In an increasingly paperless and digital world, check writing remains a favored form of payment. Check payments totaled $26.8 trillion in 2015, according to the 2016 Federal Reserve Payments Study. Many U.S. consumers are putting pen to paper to cover larger expenses while merchants continue to utilize the payment tool for everyday business transactions.
While check payments are scarce at establishments such as restaurants or convenience stores, they continue to be a popular form of payment at businesses including specialty retailers, auto dealerships, medical and dental offices and veterinary clinics.
CrossCheck has provided U.S. merchants with top check guarantee services since 1983. In recent years, our sales department has received an objection or two related to the popularity of checks as an accepted form of payment. In response, the CrossCheck editorial team examines the most popular myths and offers viable payment solutions.
Myth 1. People Don’t Write Checks Anymore
According to the Federal Reserve, consumers wrote 17.3 billion checks with a value of $26.83 trillion in 2015 (averaging 7.1 checks per month per household).
Checks represented $26.83 trillion in value — trailing only ACH Network payments at $41.64 trillion — but nearly five times the combined value of credit cards ($3.16 trillion) and debit cards ($2.56 trillion).
Additional data from the Federal Reserve study pointing to the popularity of checks includes the average value of each transaction:
- $2159 — ACH network transfers
- $1416 — Interbank check payments
- $93 — Credit card payments
- $37 — Debit card payments
Clearly, the data shows that consumers are still writing checks for big-ticket items and continue to demand that businesses accept them as a non-cash payment option.
Myth 2. We Don’t Get That Many Checks
This myth is like the flip side of Myth 1, and consequently, the response is nearly the same. The Federal Reserve study shows that consumer write checks for down payments and large-ticket items at retailers.
When consumers purchase goods and or services with checks, businesses harnessing the power of a check processing expert like CrossCheck can safeguard check transactions, streamline check processing and increase sales. Furthermore, the success of each transaction is crucial for businesses whether their check volume is small or large. Continue reading for details about the lost revenue from not accepting checks.
Myth 3. We Rarely Get Returned Checks
Although this may be true, best-in-class payments guarantee companies provide payment solutions that increase sales revenue, customer satisfaction and repeat customers while reducing risk and saving time and money.
Refer to our article “One Declined Check & the Lifetime Loss to an Auto Dealer” to uncover the true cost of declining a single check at an auto dealership.
Myth 4. We Only Take Checks from Our Best Customers
On the surface, this may seem like a sound approach to accepting payments, but crunching the numbers shows that check processing services help generate revenue in addition to simply guaranteeing checks.
Consider the infrequent customer with a solid payment history. Should they be turned away simply because they aren't one of your best customers?
“The check writer may choose to take his or her business elsewhere; maybe even to a direct competitor,” stated CrossCheck's Senior Vice President Charles Dortch III. “With a check guarantee service in place, you don't need to turn customers away. Checks from unfamiliar customers can be guaranteed in seconds. Welcome checks and you'll keep customers from walking out the door.”
Consequently, check guarantee services allow businesses to confidently accept checks while maintaining positive relations with all customers.5. Accepting Checks is Not Cost Effective
Customers who do not possess the means to immediately fund their transactions, or those who do not qualify for credit options, may become a lost sale to businesses that do not accept checks.
“How much merchants lose by not accepting checks depends on their profit margin — the lower the profit margin, the more merchants need to sell to make up the difference,” Dortch explained. “For example, a merchant operating at a 5% profit margin will need to sell an additional $40,000 to make up for a single $2,000 check that was not accepted per the following chart.”
“Electronic check processing saves time and that saves your business money. With electronic check processing, such as a remote deposit capture service, checks are accepted, converted into electronic funds and deposited into your business account with no trips to the bank,” Dortch states. “For usually less than the cost of credit card processing, you get the convenience of desktop depositd along with check guarantee. This saves the cost of sending someone to the bank, adding up deposit slips and reconciling accounts from different branches or banks.”
Implementing Check Guarantee Services to Increase Sales and Reduce Risk
Checks continue to persist as a go-to payment option for consumers. Businesses that accept check payments by using the latest payment technology and services from a preferred provider like CrossCheck can broaden their customer base and improve revenue.
CrossCheck is a leader in marketing payment technology and financial services to merchants located throughout the U.S. Download our free guide to learn how check guarantee and electronic check processing can become a profit center at your place of business.