Target has become the latest retailer to stop accepting paper checks as payment, joining other major merchants such as Whole Foods and Aldi. As of July 15, consumers will no longer be able to write a check at Target.
Target cited “extremely low volumes” for the decision, which should not come as a surprise. According to 2022 data from the Federal Reserve Bank of Boston, only 1% of all retail purchases were made via check. However, there are still areas where check writing makes sense.
Check usage has declined sharply in recent years, dropping from 18.1 billion checks written in 2015 to 11.2 billion checks in 2021, according to the Federal Reserve. Nevertheless, the overall value of check payments increased slightly from 2018 to 2021. While the number of check payments dropped, the average value of those payments rose from $1,908 in 2018 to $2,430 in 2021, totaling $27.23 trillion.
High-Dollar Services
Check usage has become almost exclusively the payment of choice for high-dollar services, but not high-dollar goods, according to the Boston Fed report cited earlier. The report noted that “while credit cards are typically accepted for large-value purchases (whether in person or online), large-value services often cannot be paid with a credit card, and consumers instead use checks to pay for those services.”
To that end, the most popular use case for personal checks was paying contractors. The Boston Fed found that a plurality of contractor payments, or 43%, was still made by check. Charitable or religious donations, government fees, and rent were the other categories where check usage was still more popular than either debit cards or credit cards.
Meanwhile, retail check payments have dropped to nearly zero, as the Target decision highlights. The Fed also found that paper check payments for hotels and transportation had declined from 9.3% and 6.5%, respectively, in 2017 to 0% in 2020.
The federal government remains another strong user of paper checks, with 23% of benefit recipients receiving assistance in the form of checks or vouchers. But even that may be diminishing. According to a study commissioned by Visa earlier this year, only 13% of the recipients prefer to get their funds that way.