Don't bank on checks going away anytime soon

Don't bank on checks going away anytime soon

With students arriving over the past week, local banks and credit unions have been busy signing them up for new accounts.

But when they open a checking account, students probably aren't ordering paper checks.

"A lot of younger people, when they're opening a checking account, don't want to order checks. They expect to only use debit or online," said Elizabeth Reed, senior vice president with First Federal Savings Bank of Champaign-Urbana.

The University of Illinois Community Credit Union has also seen this.

"When they open an account, they want a debit card and online access, but they may not order checks when they open an account like they traditionally would," said Greg Anderson, senior vice president for the credit union.

"It's not the first method of payment that they would think of when they're coming in for a checking account."

Paper check payments have been declining since 1995, when nearly 50 billion check payments were processed, but in 2015, there were still some 17.8 billion check payments, according to the Federal Reserve.

At one time, people "thought that checks would go away," Anderson said. "But they have not gone away as fast as predicted."

"There's a level of comfort for a significant portion of the population," Reed said. "It's an interesting shift, but it's not overwhelming at this point."

Over the last 20 years, debit and credit card transactions have taken over check payments.

In 2015, 34 billion transactions were made with credit cards and 70 billion with debit cards, according to the Fed.

And in the last few years, different apps and services have replaced many of the reasons people used checks.

Bills can be paid online, and paying someone back can be done with a few taps in a smartphone app like Venmo or Square Cash.

These new methods still make up a small percentage of total payments, but they're growing.

While check payments are declining about 3 percent a year, mobile wallet usage grew from 300 million transactions in 2012 to 1.3 billion in 2015, and person-to-person payments increased from 200 million to 400 million in the same period, according to the Fed.

"Debit cards and online bill pay probably have taken the biggest share of things that were traditionally check payments," Anderson said.

"Venmo and person-to-person payments would be a smaller piece of it. The debit card is still the first thing people reach for in a lot of cases. We'll see what happens as those other things get adopted."

Dick O'Neill, regional president of Prospect Bank of Champaign, welcomes the decline of checks.

"It makes our life easier because checks are expensive to handle," he said.

While debit payments are processed automatically, paper checks need to be processed in person unless the bank allows customers to cash their check with a mobile app.

And he said Prospect Bank likes debit payments "because we get an exchange fee."

For the U of I Credit Union, Anderson said it doesn't particularly matter how people spend their money as long as they're spending it from the credit union.

"It doesn't matter really," he said. "It's about having that relationship and having them using us as their primary."

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