Still use checks? Join the dinosaurs
Posted on December 20th, 2009
Your first checkbook used to be a rite of passage. Today it’s a relic — so much so that some retailers and restaurants now decline to accept personal checks.
Whole Foods Market, one of the nation’s largest grocery chains, is testing a no-checks policy at three stores in Arizona and California, and already refuses checks in several Northeastern states. Another chain, Fresh & Easy, didn’t even bother with a test, deciding from the get-go to do without the hassle when it launched in 2007.
True, millions of loyal check writers carry on with their ink-stained registers, enduring the sighs of fellow shoppers, their every entry an anachronism. “I didn’t even know there was an issue,” says John Davis, a check scribbler in Lubbock, Texas.
But for every John Davis, there’s a Carissa Clements, a 32-year-old Philadelphia resident who never writes checks unless her fiancé specifically requests one for the mortgage.
“Since I’ve gotten out of college, it’s been more of the norm,” Clements says. “A majority of my friends are the same way as I am, in that they would pay online if the option was available.”
When paying for credit card charges, utilities, parking tickets or magazine subscriptions, young people instinctively grab a mouse and click. Take a look in stores: Is it even possible anymore to find a fashionable wallet that holds check registers?
When Joshua Baer, the founder of Otherinbox, an e-mail filtering program, gave a new employee an auto-deposit form recently for his pay, the employee returned a bit befuddled. “It says to include a copy of a voided check, but I don’t have any checks,” he told Baer. (Baer assured him the account number would do.)
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“Maybe not (in) five years, but certainly in 10 years, checks are going to be pretty well gone, if not sooner,” says James Neckopulos, the manager of the financial-services-industry group at Hitachi Consulting, which conducts a biennial survey on payment methods.
“As the demographics change and as the last of the baby boom generation, who were used to using checks, move on, we’ll see paper checks definitely become extinct or almost extinct as a result,” he says.
We no longer take checks — period
In a certain sign that checks are out of favor, there are stores, even in this recession, declining to accept checks, apparently confident that such a policy won’t cost them customers.
Whole Foods Market, with $8 billion in sales last year, says its goal is to reduce losses due to check fraud, although company spokeswoman Libba Letton wouldn’t elaborate on those costs. Another aim is to speed up the checkout lines.
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“I think it’s safe to say that retailers will be looking at that (Whole Foods) test closely,” says Doug Johnson, the vice president of risk-management policy for the American Bankers Association, who expects other chains to follow suit quickly. “It will be interesting to see whether these test cases are going to be able to withstand any customer aggravation.”
If history is any guide, Whole Foods’ latest no-checks experiment will easily pass the grade. The grocery chain’s Northeastern region — with 20 stores in New York, Connecticut and New Jersey — has been refusing checks for three years, apparently without regret.
“We received very little feedback from customers as so few were using checks,” Whole Foods spokesman Michael Sinatra wrote in an e-mail. “Our stores suffered no impact on sales and we have full intent to continue this policy.”
Fresh & Easy, a chain with 130 small groceries in California, Nevada and Arizona, cut checks right out of its design. The stores, which have experienced steady growth since opening in 2007, use what the company calls “assisted checkout” registers, essentially self-service lines with a clerk standing nearby in case someone has a problem using the machines.
“With the simplicity of our system, it just doesn’t fit in” to take checks, says spokesman Brendan Wonnacott. He says customers seem not to mind. “It makes things a lot quicker. It’s a lot more efficient.”
When Ed Hardy, a trendy apparel chain, launched its retail outlets in 2006, it didn’t bother to set up its registers to take checks either.
“It’s just something that we don’t feel like we need to have,” says Philip Del Rio, vice president of store operations.
“Even just from my shopping around, most clothing retailers don’t accept checks anymore,” he says. “The only places that are going to accept them anymore are the big department stores.”
That may be true – soon. Even a larger clothing chain – Banana Republic, a brand of Gap Inc. – started a trial no-checks policy this fall.
A rapid decline
If you think you rarely see anyone writing checks in line, and when you do it’s someone of a certain age, you’re obviously on to something.
The National Retail Federation, in its 2008 holiday shopping survey, found shoppers’ use of personal checks nearly nonexistent, making up just 4.3% of payments at the registers, a drop from 5.5% in 2007 and 6.2% in 2006.
Women wrote more checks than men, and the largest group of check writers were people older than 65, at 10.9%. By comparison, 41% of all adults surveyed used debit cards, 31% credit cards and 23% cash.
“Consumers seem to be migrating toward debit cards,” says Cary Whaley, the director of payments and technology policy at the Independent Community Bankers of America, an industry trade group. “We call them checking accounts, but the check is no longer the primary payment method on a checking account. Those card transactions have grown in importance.”
Whaley has been surveying community banks for years. Most startling has been the rapid decline recently in paper transactions, even among small local banks.
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