It did not come as a huge shock when big box retailer Target announced that it would no longer accept customers’ personal checks after July 15, 2024. Nevertheless, their decision has led many business owners both large and small to ask themselves if they should follow suit.
After all, they can now employ the numerous features in their POS machines to take payments, as to run virtually every aspect of their operations with accuracy, efficiency, and added insights.
The upsides of taking personal checks.
It is no secret that customer satisfaction rises when people are given choices. This is the case when it comes to the products that you make available, as well as the types of payment options that you grant to them.
Two of the most venerable payment methods have consistently been cash and personal checks. However, recent years have seen a drastic decline in the use of both in favor of safer and more technologically advanced choices such as POS solutions and credit card readers, digital wallets, and automated clearinghouse (ACH) payments.
Even now, checks maintain their appeal for some consumers, albeit a dwindling percentage. They are, for instance, still often used by the customers of businesses in the nonprofit sector as well as by professionals such as lawyers and accountants.
For those people who are not yet ready or willing to stop using paper checks, companies who furnish them with the option gain a definite advantage.
For you as the business owner, checks provide hard copy documentation for both parties. You can think of each as its own self-contained record that displays relevant details such as the payer’s name and address, the amount of payment, the name of the business or person being paid, the name and routing number of the payer’s bank or financial institution, the payment date, the check number, the payer’s checking account number, and the payer’s signature.
The downsides of accepting checks.
Although paper checks are practical and familiar for many clients, accepting them can bring added layers of complexity to your operations. These may, to at least some degree, explain why Target made its decision to forego them going forward.
For one thing, there can be processing problems. Checks will bounce if the customer has insufficient funds in their account. Moreover, because checks can take several days to process, you may have difficulty tracking down the customer to resolve the situation.
Although insufficient funds difficulties can occur with alternative payment methods as well, the problem is usually identified faster, reducing the chances that you will be required to pay penalty fees.
What’s more, you run the risk of stop payments when people give you checks. This happens when a customer pays you with a check and then contacts their bank shortly thereafter to request that the payment be cut off.
This situation leaves you without the revenue you were expecting. If you already deposited the check into your business account, the funds will be removed, complicating your bookkeeping even further.
Checks can lead to other costs as well. According to the National Automated Clearinghouse Association (NACHA), one check transaction can cost between $1.01 to $2.00. Compare that to anywhere from $.26 and $50 for an ACH payment, and you can see how the expenses can mount quickly, particularly if the majority of your revenue comes from check payments.
Security problems are also rampant for businesses that accept checks. Not only can paper checks be lost, but also customers can pay with counterfeit checks or stolen checkbooks.
Dealing with the effects of these situations can be extremely stressful for business owners, taking time that they would rather be using to run other aspects of their companies.
Should your business accept checks?
You have now seen both the good and the bad side of paper checks. Because each company, its goals, and its customers are unique, only you can decide whether paper checks should remain in your payments pantheon.
On the positive side, checks give your clients yet another choice in how to make a purchase. This increases the likelihood that you will make a sale to those people who are rigid about using only this one particular method. Additionally, electronic check processing has automated and simplified the deposit process for checks.
Remote deposit enables you to use your mobile device to put check payments into your business account from anywhere at any time.
On the other hand, processing checks can lead to higher costs and greater security risks. Additionally, lines at the register can get jammed when customers take too long to fill out their paperwork. For these reasons, many retailers and service providers have moved toward accepting alternative forms of payment.
There are numerous other vehicles that can be used to facilitate the completion of a purchase. These include accepting credit and debit cards and taking payments via digital wallets from Apple Pay, Google Pay, PayPal, and others.
ACH payments allow automatic withdrawals to be made from a consumer’s bank account while payment links can be sent via text, email, or QR code that instantly connect the consumer to your shopping cart or payment gateway for invoice resolution.
When Target ceased to take paper check payments, the main reason they cited for the decision was that the rates of purchases using this medium had declined precipitously. This, along with the financial and security issues we have described, is transforming paper checks from ubiquitous to rare.
Even so, accepting them may well continue to make sense for your business, particularly if you also offer several of the other methods that customers are coming to expect.
