According to historians, the first check was invented in ancient Rome, around 352 BC. It took a couple thousand years for the concept to really catch on, with checks enjoying their heyday during the 20th century.
Despite the advent of faster, cheaper, and more secure payment options, checks remain surprisingly popular. According to the Federal Reserve, Americans write nearly 17 billion checks annually — with an estimated payment volume of $26 trillion.With numbers like these, does it make sense to start (or continue) accepting checks in your business? Or are you better off relying exclusively on other payment options?
Check Acceptance: Understanding the Pros
One of the biggest benefits of accepting checks is you won’t have to turn away as many sales; there always will be some customers who insist on using checks. By offering this payment option, you can attract and/or keep their business.
Here are some additional benefits of check acceptance.
Checks are a well-established and proven form of payment. Most people are familiar with how they work.
2. Startup ease
You don’t have to apply for a merchant account or pass annual PCI assessment tests (as you do for credit cards). To get started with check acceptance, all you need is a bank account.
3. Low fees
Checks don’t carry interchange fees or other processing charges. Therefore, you get 100% of each check’s face value.
There are some drawbacks to accepting checks within your business. Let’s take a look.
Check Acceptance: Understanding the Cons
Here are some reasons why adding checks to your list of payment options can be unwise (and costly).
1. Processing delays
After depositing a check, it can take several days for the funds to clear. If predictable cash flow is important to your business, check acceptance can make managing your finances more challenging.
2. Payment fraud
Because of processing delays, paper checks are ripe for payment fraud. You won’t necessarily learn that a check is fake until several days later. By then, it’s too late.
According to the Better Business Bureau, this type of payment fraud affects roughly 500,000 Americans every year.
3. Stopped payments
Similar to above, but customers can potentially pay for merchandise, leave your store and then cancel payment before the check clears.
This is essentially the paper-based equivalent of “chargeback fraud.”
4. Bounced checks
Honest customers can pay by check and not be aware that their bank accounts have insufficient funds. These checks “bounce,” resulting in fees and charges on the customers’ side. As a merchant, you also may be liable for fees.
5. Hidden costs
Checks might not carry finance charges or interchange fees, but according to some estimates, each paper check received can cost your business anywhere from $4 to $20, once you factor in:
- The time it takes to collect and record incoming checks (by hand)
- The time, postage, and fuel required to deposit each check in the bank
- Material inputs — such as envelopes, stamps, ink, printers, and file cabinets
Remember, these costs exist for legitimate checks that actually clear. When you factor in the time and effort required to chase down bounced, stopped or fake checks, the true cost is substantially higher.
There also are environmental costs, given that checks are essentially single-use items made of paper.
How to Accept Checks Securely and Affordably
When it comes to accepting checks, there is no right or wrong answer. Every business owner is different, so you need to weigh the pros and cons of this payment option for yourself.
If you’re looking for a way to service customers who refuse to use credit cards (or hate carrying cash), then integrating e-checks or ACH into your payment environment may be a cheaper, greener, and more secure option.
To learn how we can help you get started, schedule a free consultation with our merchant services team today.