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Some years ago, a friend of mine visited a US city, and went to a supermarket. Upon trying to pay with his credit card, the transaction failed, and the cashier asked if he could write out a check instead. My friend replied "check?" in a bit confused tone. The cashier replied, "well, maybe someday you will get those in your country too".

The thing is though, checks has been practically extinct in Norway, and surrounding countries, for as long as I have activly used my bank account, closing in on 20 years. We manage our accounts online. Absolutely every bank have online options, and the vast majority of all transactions happen through the internet. Lately mobile transactions though smart phones has become popular too.

How come the US still use checks in such a large scale, when there are so many modern solutions that seemingly are so much better?

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    This question has been asked before. The answer, in the end, boils down to "why not?". It works, it avoids the need to deal with vendor accounts and transaction surcharges, it's no less valid an alternative than cash or card or whatever. " So much better" is opinion, not fact; the trade-offs are different but not inferior. – keshlam May 3 '16 at 13:28
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    If it has been asked before, I would very much like to see a link. Why Not? It is less practical, more time consuming, and more complicated than other solutions. They need manual handling, whereas online electronic solutions don't. In other words, I would expect that there must be a better reason for it, and particularly why there are so big differences between our countries there. I would think that the banks in particular would want things to run more automatically. – jumps4fun May 3 '16 at 13:33
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    As you've discovered, checks are a little bit more fault tolerant than credit cards. – Chloe May 3 '16 at 19:23
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    "We manage our accounts online. Absolutely every bank have online options, and the vast majority of all transactions happen through the internet. Lately mobile transactions though smart phones has become popular too." This is all also true of the U.S. I get the feeling from your question that you drastically overestimate the use of checks in the U.S. Personally, I don't recall the last time I used a check for anything other than donating to a charity (and even then I usually don't use a check) or paying my annual car registration fee. – reirab May 3 '16 at 20:10
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    Is this really a personal finance question? If so, we may as well ask the question why do we use cash at all, why isn't every transaction electronic? – JTP - Apologise to Monica May 3 '16 at 20:26
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Check use is declining here too, but it still has some practical advantages over electronic means:

  1. It does not require the receiving party to provide any account number to the paying party (directly or indirectly). The receiving party does not even have to have a bank account at all, since a check can be cashed at the bank on which its drawn.
  2. The receiving party can frequently deposit a check with no fees. For the most part businesses taking payments electronically pay for the service. Many small "mom & pop" businesses don't want to pay or cannot afford to pay those fees.
  3. It works (as in the example you gave in the question) when electronic transactions fail, precisely because it is low-tech.
  4. Even online transactions sometimes get converted to check in the end. I can use "online bill pay" for almost any transaction (including to pay back a friend where no real "bill" exists), but the bank sends a physical check to many such parties (especially if it goes to a friend who isn't going to be registered in the bank's system).
  5. It's a matter of opinion whether the electronic transactions are "better." I certainly find them to be more convenient in many cases, but people used to the old system still like it, and it generally works, so there's no specific reason to kill it.
  6. For some specific purpose like paying taxes, you get slightly better treatment paying by check because most transactions are credited based on the postmark on the physical mail but get debited from your account based on when the check clears the banking system. That only buys you about a week, but for some people that week might be worth the "hassle" of writing a physical check.
  7. Relative to cash, the check is safer and creates a self-documenting transaction because the cleared check is a legal record of the transaction. (Obviously electronic transactions also share these features.)
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    Dean Inge quote: "There are two kinds of fool. One says 'this is old, and therefore good.' The other days 'this is new, and therefore better.'" Electronic payment is new, but for many purposes not sufficiently better to motivate changing existing practices. Pick your preferred trade-offs. – keshlam May 3 '16 at 17:05
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    deposit a check with no fees might be true on your side of the Atlantic. Here (Germany) it is very common to pay a fee upon depositing or cashing a check. This adds to the effort to either walk to your bank or snail-mail the check (is this supposed to be a safe thing?) which makes checkes less desirable (in my eyes). – Ghanima May 3 '16 at 18:15
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    @Ghanima The question was specifically about why checks are used in the US. – user32479 May 3 '16 at 18:31
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    Also, many rental properties require payment by check and when you set up direct deposit for work, they also require a voided personal check. It does seem quite antiquated and outside of those two factors I haven't used checks in more than a decade. Also, sending money as a gift is safer with a check. If it gets lost, you can stop the check. Even a cashiers check from the bank isn't that safe. – coblr May 3 '16 at 20:05
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    @Aganju I think you're confusing a payday loan with what I said. If you take a check to the bank on which it's drawn, they will usually cash it for you for free or at worst a small fee. If you take it to a "check cashing" business, then all bets are off. – user32479 May 3 '16 at 20:13
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Because it makes money for all parties, and because the general public is reluctant to any change.

  • people pay (sometimes) the bank to get checks printed
  • people pay a store for envelopes
  • people pay USPS for mailing the check
  • people pay (sometimes) for depositing the check

Who should have an interest to change that? People. And they have no say in it.

You can actually do a lot without paper checks nowadays (I only use one per year for car taxes, as they do not accept anything else), but many people shake their heads about even online banking and would never trust it.

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    FWIW it's worth noting that many economists would disagree with your take on lightbulbs. (1) the only reason the "new" lightbulbs were developed was for corporations and government to make more money (the talk about "efficiency" "green" etc was just words) (2) overall, the "new" bulbs will cost consumers more money. (3) in the future, a new "new" lighting system will come along, which will take more money again from consumers. Note that it's extremely well known that when fluoros came along for industrial use, industrial users simply ..... used far more lighting, hence spending more overall. – Fattie May 3 '16 at 14:54
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    There's an interesting attempt to quantify the costs for three different bulb types here. – Peter K. May 3 '16 at 15:40
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    This is just wrong. Card processing fees are much higher than the cost of checks and I've literally never heard of anyone paying to deposit a check. Also, for the situation described in the question, there is no envelope or stamp involved. – reirab May 3 '16 at 19:52
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    Specific situation or not, the fact remains that there's way more money being made by the banks in cards than in checks, thus, the first premise of this answer is wrong. – reirab May 3 '16 at 20:06
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    @Aganju - You are wrong about the credit card fees being paid solely by the merchants. If I want to pay any of my government taxes/fees by credit card (debit is not an option) then I will be whacked with a big surcharge. If I want to pay my homeowners association dues, once again big surcharge. There are other examples but there are still ample uses for checks and the only reason that online banking is more convenient is because you can setup autopay. Otherwise, writing a check versus logging in to each site to pay the bill is about the same level of pain. – Dunk May 3 '16 at 21:02
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In a system where electronic payment is well developed you can consider the following 2 scenarios:

  1. A person pays by cheque
  2. A person pays by card

Now let us zoom in.

1. What happens when you pay by cheque

  • A cheque is physically created, and arrives at your home
  • The check is physically transferred to the seller
  • The check is digitized for processing

2. What happens when you pay by card

  • You use your card
  • The transaction is electronically verified

Regardless of what costs are actually charged, it should not be hard to see which system is most (real cost) efficient once electronical payments are well developed.

And so, the conclusion is not hard to reach:

The electronic payment system is not yet well developed in all of the US.

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    If you are a merchant and you have a phone, be it mobile or landline then for like $50 + a percentage of each transaction a merchant can take credit card payments. There's not much more to be developed. – Dunk May 3 '16 at 21:06
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    @Dunk: But if once in your life you have to make a payment to Joe Blow (who's not right there so you can hand him cash), you can either go through the hassles of getting what, 17 digits of a bank account number correct, or you can mail a piece of paper with "Joe Blow" written on it. And the bank will probably accept it even if it's made out to "Joe Blew". – jamesqf May 3 '16 at 22:10
  • This answer doesn't include transfers from companies to private citizens, or inbetween people. It only adresses people paying for services or goods at a company. It is also not very well documented or argumented... – jumps4fun May 4 '16 at 8:20

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