Paper checks, at least the ones issued by the federal government, will soon become a thing of the past.
As part of March 25 executive order, titled “Modernizing payments to and from America’s bank account,” President Donald Trump directed all federal departments and agencies to stop using paper checks and switch to electronic payments by September, citing “unnecessary costs, delays and risks of fraud lost payments thefts and inefficiencies.”
“Mail theft complaints have increased substantially since the COVID-19 pandemic,” the order said. “Historically, Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer (EFT).”
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According to finance experts, electronic payments come with benefits, including faster and more secure payments, and a lower cost. NBC 5 Responds reported that it costs approximately $2 to $4 to issue a paper check and then $1 to $2 to receive it, compared to a 50-cent electronic transaction.
The change also comes as a growing list of retailers, including Target and Nordstrom, announced they would no longer accept checks as a form of payment.
According to the order, the U.S. Treasury — which mails out hundreds of thousands of checks, including those for tax refunds and Social Security — has until Sept. 30 to phase out the use of paper checks. Beginning on that date, all government departments and agencies will have to issue disbursements via electronic transfer methods, like direct deposit, debit or credit card payments, digital wallets and real-time transfers.
Consumers will have until the deadline to set up an online bank account or some form of digital payment option, with limited exceptions for those who do not have access to banking services or electronic payment systems.
Similar moves have been made in years past. In 2011, the U.S. Department of Treasury said anyone newly applying for Social Security, Veterans Affairs or other federal benefits must select an electronic payment method, saying paper checks will “no longer be an option.”
In 2010, The Treasury Department published a final rule to gradually eliminate paper checks for federal benefit payments.
Who is impacted?
A 2024 survey from GoBankingRates revealed 46% of Americans did not write a check in 2023, and 15% of Americans wrote just a few checks a month.
Still, some groups frequently use checks. According to the survey, Americans over the age of 55 were most likely to write checks every month. Experts say its those people that are most likely to be targeted by scammers.
“The elderly are significantly disadvantaged by the antiquated systems and you have to get them into digital payments,” Haywood Talcove, CEO of LexisNexis Risk Solutions’ government group said.
And while the big change also comes with trade-offs, experts say the benefits will outweigh the headache the transition may cause.
“Maybe it will be a little harder to kind of stay anonymous or not, have a banking trail, but you also have less of a risk of the government sending you a check you don’t know is coming and someone stealing it out of your mailbox,” John Kiernan, managing editor at WalletHub told NBC 5 Responds.
Kiernan also said the announcement is a “good reminder to make sure your money is in the best place it can be.”
For example, online savings accounts will give you the highest interest rate right now, about five times more than branch based accounts, according to NBC 5 Responds. Some banks, like SoFi will give you a higher interest rate if you enroll in direct deposit. WalletHub also recommends using a Credit Union, because some can offer interest rates higher than checking accounts at regular banks.
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