A CENTURIES-OLD payment method could cease to exist in American banks weeks after Social Security payments made the same switch.
A notice from the Federal Reserve this week suggested that bank checking services could soon be “winding down”.
Paper checks have been phased out in favor of electronic payments for the majority of Social Security beneficiaries under the direction of President Donald Trump.
And now, the future of checks at brick-and-mortar bank branches could be at risk.
In a statement on the possibility, the Federal Reserve said that electronic payments are more widely used.
It said: “Over time, check use has steadily declined, digital payment methods have grown in availability and use, and check fraud has risen.
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“Also, the Reserve Banks will need to make substantial investments in their check infrastructure to continue providing the same level of check services going forward.”
WHAT THIS COULD MEAN
If this happens, it could spell trouble for those who do not have access to internet banking tools and rely on paper slips to receive some of their funds.
Some older consumers might not be comfortable with smartphones for internet banking.
According to the Federal Reserve, about 6% of adults were “unbanked” in 2024.
This means that they didn’t have an online checking, savings, or money market account.
The figure rose to 22% for those with an income below $25,000.
A June report from the Federal Reserve Bank of Atlanta found that more than 90% of those asked last year preferred using something other than a check for paying bills.
The report claimed that only 6% paid by check, down from 18% in 2017.
PAPER CHECK IMPORTANCE
The growth of electronic payment apps like Venmo, PayPal and Zelle has reduced the need for paper checks.
Americans also said that paper checks were inconvenient and too slow for their banking needs.
How to contact your bank
WITH bank scams running rampant, it is important to know how to reach out to your bank without risking fraud.
There is of course the foolproof method of going to your bank in person, but you are likely going to be directed to a customer care phone line.
In order to ensure that you are contacting the bank, make sure to use a phone number given to you by the representative or off of the bank’s website.
Some banks also have online helplines that can securely connect you with a representative.
Conversely, if you think the bank is reaching out to you with an account issue – make sure to verify the concern by calling a bank contact that you know is legitimate.
Scammers commonly mascarade as bank representatives to steal information from frightened customers.
But some have spoken out against the Federal Reserve‘s proposal and highlighted the ongoing necessity for paper checks.
Michelle Bowman, the Fed’s vice chair for supervision, undermined the proposal and argued in favor of paper.
She said: “Checks remain important payment mechanisms for consumers and businesses.
“Discontinuing Federal Reserve check services is not an efficient solution to the growing problem of payments fraud, particularly in light of the ongoing role of checks in the payments system.”
She claims that paper checks make up roughly 5% of transactions and represent 21% of the value of those payments.
Doug Kantor, general counsel for the National Association of Convenience Stores, provides cash checking services for customers and also disagrees with the proposal for now.
Kantor argued: “Checks are obviously not used nearly as much as they used to be, but they’re still an important part of the financial system, especially for low-income people.
“I would think they’re not ready to wind it down yet, and I would hope they’re not ready to wind it down yet because there are significant numbers of people – a minority, no doubt – but still significant numbers who rely on the system.”
NO MORE PENNIES
In November, the US Mint pressed the final batch of one-cent coins and ended the practice for the first time in 238 years.
Billions of pennies are still in circulation, but no new ones will be produced.
Pennies would cost 3.69 cents to produce, and Trump made the change to cut costs in the government.
In February, he called the production of pennies “wasteful”, and in 2024, the US Treasury reported a loss of $85.3 million from creating more than three billion new pennies.
