Target's recent decision to stop accepting checks in stores dealt another blow to the already dying checkout method.
The retail chain stopped accepting checks in its stores on July 15 due to "extremely low volumes," according to a company statement. Target's experience underscores a broader trend that's been happening over the past decade. There were only around 12 billion checks written in 2021, a nearly 41% plunge from 20.2 billion in 2015, according to recent Federal Reserve data.
People don't carry cash or checks as much as in the past because they rely heavily on their phones — using
"The general trend is that consumers are using checks less and particularly at the point of sale," said Elisa Tavilla, director of debit advisory services at Javelin Strategy & Research. Notably, a research report from Javelin last year showed that a mere 1% of consumers prefer to use checks when making an in-store purchase, such as at a retail store or restaurant.
But checks still have some life left. Plenty of retailers allow consumers to pay by check, including Best Buy, CVS, Walgreens and Macy's. Others, such as Whole Foods Market and Aldi, do not allow checks, and some industry observers suggest more retailers may follow their lead for a host of reasons, cost being a major factor. Receiving paper checks had a median cost of $1.01 to $2 for businesses, though it was lower for private organizations, according to a 2022 benchmarking survey from the
By contrast, the study found the median cost of initiating and receiving an ACH payment for all businesses to be between 26 cents and 50 cents. Moreover, ACH debits and credits had an estimated median internal cost of 15 cents and a median external cost of 25 cents. "Checks probably have the highest labor cost associated with them," the report said, noting that "advances in technology surrounding the use of checks often offset the value in the cost of labor to produce them."
Beyond cost, there are plenty of reasons businesses wouldn't want to accept checks. These include the prevalence of fraud, the lag time before the full funds are available and deposit-related headaches. Checks also aren't always an option for self-checkout, which many stores offer to speed up checkout processes.
For a mom-and-pop store that goes to the bank weekly anyway because it accepts cash, it may not be as big a deal to continue to offer checks, said Rodman Reef, founder of Larchmont, N.Y.-based payments consulting firm Reef Karson Consulting and a member of the U.S. Payments Forum. But for businesses with multiple locations, the cost-benefit analysis may lead to a different conclusion. "If the volume of cards and cash makes up 90% or 95% of the business, they've got to start asking questions about the other 5%. Why are they dealing with it?" Reef said.
In Target's case, the retailer said it offers consumers numerous other ways to pay, including its Target Circle Card, previously known as Target RedCard, which offers a debit, credit or reloadable option. The retailer also accepts cash; digital wallets; SNAP/EBT; buy now/pay later services and credit and debit cards, according to a company statement.
While it's possible more major retailers will follow Target's lead on checks, it will take a lot for paper checks to go away completely, in the absence of a regulatory push, industry participants said. South Africa, for instance, discontinued check issuance and acceptance at the end of 2020.
In the U.S., however, industry watchers say checks are still too ingrained in the payments landscape to disappear anytime soon. Many tradespeople such as plumbers, air conditioning repair, electricians, painters and carpenters rely on physical checks for payment, for example. Government agencies and local municipalities often accept checks as well. Though check usage in B2B payments is trending downward, checks were still used in 33% of B2B payments in the U.S. and Canada in 2022, according to the Association for Financial Professionals study. This is true even with the growing prevalence of other options like Zelle, Venmo and ACH.
Though tides could continue to shift away from check acceptance, some merchants may not want to give up on checks completely, Tavilla said. In some cases, small businesses may still prefer checks over credit cards due to fees. Some accept Zelle or other P2P apps, which can be more efficient for receiving funds and cost efficiency, but certain businesses may well decide that check acceptance is worth the trouble, even if only a few customers want to pay that way.
"Many merchants will take whatever form of payment their customers want to pay with because they're not in the payments business; they're in the business of selling goods and services," Reef said.
