The use of checks and other noncash payment instruments in the United States - Statistical Data Included

Federal Reserve Bulletin, August, 2002 by Geoffrey R. Gerdes, Jack K. Walton, II, Thomas Guerin, Amin Rokni

The apparent decline in the number of checks paid between 1995 and 2000 was likely not driven by a change in the general level of economic activity. Both years were part of an economic expansion that began in the early 1990s and peaked in March 2001 (according to the National Bureau of Economic Research), and spending by consumers and businesses, which make the predominant number of payments in the economy, increased during the period. Instead, the decline in check use appears to have been related to increased use of electronic payments by consumers and businesses.

Although the number of checks paid appears to have declined during the latter part of the period, the number increased on net from 1979 to 2000. The value of checks paid, however, decreased--from an estimated $50.7 trillion in 1979 to $39.3 trillion in 2000 (both in 2000 dollars; table 3). (3) The declines in overall check value and related measures (the estimated average value of a check, for example, declined from $1,544 in 1979 to $925 in 2000) provide supporting evidence that electronic payments have replaced checks for at least some types of transactions. In addition, most large-value payments for settlement of financial market transactions that were once made by check are now made electronically, many using the large-value funds transfer systems (such as Fedwire and CHIPS). Such payments are discussed separately because they are not considered retail noncash payments.

[GRAPHIC OMITTED]

VARIATIONS IN CHECK PAYMENTS A CROSS DEPOSITORY INSTITUTIONS

Almost 15,000 depository institutions in the United States--commercial banks, credit unions, and savings institutions--provide checking or share draft accounts. However, the distribution of transaction deposits and the number and value of checks paid are skewed toward a small number of very large institutions. (4)

Trends across Depository Institutions

Credit unions and savings institutions generally did not offer checking accounts (or their equivalent) until the late 1970s. Since that time, transaction deposits at, and the number and value of checks paid by, these institutions have grown briskly.

Despite the overall decline in the number of checks paid between 1995 and 2000, the number paid by credit unions and savings institutions continued to grow (table 3). These institutions together paid an estimated 14 percent of checks in 1995 but more than 20 percent in 2000. The 1.8 billion increase in the number of checks paid annually by these institutions, however, was more than offset by a dramatic decline of about 8.7 billion in the number paid annually by commercial banks. (5)

Differences across depository institutions in 2000.

The average value of checks paid in 2000 varied by type and size of depository institution, presumably because of the mix of business and consumer customers served by different institutions. Large commercial banks and some large savings institutions serve corporations and other businesses as well as consumers. Because large corporations tend to make larger-value payments, the average value of checks paid by depository institutions that serve them tends to be larger. Community banks (small commercial banks and savings institutions) typically serve smaller businesses and consumers, so the average value of checks they pay is smaller. Credit unions overall have the smallest average check value because they generally provide accounts only to consumers (table 4). (6)