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'I'll Write You a Check'

Older Americans are among the few who still say that, as electronic payments take control

Still carrying around your checkbook? You're a rare breed.

"No matter what statistic you look at, check usage has really declined year after year," says John Russo, a vice president at Hitachi Consulting. Could extinction be drawing near?

A new survey conducted by Russo's firm and BAI Research found that only 5 percent of in-store shoppers used checks as their payment of choice, down from 8 percent in 2005.

Bill paying by checks, once a national ritual at the kitchen table, has declined even more. Only 30 percent of respondents said that checks were their most-used method for paying their bills, down from 48 percent in 2005. The rising popularity of online payment is a big reason.

The survey found that the older you are, the more likely you are to stick with checks: People 55 and older were nearly twice as likely to use checks for in-store purchases as those who were younger.

The payment method most on the rise, meanwhile, is the debit card. It was the preferred method for 42 percent of shoppers, up from 33 percent in 2005. With credit card use headed down, the study's authors concluded that the bad economy was encouraging consumers to "steer clear of credit and rely more on payment options that help them control spending."

Despite the trend toward paying electronically, some merchants continue to prefer payment by cash or check, says Mallory Duncan, general counsel at the National Retail Federation. Though electronic payments are guaranteed and processed quickly, each one costs the retailer, in the form of a significant fee paid to banks and credit card companies.

"That's quite a bite out of your transaction," Duncan says. But "it's great for the card issuers."

Misperception has also given personal checks a bad rap, Duncan says. While other payment alternatives may seem more convenient, Duncan says that studies show that filling out a check at the cash register takes about the same amount of time as presenting a debit or credit card and signing to authorize the payment.

Still, he adds, "everyone can remember a situation in which a check appears to have slowed them down."

The way we pay

Today's payment methods are a far cry from the peak of Americans' love affair with checks in the mid-1990s, when approximately 50 billion were written each year. At the time, the Federal Reserve banks operated a network of 45 check-processing facilities to manage the flood. But in 2003 the Fed began reducing the number of locations. Early this year, the job was consolidated down to just one site, located in Cleveland.

This retrenchment was due both to the dwindling numbers of checks and the introduction of efficient processing technology. Today, about 99 percent of checks are processed as electronic images — the actual paper isn't moved from place to place. You don't get it back in your monthly statement.

An early check

No one is sure when checks were invented, but they were in common use in the eastern Mediterranean in the 11th century. Historical records mention an Iranian traveler named Nasir-i Khosrau, who visited the city of Basra (now in Iraq) in that century and executed a sakk, a merchant's written instruction to his bank to make a payment from his account.

Checks began to appear in Europe around the year 1400 and gradually spread around the world. Encouraged by the Federal Reserve system, use of checks mushroomed in the United States in the 20th century, outstripping use in most other countries of the world, where people continued to rely more on cash and direct account-to-account bank transfers.

Now the expense of producing, mailing and processing checks is prompting banks to try to reduce their use, Russo says. But as for extinction, he doesn't see that happening. He notes that checks remain useful for some transactions. Who doesn't enjoy a birthday, wedding and graduation card sent through the mail, complete with a paper surprise?

Darci Smith is a freelance writer who lives in Chicago.