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Payments Study: Checks Down, Not Out, While Debit Card Use Rises

Tuesday, April 1, 2008

You've probably seen the slick ads on TV that show hip people paying for everything with credit or debit cards in a stylishly choreographed routine-until someone stops the music by trying to use cash or check.

So, it's hip to use plastic, right? The numbers, at least, would agree. The 2007 Federal Reserve Payments Study demonstrated that by 2006 more than two-thirds of noncash payments were electronic-debit cards, credit cards, electronic benefits transfer (EBT) and automated clearing house (ACH). A similar study in 2003 showed electronic payments and paper checks running roughly neck and neck.

People are still writing checks, as bankers well know-but, of course, in numbers nowhere near as great as they used to be. The number of checks being written is declining at an average rate of 6.4 percent per year since 2003. According to the study, the number of checks paid fell by about 7 billion between 2003 and 2006. In contrast, about 19 billion more electronic payments were made over the same period. Of the 93 billion noncash payments in 2006, about 63 billion were electronic and about 30 billion were checks. The accompanying charts illustrate the changes in forms of payments used over the past four years.

Electronic processing also increased proportionally during the study period. By 2006, about 40 percent of all interbank checks paid (checks drawn on a different depository institution than the one at which they were deposited) were replaced with electronic information at some point in the collection process. Also, by 2006 almost 3 billion consumer checks were converted and cleared as ACH payments rather than check payments (for a total of 33 billion checks written in 2006).

The Federal Reserve will release further study details later this year on the use of checks by payer, payee and purpose. Read the Payments Study results at

Non cash