Analysis | Paper checks are dead. Cash is dying. Who still uses them?

So where — if anywhere — are paper checks making their last stand? That’s what astute reader Bill O’Donnell from Chicago wants to know. “How many Americans still use paper checks?” he asks. “Who are they and where do they live? What are the trend lines?”

Let’s start with the trend lines, Bill! They, uh, point down. At the turn of the millennium, back when recording each transaction on paper might still have seemed like a good way to outfox the Y2K bug, they were the default for anyone not handing over cash.

Back then, 6 out of every 10 noncash purchases, gifts and paid bills were handled with checks. A mere two decades later, just 1 in 20 are. The paper check’s fall from grace has been meteoric, in the plummeting-so-fast-it-immolates-in-the-mesosphere sense.

As recently as 2003, the Federal Reserve ran 45 check-processing locations in which brigades of workers routed each check. A decade later, it was operating just one, in Atlanta, as check usage fell and the Fed executed a long-planned transition to a largely electronic system. The checks were also processed faster, meaning even fewer of them were, as the cliché went, in the mail.

We don’t know exactly when the paper check peaked, because the Fed wasn’t consistently measuring transaction methods until after the decline began. In the future, officials hope to stay ahead of our payment preferences. If we were to ditch cash at the rate we gave up checks, for example, the Fed’s enormous cash-processing operations might require a sudden and substantial overhaul.

“[People were] caught off guard by the rate at which check-writing dropped off the map,” said the Atlanta Fed’s Kevin Foster, who has spent more than a decade measuring Americans’ payment habits. “We don’t want to be caught off guard the same way with cash!”

In partnership with colleagues from other regional Federal Reserve Banks, Foster directs a survey every fall that asks almost 5,000 Americans to answer some questions and submit a diary listing all their spending for a few days. The diary contains the amount, type and other data points for thousands of transactions — from cash to credit cards to cryptocurrencies — and we are grateful to readers Kathryn Anne Edwards and Kinsey Kiriakos for calling attention to it when we first asked for help with Bill’s question.

And indeed the Fed would do well to keep an eye out. As recently as 2017, cash was still king. The following year, it was usurped by the debit card. And then covid-19 hit and made us all a little more reluctant to meet in person and pass objects back and forth. Now cash is used far less frequently than it was just five years ago.

The rise of the credit card, which is used in almost a third of all U.S. transactions and took over the top spot from debit cards in 2022, has further sidelined paper bills. And payment apps such as Venmo and Zelle, while still a minor part of our financial lives, expanded rapidly during the pandemic and remain elevated.

As for the debit card’s analog cousin, the paper check? It starred in just 4 percent of our transactions. These days, most Americans (57 percent in 2020 and 2021) have not written a check in the past month, and even those who write them do so rarely. They’re most common in high-dollar transactions of $500 or more, but even then we write checks only 14 percent of the time.

As a rule, age predicts check usage: Three-quarters of retirement-age Americans still use checks, compared with fewer than a tenth of their college-age comrades. It’s also higher among those with more education and higher earnings, regardless of age.

Bill also asked about geography. We don’t have great data on that, but it looks as though check usage is most common in the great Pacific coast and the Midwest, and lowest in the East and the South.

There’s another way to look at where people still use checks: by merchant type. Even in 2022, there are still a handful of businesses where checks are the most common form of payment. In particular, we still reach for the old checkbook when dealing with contractors, charities, taxes and landlords. But you may encounter some furrowed brows if you hold up the line in Safeway or Taco Bell to painstakingly spell out “sixteen dollars and forty-four cents” — data shows that almost nobody uses checks for groceries, fast food or transportation anymore.

One factor transcends age, income, education and geography in terms of check usage: race. White people still love writing checks. Most White people (51 percent) have written a check in the past month, while fewer than a quarter of their Black friends have done the same. Hispanic (31 percent) and Asian (37 percent) Americans are in the middle, though further analysis hints that their numbers tend to be closer to Black people than to White ones.

White America’s preference for paper checks can’t be explained by any demographic characteristic we considered. At every age, income tier and education level, a White person is much more likely to write checks than friends of other races, with Black Americans standing out almost as much on the other end. It seems likely the real rift lies not in demography, then, but in history.

Black Americans, once marginalized by the formal banking system, were five times more likely to be unbanked than their White peers in 2021, according to the Federal Deposit Insurance Corporation. With more than 1 in 10 Black households remaining unbanked, it’s no surprise that Black Americans are consistently the biggest cash users.

Black Americans may also turn to cash because they’re much more likely to be denied credit. Almost half (46 percent) of Black people who applied for credit in 2021 were either denied or approved for less than they requested, dwarfing the 22 percent of White people who met the same fate, according to a Federal Reserve survey.

Hispanic Americans also tilt toward debit cards and cash, while Whites match the overall trend in which debit cards replaced cash, only to be overtaken by credit cards. Asian Americans have the most lopsided financial group of any we looked at. On average, they use credit cards in about 60 percent of their transactions, up from a bit over 40 percent a few years earlier.

No other transaction type captures even 10 percent of this group’s transactions. We’re not sure why Asian Americans prefer credit cards, though we can guess it’s not related to financial need — Fed data shows they’re much less likely than other groups to carry a credit card balance from month to month. It’s one of many quirks of this data set that could easily inspire a separate column.

Hi! The Department of Data exists to answer your quantitative questions. What do you wonder about: How often are U.S. children given their mother’s last name? Which states have the biggest racial gaps in unemployment rates? Which parts of the United States are aging most rapidly? Just ask!

If your question inspires a column, we’ll send an official Department of Data button and ID card. This week we’re sending a button to Bill O’Donnell, who earned one earlier for asking about landlines. We’ll also send yet another button to DoD membership card collector and economist Kathryn Anne Edwards, who has now scored a DoD hat trick of inspiring a column, being quoted in a column as an expert source and being picked as the most helpful respondent to a reader call-out. Finally, we’ll reward first-time button winner Kinsey Kiriakos, who also pointed us to the Fed survey cited above.