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What Are Some Advantages and Disadvantages to Paying with Checks?

How Checks Work - Benefits and Drawbacks

A stressed employee is seen paying with checks instead of digital methods on a desk with charts, graphs, and a laptop, symbolizing secure and flexible accounts receivable solutions. The center features “Paying with Checks” in faint yellow all-caps letters with a neon effect and the second part, “Pros & Cons” in thin purple letters outlined in white, both overlaid on a circular rectangular translucent black background, outlined in gold. The Alternative Payments logo is in black and grey lettering and sits in the top right corner.

In an age where digital transactions dominate, paying with checks might seem outdated to some. Despite the rise of digital payment methods, many businesses still rely on checks for security, record-keeping, and widespread acceptance. However, checks still hold a significant place in financial transactions for many individuals and companies. Answering the question, “What are some advantages and disadvantages to paying with checks?” can help you decide what role they may play in your future financial needs.

History of Checks

The use of checks dates back to ancient times, with early forms appearing in Persia around the 1st century. Checks were introduced to the United States in the late 17th century by British banker Lawrence Childs. Before this, transactions were carried out through handwritten IOUs.

Over the centuries, checks have evolved as a cornerstone of financial transactions and play a significant role in modern banking. They have played an important role in the development of commerce by providing a secure and convenient method for transferring large sums of money without needing physical cash.

How Checks Work

Checks play a critical role for businesses, serving as a formal written order for payment. Essentially, a check is a written, dated, and signed document that instructs a bank to pay a specified amount of money to the individual presenting or depositing the check.

Once a check is written, the bank undertakes a process of verification to ensure that there are adequate funds available to cover the specified amount. This process, referred to as check clearing, can span over a few days, during which the bank meticulously confirms the validity and authenticity of the check. While this manual process is secure, it is also susceptible to being time-consuming and prone to potential delays.

Key Terms

Here are some relevant technical terms that are worth understanding about checks:

  • Drawee: The bank or financial institution where the drawer's account is held and which is responsible for paying the check.
  • Drawer: The person or entity that writes the check and holds the account from which funds will be withdrawn.
  • Payee: The individual or organization to whom the check is written and who will receive the funds.
  • Endorsement: The signature or statement of the payee on the back of the check, authorizing its transfer or cashing.
  • Post-Dated Check: A check written with a future date, indicating that it should not be cashed until that specified date.
  • Stop Payment Order: A request made by the drawer to their bank to not process a specific check that has not yet cleared.
  • Bank Draft: A check drawn by a bank on its account in another bank, guaranteeing the availability of funds.
  • MICR Line (Magnetic Ink Character Recognition): The series of numbers at the bottom of a check that includes the bank's routing number, the drawer's account number, and the check number, used for automated processing.

What Are Some Advantages and Disadvantages of Paying with Checks?

Advantages of Paying with Checks


One of the key advantages of paying with checks is akin to the security that any analog mechanism provides in the modern era. Unlike digital transactions, which can be susceptible to online fraud and hacking, checks offer some peace of mind when transferring money. Each check must be manually processed and verified, and those with patience will be satisfied with the reduced risk of unauthorized access to your funds.


Businesses must maintain accurate financial records and checks offer excellent record-keeping capabilities. Each check you write serves as a tangible, verifiable transaction record, to track your spending. Banks provide detailed statements that include images of the checks you’ve written, helping you keep an accurate account of your financial activities.

No Transaction Fees

Another significant advantage is the lack of transaction fees. Unlike credit cards that often charge fees for each transaction, checks typically do not incur additional costs. This makes them a cost-effective payment option, especially for large amounts.


Despite the rise of digital payments, some businesses accept checks exclusively, especially for large transactions such as rent, utilities, and professional services. Certain vendors still prefer checks for their reliability and traceability. This universal, widespread acceptance makes checks a payment method that offers a modicum of convenience.


In a world where the hand-written word is sparsely seen, writing a check can add a personal touch to your transactions. For instance, when giving or receiving a check as a gift can feel more personal and thoughtful than a digital transfer. It also allows you to include personalized messages or notes, enhancing the recipient’s experience. Moreover, for businesses with larger transaction sizes, holding a large check in your hands has a unique feel, as if it were an actual stack of cash.

Disadvantages of Paying with Checks

Processing Time

One of the main drawbacks of using checks is the processing time. Unlike instant digital payments, checks can take several days to clear. This delay can be inconvenient, especially if you require immediate access to funds. When you consider the reality that digital payments can be automated, and add in the fact that we live in an increasingly digital world, the continued use of physical checks by your business deserves serious consideration.

Risk of Bouncing

There’s always a risk of a check bouncing if your account contains insufficient funds. When a check is deposited, the bank adds the amount to the customer’s account right away, which is known as the float. However, it takes time to receive and process the check from the payer’s bank. During this time, the money is considered to be in both the recipient’s and the payer’s accounts, even though it’s only in one place.

A bounced check can lead to financial penalties, damage your credit scores, cause embarrassment, and strain business relationships. The practice of floating a check, or writing a check without sufficient funds in the hope that deposits will cover the check before it is processed is considered in the eyes of the law as the use of others’ funds and can be classified by authorities as wire fraud or mail fraud. Without stating the obvious, you must ensure you have enough money in your account before writing a check.

Physical Security

Checks can be lost or stolen, posing a risk to your financial security. If you do not have the proper compliance and access rules in place within your office, and a rogue employee or ill-intended third party gets hold of your checkbook, they can forge your signature and withdraw money from your account.

While banks have measures to detect fraud, it’s still a significant concern. Checks can also be lost in the mail, leading to additional losses. In other words, if the money you set aside for your next payroll is accessed in an unauthorized manner, it may leave you in a precarious and vulnerable situation.


Compared to digital payments, writing and mailing checks can be inconvenient. A checkbook needs to be carried around so that when you’re paying with checks, they are readily available and on hand. This will allow for complacency and may lead to a failure to realize vulnerability; therefore, it is crucial to incorporate simple protocols and habits, such as securing the checkbook, filling it out manually, and ensuring its safe delivery to the payee.

With the increasing number of scams through the postal mail, you have no choice but to physically travel to the end location if you are apprehensive about sending a 6- or 7-figure check these days. This process is far less convenient than the cash flow experience that Alternative Payments provides its customers.

Limited Use

Paying with checks is on the decline, with many businesses and individuals preferring digital payment methods. In fact, 57 percent of Americans haven’t written a check in the past month, and those who do rarely write one. In transactions with a value of $500 or more, checks are most common, but even then they are written only 14 percent of the time. Some businesses no longer accept checks or cash, making it essential to verify with the other party before assuming you can use a check for a transaction.

Security Concerns in Paying with Checks

While checks are ironically secure in this increasingly digital world, they are not immune to fraud. Common issues include forgery, where someone alters the check, and theft, where someone steals and uses your checkbook. To that point, private companies and small businesses rank highest in occupation fraud at 42%, with the largest contributing factor being a lack of internal controls. For companies with less than 100 employees, 29% cited billing schemes as being the reported fraud committed in their organization.

To mitigate these risks, always store your checkbook in a safe place, and promptly report any lost or stolen checks to your bank as well as monitor your accounts for any unauthorized activity.  While not vulnerable to hackers, physical payment methods such as cash and checks are not immune to their security being breached and lack the convenience of digital payment methods that can help you save time and money.

Checks in the Digital Age

Despite the rise of digital payment systems, checks have adapted to the digital age. Many banks now offer services like mobile check deposit, allowing you to deposit checks using your smartphone. In the B2B arena, however, the overall use of checks is on the decline as more people and businesses opt for the convenience and security of digital transactions.

Digital payments, wire transfers, and ACH transfers have become increasingly popular when executing B2B transactions. Companies are gravitating toward e-invoicing and digital payment solutions knowing the importance of getting paid quickly and efficiently to accelerate their cash flow. As a result, the need for physical checks is slowly becoming obsolete.

Common Types of B2B Fraud When Paying With Checks

Businesses must understand the different types of check fraud to design proper safeguards and preventive measures that are most sensible for their organization. Internal controls are one way to combat and protect against unwarranted security breaches. These controls can include processes and procedures to secure assets, ensure accurate financial reporting, and promote compliance processes that follow laws and regulations.


The act of fraudulently replicating the drawer’s signature on a check to unlawfully authorize it. Additionally, forgery can involve changing the payee’s name or the amount specified on the check in an attempt to deceive and defraud.

Check Washing

A form of check fraud where criminals use various chemicals to erase the ink on a legitimate check. Once the ink is removed, the fraudster can then rewrite the check to a new payee and change the amount, essentially creating a new, fraudulent check. This method can be used to steal money from unsuspecting individuals and organizations.

Counterfeit Checks

Fraudulent checks are typically produced with high-quality printing equipment and techniques that mimic legitimate bank checks. These deceptive checks often contain fictitious bank names, addresses, account numbers, and routing numbers, making them appear genuine at first glance.

Check Kiting

A financial scheme that involves drawing funds from one bank account using checks from another account that has insufficient funds. This is done to create a false impression of high balances in the account being drawn from, taking advantage of the delay between when a check is deposited and when it clears. This is illegal and can result in severe consequences for those involved.

Paper Hanging

A form of check kiting involves the practice of paying with checks from a closed account. This deceptive practice often involves repeat offenders who intentionally use bad checks to defraud individuals or businesses.

Payroll Check Fraud

A form of financial fraud that occurs when individuals issue payroll checks to non-existent or “fake” employees. This can also involve altering legitimate payroll checks to increase the amount paid. Payroll check fraud can have serious financial implications for businesses and is considered illegal.


When employees or individuals with inside access to financial accounts misuse their privileges to issue unauthorized checks. This type of fraudulent activity often involves the forging of signatures or the creation of fictitious invoices to conceal unauthorized transactions.

Identity Theft

When criminals unlawfully obtain personal information, such as social security numbers, credit card numbers, or bank account details, to fraudulently open accounts, make unauthorized purchases, or forge checks in the victim’s name. This malicious act can involve physically stealing checkbooks or accessing account information electronically.

Remote Deposit Capture Fraud

When an individual deposits the same check multiple times using remote deposit capture technology. This type of fraud takes advantage of the delay in the clearing process to repeatedly cash in on the same check, potentially causing financial harm to the parties involved.

Alteration Fraud

Involves the unauthorized alteration of the details on an existing check. This can include changing the payee name, the check amount, or both. Perpetrators may use techniques such as erasing and rewriting parts of the check to carry out this type of fraud.

Social Engineering

Refers to the malicious manipulation of individuals to deceive them into divulging confidential information. This deceptive tactic can involve perpetrators impersonating trusted entities, such as bank officials, to gain unauthorized access to sensitive information, such as account details or personal identification.

By implementing well-defined internal controls, such as segregation of duties, regular financial audits, and integrating a comprehensive compliance function with effective monitoring and reporting mechanisms, businesses can effectively safeguard their financial interests against fraud, errors, and non-compliance.

The Importance of Financial Controls: Lessons from Dixon

If familiar with the story of Rita Crundwell and the city of Dixon, Illinois then you might agree with the need for both businesses and municipalities alike to have financial controls in place that prevent fraud. To sum up the story, Crundwell had been embezzling millions of dollars from the town, which had been in financial straits for over two decades – amounting to $54 Million and is the largest municipal fraud in US history.

You may wonder what the correlation is between public corruption and keeping your business safe. She served as the town’s comptroller and had near unilateral control while also creating fake invoices and approving payments to be directed to non-existent businesses. Dixon’s finances have undergone annual independent audits and audit reviews by the state of Illinois. The bank that managed city accounts had never raised any concerns either. The lesson here is that even when you think you’re doing all the right things, you likely aren’t doing enough.

Tips for Using Business Checks Safely

  • Use secure check stock with anti-fraud features.
  • Always use a pen with permanent ink to prevent alterations.
  • Keep your checkbook in a secure, locked location.
  • Reconcile your bank statements regularly for any discrepancies or unauthorized transactions.
  • Implement strict authorization protocols for issuing checks such as dual signatures
  • Avoid leaving blank spaces on the check, as these can be exploited.
  • Report lost or stolen checks immediately to your bank.
Mayor Burke has his own business. Would he turn all financial controls over to an employee of his business, with the almost total lack of oversight that this city had had? Would he run his business that way? That’s the way he ran Dixon.
Citizen of the Town of Dixon, IL

The fact is that although some security measures like dual signatures involve traditional financial tools or rely on traditional banking institutions, businesses have increasingly adopted a digital-first approach. Besides the convenience, there’s a strong argument that the streamlined security and access are harder to manipulate, unlike what transpired in Dixon.

Paying with Checks vs. Other Payment Methods


While cash offers immediate settlement and eliminates the need for a clearing process, it lacks the security and traceability of checks. Moreover, you risk not being able to recover cash if it is lost or stolen. For businesses, this becomes an increasing burden when carrying large amounts, and is largely considered impractical.

Credit/Debit Cards

The advent of credit and debit cards has simplified the way we handle transactions, providing us with the luxury of instant payments that are accepted by merchants worldwide. Despite their convenience, it’s important to consider the fees and risks associated with using these cards, including the possibility of falling prey to online fraud. Paper checks do offer a secure alternative to cards, as they do not come with transaction fees and provide added security against digital theft. That being said, as you know by now, there are trade-offs.

Digital Payments

Digital payment platforms like Alternative Payments provide speed and ease of use, unmatched by paper checks – making them a popular alternative. While you do need access to the internet, which is something checks do not require, billing systems can streamline transactions, reduce processing times, and offer enhanced security features that you may not see in traditional banking institutions.

When considering we have shifted into a digital-first world where analog processes are on the decline amid the digital transformation if you’re still paying with checks in your business then it might be prudent to consider digital payment alternatives.

Modern Digital Solutions: Alternative Payments

Alternative Payments is leading the way in providing modern solutions that address the limitations of traditional checks. By offering secure, efficient, and cost-effective digital payment options, businesses can overcome the drawbacks of checks.


Alternative Payments enable quick and seamless transactions, which can greatly reduce the time it takes to access funds as you previously would have to wait for payments to clear. This, in turn, helps businesses to better manage their cash flow, ensuring that funds are available when needed and improving overall financial efficiency.


Utilizing digital payment methods provided by Alternative Payments can lead to a reduction in transaction costs when compared to traditional banking fees. This cost-saving benefit is particularly significant for small businesses and organizations aiming to streamline and improve their financial operations.

Enhanced Security

Alternative Payments utilizes advanced security protocols to safeguard and shield transactions from fraudulent activities and unauthorized access. Our digital security measures go above and beyond the traditional security measures associated with paper checks.


Alternative Payments offers modern digital solutions that streamline payment processing. Therefore, businesses can effectively oversee and manage their transactions online. This not only saves valuable time but also minimizes the administrative workload, allowing businesses to focus on their core operations and growth.

Wider Acceptance

An increasing number of businesses are adopting solutions such as those offered by Alternative Payments, as the shift towards digital payments continues to gather momentum. This technology is designed to seamlessly integrate with a wide array of business processes; thereby, enabling widespread acceptance and unparalleled ease of use.

Future of Checks

The future of checks seems uncertain as digital payment methods continue to gain traction. However, checks are unlikely to disappear entirely, especially for specific transactions like rent payments and B2B payments. Business transactions will be largely influenced by advancements in digital payment technology. Paper checks may not entirely disappear, but their role will undoubtedly diminish as more businesses recognize and adopt the security and efficiency of modern solutions like Alternative Payments.

Digital Payments is the Future

Understanding the pros and cons can help you choose the best payment method for your needs. Paying with checks in B2B transactions has its set of advantages, including security, record-keeping, and cost-effectiveness. However, the disadvantages such as processing delays and physical security risks cannot be overlooked. Despite the appeal of seeing your name on a checkbook, the convenience and speed offered by digital payment methods cannot be ignored.

Modern digital solutions from companies like Alternative Payments offer businesses more efficient, secure, and convenient payment options that address the challenges of paper checks, which themselves are increasingly less viable options for your business to rely on. Understanding these dynamics can help businesses make informed decisions about their payment strategies.

Learn more about how Alternative Payments can provide secure payment solutions for your business.

FAQs & (more) Key Terms

What should I do if my business check is lost or stolen?

Immediately report the loss to your bank. They can place a stop payment on the check to prevent it from being cashed or deposited.

Can I still use checks for large B2B purchases?

Yes, checks are often used for large transactions, such as rent, mortgage payments, and business expenses due to their security and traceability.

How do I order business checks from my bank?

You can order checks through your bank’s website, visit a branch, or call customer service. Many banks also offer online check-printing services.

Are there fees associated with using checks in B2B transactions?

Generally, there are no transaction fees for writing checks. However, there may be fees for checkbooks or if a check bounces due to insufficient funds.

What happens if someone forges my signature on a business check?

If you suspect forgery, contact your bank immediately. They will investigate and, in most cases, reimburse you for the fraudulent amount if they confirm the forgery.

Types of Checks

  • Stale Check: A check that is presented for payment after a long period, typically six months or more, which may no longer be valid for payment.
  • Certified Check: A check guaranteed by the issuing bank, ensuring that the drawer has sufficient funds and that the bank will honor the payment.
  • Cashier’s Check: A check issued by a bank, drawn against the bank’s funds, often used for large transactions requiring guaranteed funds.
  • Traveler’s Check: A pre-printed, fixed-amount check designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer (usually a bank) for that privilege.

Check Processes

  • Check Register: A record that the account holder maintains to track all checks written, deposits made, and current balances in their checking account.
  • Reconciliation: The process of comparing the check register with the bank statement to ensure all transactions are accounted for and to resolve any discrepancies.
  • NSF (Non-Sufficient Funds): A situation where a check cannot be processed due to the drawer’s account lacking sufficient funds to cover the amount.
  • ACH (Automated Clearing House): A network for processing electronic payments, including direct deposits and automatic bill payments, often used as an alternative to paper checks.

Learn about the world of digital payments

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