All about the challenges of Midlife Finance

An Endangered Species

What financial tool was critical to your parents, moderately helpful to youand is largely irrelevent to your kids?

Your checkbook.  

I have childhood memories of watching Mom at the kitchen table, carefully writing out check after check, a pile of stamped envelopes nearby waiting for the mailman. We followed the tradition when we first married. By the time we were in our second decade of marriage, however, Husband was only sending a few checks a month, if that — the rest were taken care of via automatic bill payment, thanks to our credit union.

     We’re not the only ones. The Canadian government recently announced that it would no longer issue checks after 2016. The U.S. government has already stopped sending out Social Security checks — they rely on direct deposit, instead. Even the Federal Reserve is quoted as saying:

     “Paper check writing continues to persist as a significant portion of noncash payment, but interbank processing and clearing of these checks are virtually all electronic.” 

     In other words, you may still see (or use) checks — but they’re largely being processed in a different manner. Make a purchase at Wal-Mart or another large chain, and your check will be scanned through their system. The money is then automatically drawn from your account as an e-check. You get your paper check back – and the business gets their money, without having to wait as long for it.

WHY THIS IS HAPPENING

Checks are expensive. Open a checking account, and you’re generally going to be paying a fee every month, unless you keep a large balance. Bounce one of those checks, and you’ll be paying at least $25 in overdraft fees, as well, unless you have overdraft protection. (And if you do, you’ll be paying extra for that, too.)

      The sad truth: deposit someone else’s check, and if it bounces, you’re also going to be docked an overdraft fee. At least $25 comes out of your account, as well as the bounce-r’s account. And if you think the bank is actually spending that much to maintain your account, or process checks, you’ve got another think coming

Checks can be faked.  Anyone who’s had a checkbook stolen, or their account hacked, knows it. Even mailing a bill, you run the risk that thieves will steal your envelope from your unlocked mailbox, bleach out the recipient’s name (or the amount), then rewrite it to themselves. Our brother and sister-in-law discovered this, much to their grief, when hundreds of dollars disappeared from their accountand bills suddenly weren’t paid.

     Signatures checked?  Ha.

They’re too much hassle… for the institution and for you. If they cash a paper check too quickly, they take the risk that it’s not authentic, or nothing’s in the account. (Craigslist and other online scammers have taken advantage of this repeatedly.)  Meanwhile, they must handle and store the check; add this up dozens or hundreds of times, and it takes up time, space and energy.

     The larger the check, the bigger the issue. Our local bank will not guarantee money from a large check until it actually has the money transferred and in hand — which means that you will be waiting up to five days to access the cash, no matter how badly you need it.

An increasing number of companies don’t accept checks. Restaurants and gas stations are leading the way on this. Many no longer accept anything but cash, debit (see below) and credit cards. Why would you, if your account was going to be punished every time a check bounced?

     It’s not just personal and business checks, either. It’s getting increasingly difficult to find overseas merchants who will take travelers checks, for fear of fraud. Instead, you must search for an exchange or local bank to cash them. Their hours of business are often limitedif they even exist in that town. (American Express, take note.)

They’re unnecessary.  Debit cards can be used just as easily as credit cards nowadays — automatic bill-pay systems, taken directly out of the account, take up the slack. Not only that: banks feel more protected, since you won’t be able to ‘pay,’ unless funds are actually in the account. (Or if you do, the bank can charge lots of extra fees for you to do so — a real bonus for them.) The increasing use of smartphones to not only use coupons and discounts, but pay the bill, is starting to make a totally cashless (and checkless) system probable, in the long run.

Many people already do without them. Why bother, when some banks (Chase being a prime example) will issue, via snail mail, the few checks you might need? Use your debit or credit card or smartphone, have the money automatically drawn from your account, or stop by the ATM for cash.

ARE CHECKS OBSOLETE?

Not yetbut it’s coming. Don’t be surprised if this financial standby all but disappears by the end of the decade. Meanwhile, the sooner you get a debit card and set up automatic bill-pay, the better-prepared you’ll be.

One Response to An Endangered Species

  1. God, I’d chuck my checkbook RIGHT NOW if my landlord didn’t insist that I pay using check or cash. And who’s going to send $900 in cash over the mail? No one I tell you, no one! Not to mention the last time I got a checkbook refill from my bank it cost me $25 which still leaves a bad taste in my mouth.

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