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Jewish World Review May 1, 2001 / 8 Iyar, 5761

Mary Deibel

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Consumer Reports

Check floating to sink from technological wave -- WHEN Holly the golden lab mix and Rusty the part beagle finish at Bull Run Veterinary Hospital, office manager Dawn Whitlow checks them out by running their owner's check through a scanner that subtracts the money from the master's bank account.

"It's new, it's change, and people don't like change, but we're all going to have to get used to not having four or five days when we pay by check," says Whitlow.

The Haymarket, Va., veterinary clinic is in the vanguard of an e-commerce revolution that could help end Americans' love affair with paper checks.

BB&T of Winston-Salem, N.C., with more than 850 bank branches throughout the Southeast, started testing the checks-as-debits system with customers in North and South Carolina, Georgia and Virginia in January.

Bank of America will join the program in June, and nine other banks will convert by March 2002: ABN/AMRO, Citibank, First Union, J.P. Morgan Chase, Summit, U.S. Bancorp, Union Bank of California, Union Planters and Wells Fargo.

Woody Tyner, systems payment strategist for BB&T, calls the project "the first step in eliminating lengthy processing of the 18 billion checks that customers write merchants each year at point of sale." He says checks don't clear a checking account instantly for now but typically take until the next day.

Electronic funds network Star Systems is running a separate test with big merchants: By summer, when you write a check at Best Buy, CompUSA, Kmart, Sears, ToysRUs and other retailers, the Star Chek system will verify your account, then subtract the money from it regardless of the bank you use.

It's been 30 years since banking experts first predicted electronic money transfers would make paper checks extinct, but those predictions proved wrong.

Checks still account for almost half of America's purchases and remain the most popular method of payment - more popular than electronic transfers, more popular than credit cards, and more popular than cash, according to a recent report in the Federal Reserve Bank of Atlanta's Economic Review.

In 1997, the last year for which numbers are available, authors James McAndrews and William Roberds say, Americans wrote 66 billion checks worth $77.8 trillion, or 250 checks a person for an average value of $1,177.

And the numbers are only rising: Check writing may top 80 billion in 2001, according to industry estimates.

One reason Americans like paper checks is the float, the grace period between the time you write a check and it gets cashed against your account.

Checks afford most families a little space between the time they send in the mortgage check in time to avoid late fees or write a check to the supermarket and their paycheck gets deposited. Lag time also can add an average of 5 cents a check to your account, assuming your checking account pays interest.

Check clearing still relies on the Federal Reserve's relay system of commercial trucks and planes. It shuttles some 23 tons of checks a night from the city where they're written to their ultimate destination.

But float isn't what it used to be in these days of low interest rates and speedy check clearance.

For businesses, however, float on check payments by customers and suppliers can add up to thousands of dollars gained or lost a month, and more for big businesses. For small business owners for whom time is money, doing without the daily trip to the bank to drop off the checks can add to the bottom line.

Check fraud adds up, too: It costs merchants $12 billion a year and gets passed onto honest consumers in higher prices.

Checks don't come cheap: The National Automated Clearinghouse Association says electronic deposits cost only 14 cents apiece compared to $1.90 a paper check - 10 cents for the check stock, 25 cents for processing and distribution, 15 cents each in bank charges and "cash-on-hand" and $1.25 in lost time.

The Food Marketing Institute alone estimates the check you write at the checkout counter passes through five employees' hands before it ever leaves the grocery store, an industry that lives and dies by razor-thin profits.

Saving $1.50 a check in costs would add up for the 18 billion checks written to merchants each year. "That's $27 billion," says Atlanta Fed economist Roberds. "If a big retailer didn't do it, they'd be letting $100 bills just lie around."

Roberds confesses he personally likes checks and the paper trail they leave of his transactions. "I'm 'of an age,'" he says.

For consumers accustomed to reconciling their checkbook and bank statement monthly, the era of the instant check will require new financial habits:

- Be sure to hang onto any check a merchant scans and hands back to you, just as you do with credit card receipts, so you can reconcile your checking account later.

- Take care to record in your checkbook any checks that are scanned and subtracted from your account in case the transaction shows up as a nameless "debit/date/amount" you can't remember on your bank statement.

Bull Run clinic office manager Dawn Whitlow keeps her personal checkbook up-to-date "so it's not a change if a check gets debited to my account. For the average Joe Blow who doesn't keep books for a living," she says, "it's going to be a brave new world in which you need to keep careful count of what you spend and where."

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