was sent; instead, they just went ahead and paid it.
If the banking system allows 3rd parties to fabricate e-checks with no verification, they should also offset that dangerous power by allowing account holders the security tools to stop those types of echecks from being cashed. E.g. a smartphone approval step.
> It would prevent me from losing my money! I filed a fraud claim form that also required an affidavit with notarized signature and Bank of America still won't return the stolen money. That money is gone.
As someone who was previously a customer of Bank of America and suffered my own form of theft and fraud (I was pickpocketed and someone used my debit card illicitly afterwards before I could cancel it). I can tell you with an absolute certainty that your experience is very specific to Bank of America or large national banks generally and not any sort of rule or law.
Do yourself a big favor and close your accounts with BoA and join a local/regional credit union. Nearly a decade after my first incident, I had another issue and the experience and how I was treated by my credit union vs how BoA treated me were worlds apart.
Either one will require an affidavit, the credit union offers members a free notary service at any branch so I simply filled it in person at a branch. The affidavit is to protect the bank by ensuring you are liable for false statements. The credit union also helped me pressure the police to actually do something, which resulted in three arrests of a group of teenagers that had more than 800 stolen cards in their possession when arrested. And I had the stolen funds returned to my account the same day at the branch, good as cash.
In that interim decade I stopped carrying a debit card and only used credit cards because of how badly my experience with BoA was. I now know that it’s not the card you use, it’s the /bank/ you use that makes the difference.
It is likely because the bank doesn’t know what checkbooks you own and use, and has no way to know it. You could have ordered more third-party checks (legal, not fabricated), and if you do, commonly you would use a different sequence starting point for those, so that you can distinguish which checkbook you used. More commonly the case for businesses but you can buy them from Intuit for example: https://intuitmarket.intuit.com/checks
> We're talking about basic sanity checking for fraud. E.g. Do bank account holders typically write billions of checks such that the simple subtraction of 2 different check sequence numbers is billions apart?
When I last used checks (about 30 years ago?), my sequence numbers would vary by that much because I used them to encode metadata about the check. Only the last 3 digits were actually a sequence number.
Checks also let you do fairly complex multiparty commerce without needing to spend millions of dollars engineering it, like an apartment broker requiring you to give them a check for deposit/first month’s rent and signed lease prior to releasing the keys to you. Note that the check is to the landlord and the broker cannot access her accounts, but visual inspection of a check plus the previous underwriting lets this work without needing to loop landlord in again (in real time) to release keys.
> Checks also let you do fairly complex multiparty commerce without needing to spend millions of dollars engineering it, like an apartment broker requiring you to give them a check for deposit/first month’s rent and signed lease prior to releasing the keys to you.
You don’t need to spend millions of dollars engineering an electronic solution to this problem, you just need a legal agreement between the broker and the landlord allowing the broker to accept the deposit on the landlord’s behalf. That’s not exactly a stretch.
I don’t even know my current landlord’s name, to be honest. It’s on the lease, but my deposit and rent go to the management company that maintains the building.
The broker and landlord have no idea if the money exists just because they get a paper check. Seems like a far worse guarantee than simply transferring the money electronically and the landlord having instant assurance they received it.
If the recipient of a check wants assurance that there is actual money behind the check, they should demand a cashier's check for reasons I already iterated.
Receiving a fake cashier’s check, or the opposing party hacking into your bank and showing a transaction that will disappear?
Regardless of how unlikely the fake cashier’s check is, a fraudulent electrinic money transfer is still more unlikely. And the electronic transfer is cheaper (free). And less work for everyone.
I think you may be misinformed about "electronic money transfer" at least in the United States.
As far as I know the only way to execute an immediately-settled electronic transfer is a wire transfer, which is inaccessible to lots of people and has an associated fee for nearly everyone else.
I used to pay a landlord with Zelle 10+ years ago.
And Zelle obviously has a lot of limitations, such as being for smaller amounts of money so not useful for down payments or such, I was referring to checks versus electronic payments as a concept in general, not the US’s specific implementation. Which there isn’t one, but due to political failure, not technical limitations seeing as how every other country has the capabilities.
I was under the impression that immediately-settled electronic transfers were Zelle’s raison d'être. I understand that it’s not universally available, but still.
I'm using "settled" in the colloquial "the money has been debited from the sender's account and has been credited to the receiver's account" sense, which for the purposes of this discussion is the definition that really matters.
You can't just unilaterally reverse a Zelle payment any more than you can a SEPA transfer.
My understanding is that Zelle transfers are just settled by ACH under the hood, which is the same system that settles checks.
However there is possibly some new "real-time payment" feature of the ACH network that could be equivalent to wire settlement, but I'm not sure Zelle actually uses it.
As far as I know Zelle prefers RTP[1] for settlements and falls back to ACH only when necessary, but I'm sure there's a Zelle employee on here who can confirm one way or the other.
There's also FedNow[2] but I don't know of any retail implementations yet.
Security: not so much, you’re handing the recipient your “user and password” to your account printed right there on the check.
Convenience: will be superseded by FedNow. Is already superseded by various apps.
Assurance: cashiers checks aren’t really relevant to this discussion. They’re not the same as a check, they might as well be a different product entirely, and they generally cost money to use for everyone except those who have fancy high value bank accounts.
> and I doubt they will ever become truly obsolete.
I expect they will just become obsolete slower in the USA than other parts of the world.
Personal cheques are already obsolete in my country (New Zealand). And their usage looks to be sharply declining in European countries: https://www.statista.com/statistics/443677/cashless-payment-... or countries are trying to stop their usage (UK, Australia).
Yes, checks have important benefits but the downsides (fraud, processing costs, credit risk) lead to them becoming uncommon and then obsolete in other countries. No reason the USA will be different.
Though I was surprised a couple years ago when I bought a new car. I thought I'd have to run to a bank branch to get a cashier's check to pay the balance (as I've had to do in the past). They were fine with just a personal check. I assume the finance guy had some means to verify I had the balance in my account.
> I assume the finance guy had some means to verify I had the balance in my account.
I don't assume that.
Every dealership has their own policies. My guess is nonpayment on personal checks for car purchases is such a low occurrence that they are willing to take the risk of just assuming that the check will clear. Plus they also (in my state anyway) register and title the car on behalf of the DMV so they have all your information.
When I bought my car I said I needed to move the money into my checking account before I wrote a check. It was from the same bank so it was instant but they replied "no problem - do you need us to hold the check for a couple days then?"
When I came to the US ten years ago I hadn’t written a check in a decade. I was absolutely shocked that I could buy a car and later put down a deposit on a house with a personal check.
The amount of trust people are willing to place on a piece of unauthenticated paper is astonishing.
In the US, anyone can sue anyone for anything. If the check comes with a legal agreement, especially notarized, being made whole is easy. Worst case, they take the collateral (house, car) back and get to sell it again. And then there's the fines and jail time if the local prosecutor takes an interest. It's all downside for the aspiring thief.
There are kinds of check fraud people get away with it, but none of them involve legal names and an address to send a summons to.
Being able to sue has no relation to being able to collect any judgments for damages.
Even the US government requires cashier’s checks, not personal checks, for passports.
>Worst case, they take the collateral (house, car) back and get to sell it again.
Worst case is the asset gets trashed or stolen and not recovered, and the seller spends a ton of time and money in court to find out the buyer has no assets to recover from.
Edit: I was wrong about the US passport needing a cashier’s check. It was probably for a travel visa, so a different country requiring it.
The benefits of your first two points are even greater with electronic mechanisms of transferring money.
And a big downside of checks is that it reveals your bank account and routing # in an ACH system where money can be “pulled” anytime from your account. Compare to an electronic money transfer system where money is pushed from entity to entity using a unique identifier, but can’t be “pulled”.
As for the benefits I just alluded to, they are in no particular order:
* Simplicity and security. You cut someone a check, it's effectively the same as handing someone a wad of cash but without the logistical, security, and social issues associated with handling wads of cash.
* Convenience. Checks are easy to use and require nothing other than a pen compared to other forms of transferring money, such as wire transfers or debit cards.
* Assurance. Cashier's checks are a special kind of check guaranteed by the underwriting bank. These are often used when large sums of money need to exchange hands with no hassle or problems (eg: real estate or vehicle purchases).