Are Paper Checks Safer Than Electronic Bill Payment?

Personal Checks vs. Electronic Bill Payment: Which One is Safer?

Mobile phone illustration with credit card being inserted into itBillions of paper checks are written every year. That represents billions of chances people will get ripped off.

Don’t be one of them.

If you want to keep your money safe, use electronic bill payments instead of personal checks.

Some people cling to their checkbooks, but the traditional checkbook is going the way of phone booths, VCRs and newspapers – all victims of the Digital Age.

It’s easier to communicate, be entertained, get informed and handle your finances online. More importantly, it’s also safer to use electronic bill payments than old-fashioned checks, which basically broadcast sensitive financial information to the world.

“What you’re doing is handing someone a piece of paper with your name, address and bank account information,” Steve Kenneally, senior vice president of payments and cybersecurity policy for the American Bankers Association, told Cleveland.com.

That’s all an unscrupulous someone needs to raid your bank account.

It’s hard to think of a good reason to keep using paper checks to pay your bills. Perhaps for emergencies, like when you’re out of cash and your neighbor wants payback on the $20 he loaned you.
But just about every business now utilizes electronic banking. The growth of online shopping has been a major catalyst.

Nobody had heard of Amazon Prime 15 years ago. Now online shopping sales topped $4 billion on Thanksgiving Day alone in 2019.

This revolution in consumer behavior wouldn’t happen if the payment system wasn’t safe. But old habits die hard.

Consumers wrote about 40 billion checks in 2000, according to the Federal Reserve’s Cash Products Office. That number plummeted about 2 billion a year, but it has slowed since 2016.
If you’re debating whether to join the revolution, here are a few basics to consider.

What is a Personal Check?

It’s pretty simple. A personal check is a piece of paper that’s traditionally 6 inches by 2 3/4 inches in diameter. Personal checks are often called “paper checks,” since that’s what they are made of.

Banks use these paper slips as a form payment that draws directly from a checking account.

A person writes the payee’s name and the amount the payee should receive. When presented to the bank or “cashed,” those funds are drawn from the payer’s checking account.

What is Electronic Bill Payment?

It’s an electronic form of a check that banks offer as an alternative to personal checks. Customers get a bill from a company like Visa or the cell phone company or their mortgage broker. They enter how much money they want to pay, and that amount is transferred to the company’s account.

Are Personal Checks Safe?

They are relatively safe considering the amount that are written, but they don’t offer the safety of electronic checks. The big danger is they include the following information about you anyone with one good eye can read:

  • Name
  • Address
  • Phone number
  • Bank name
  • Bank account number
  • Bank routing number
  • Signature

You would never put that information on your Facebook page or Twitter account for any Tom, Dick or Vladimir to see. But people have no problem putting on a pieces of paper total strangers will handle.

Armed with such information, a crook could make an electronic transfer out of your account. Your checking account and bank routing numbers are especially valuable tidbits.

Electronic checks are also covered under the Federal Reserve’s regulations on consumer rights and protection from errors and fraud, which limits your liability and makes it easier to recover stolen funds. There is no comparable federal law governing paper checks.

What is Check Fraud?

Financial fraud is using deception to intentionally deprive someone of money. Check fraud is when it’s done using checks.

Examples include:

  • Forgery – signing a check without authorization or endorsing a check not payable to the endorser
  • Theft – stealing checks to be used fraudulently.
  • Check kiting – accessing funds in one account before the bank collects them from another.
  • Check washing – removing information from a check using chemicals.
  • Counterfeiting – illegally printing checks with a victim’s information.
  • Paper hanging – writing checks on a closed account.

How to Safely Use Personal Checks to Avoid Check Fraud

If you use common sense and a few simple precautions, you can reduce the chances you’ll become a victim of check fraud.

The basic steps are:

  • Keep a record of all checks you write.
  • Monitor bank transactions.
  • Keep your checkbooks in a safe place.
  • Mail letters containing checks at the post office, where only federal workers handle them.
  • Use a fraud-resistant pen containing ink that resists erasing. You can get three for $8.50 on Amazon.

Is it Safe to Pay Bills Online?

Nothing is 100% safe with financial transfers. Online pirates will always try to breach security systems and engage in identity theft. But the risks with paying bills online are acceptable, especially compared to using paper check

Financial institutions use encrypted user data, multi-step verification and require
passwords to even begin the process.

If there is a fraudulent transaction, banks must investigate and refund your money within 10 days. The investigation can be extended to 45 days if you receive a provisional refund within 10 days.

How to Safely Pay Bills Online

It’s in the bank’s interest to do everything possible to keep your money safe, but there are things you can do to help.

Keep these steps in mind, and you’ll have more peace of mind:

  • Email is notoriously insecure, so never pay bills through a link in an email. Go the company’s website or your bank’s website if you’ve set up a bill-pay system there.
  • Don’t send personal information through email.
  • Don’t save your password or username on a company site if it’s offered. It may be inconvenient to type those in, but that will be one less place where sensitive is stored and at risk.
  • Use banking service that have multi-step verification log-ins. While it may be exasperating having to answer a pre-set question and re-type your username and password every time you log on, having your checking account raided is a much bigger pain.
  • Never pay bills using a public computer, like one at a library.
  • Have a password lock on your computer, and always log out of your account after paying the bill.
  • Regularly check your bank statements and credit report to make sure there aren’t suspicious or fraudulent transactions.

Again, there is no 100% guaranteed, fraud-proof way to pay your bills. But what are the alternatives to electronic checks?

You could always go off the grid and pay only in cash. But having to go to your cable company, electricity provider, doctor’s office, etc., etc., etc. and handing over cash is no way to spend your life. And the odds are far greater you’ll get robbed or lose your wallet than you’d lose your money via electronic fraud.

The only reasonable alternative is the personal check. But compared to that, electronic bill payments are faster, they are more convenient, they offer more protection and they are more environmentally friendly.

So if you’re still debating, put that checkbook in a drawer next to your 8-track tapes and flip phones.
Something better has come along. And better yet, it’s something safer.


Sources

Kimball, J. (2018, March 16). A Short Amazing History of Checks in the USA. Retrieved from: https://www.paymentsjournal.com/a-short-amazing-history-of-checks-in-the-usa/

Kvederis, B. (2017, January 19). The Paper Check Lives: Why the Check Decline Slowed in 2016. Retrieved from: https://fi.deluxe.com/community-blog/payments/decline-check-suddenly-slowed-2016/

Lunden, I. (2019, November 28). Online shopping on Thanksgiving hit $4.2B, up 14.5% on 2018, 45% of sales via mobile. Retrieved from: https://techcrunch.com/2019/11/28/thanksgiving-2019-online-shopping-stats/