The Role of Paper Checks in Modern Transactions

In today’s digital age, where Apple Pay, Venmo, and online shopping dominate, the relevance of paper checks might seem questionable. However, paper checks still hold a unique place in certain transactions. At O1ne Mortgage, we understand the importance of various payment methods and are here to guide you through the pros and cons of using paper checks, as well as their alternatives. For any mortgage service needs, feel free to call us at 213-732-3074.

What Are Paper Checks Used For?

Despite accounting for just 3.8% of consumer transactions in 2022, according to the Federal Reserve Bank of Atlanta, paper checks remain useful in specific scenarios:

Paying someone without using a payment app: If you owe money to a friend who doesn’t use apps like PayPal or Venmo, a paper check is more secure than handing over cash.

Paying certain businesses or organizations: Some small businesses or charitable organizations may not accept debit or credit card payments, or you may have concerns about the site’s security. Checks are often preferred by small businesses to avoid credit card fees.

Gifting money: Mailing or giving someone a card with cash or a gift card inside is risky. If the card is lost or stolen, your gift is gone too. If a check goes missing, you can simply stop payment on it and write a new one.

Paying school or extracurricular fees: Your local parent-teacher association, school fundraising organization, or Little League team may not be set up to accept credit or debit card payments.

Setting up direct deposit: When initiating direct deposit of your paycheck or government-issued benefits, you may be asked for a blank, voided check. Although there are other ways to set up direct deposit, a paper check provides all the necessary information in one place.

Setting up automatic payments or other transactions: A blank, voided check can be used to set up automatic bill payments or authorize automated transfers from your checking account into an investment account.

Making a purchase without a debit or credit card: While rare, some business owners still accept checks. If your debit card is lost or stolen, paper checks may let you make purchases from your checking account without carrying cash.

Getting a written record of your payment: A copy of your canceled check proves the recipient received and cashed the check. While you can get proof of debit card, credit card, electronic, or cash transactions by saving records or confirmation numbers or asking for receipts, these might get lost. A canceled check can typically be accessed any time via your banking website or app.

Pros and Cons of Using Paper Checks

When deciding whether you need paper checks, consider the pros and cons.

Pros of Using Paper Checks

Gift money to friends and family without a peer-to-peer payment app: Not everyone uses digital payment methods, making checks a versatile option.

Pay for goods and services when other payment methods aren’t accepted: Some businesses still prefer checks over digital payments.

Obtain easily accessible proof of payment: Canceled checks provide a reliable record of transactions.

Unlike cash, can be deposited via mobile app without visiting a bank or ATM: This adds convenience and security.

Safer than carrying cash or gift cards, especially if filled out correctly using black pen: Checks can be stopped if lost or stolen.

No computer or smartphone required to write or cash a check: This makes checks accessible to everyone.

Cons of Using Paper Checks

Banks typically charge extra for paper checks: This can add to your banking costs.

Writing and recording checks can be time-consuming compared to debit card or online payment transactions: Digital payments are generally faster.

Mailing checks requires paying for postage: This adds an extra step and cost.

Paper checks may take two days or more to clear: This can delay the transaction process.

Check amounts won’t be deducted from your account balance until the recipient deposits the check, potentially making it harder to track your account balance: This can lead to overdrafts if not carefully monitored.

Lost or stolen paper checks can be used to steal money from your checking account: This poses a security risk.

Recipients without bank accounts may have to pay fees to cash a check: This can be inconvenient for the recipient.

Alternatives to Paper Checks

While paper checks have their place, there are plenty of alternatives that offer faster, more secure ways to pay with your checking account.

Debit cards: These let you access funds from your linked checking account. You can pay with a debit card at most businesses, use it for online purchases or payments, or link it to a peer-to-peer payment account. Funds come out of your checking account immediately.

Peer-to-peer payment (P2P) apps: Apps like PayPal, Venmo, and Zelle allow you to pay businesses and individuals from a linked bank account or credit card. Payments can be sent and received instantly using the P2P app. However, transferring funds from the app to your linked account may take a few days unless you pay a fee.

Automated clearing house (ACH) transfers: These are used to send money to individuals or schedule online payments from your bank’s website or mobile app. Making an ACH transfer is typically free and usually takes one to three days.

Wire transfers: These electronically move money between banks. They are typically faster than ACH transfers—sometimes as fast as the same day—and involve a fee. You might use a wire transfer to send money to people overseas or cover a large transaction, such as a real estate purchase.

Money orders: These can be cashed just like checks and used to send money overseas or when you don’t have a checking account but need to pay with a check. You can purchase a money order from your bank or credit union, the post office, some retailers and supermarkets, and services like Western Union or MoneyGram. There is typically a small fee and a $1,000 limit.

Certified checks: Available from your bank or credit union, typically for a fee. A certified check is safer than a personal check because the issuer verifies your signature and sets aside funds in your account to cover the payment.

Cashier’s checks: Used for major transactions such as a down payment on a home or buying a car from a private party. The bank or credit union issuing the cashier’s check guarantees payment using their own funds. A cashier’s check typically clears by the following business day and may involve a small fee.

Check It Out

Depending on your spending habits and tech savvy, you may not need paper checks. Considering going all-digital? If you’re thinking about opening a new checking account, the Experian Smart Money™ Digital Checking Account & Debit Card can help you build credit without debt by automatically linking to Experian Boost®ø, which gives you credit for eligible bill payments after three months of payments. You’ll also pay no monthly fees¶ for Experian Smart Money, have access to more than 55,000 fee-free ATMs worldwide** and could receive your paychecks up to two days early when you enroll in direct deposit†. You can get an Experian Smart Money Account through a free or paid Experian membership, which also gives you access to your FICO® Score☉, Experian credit report, and more. See terms at experian.com/legal.

For any mortgage service needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with one of our expert loan salespersons today!