The Green Sheet Online Edition

February 10, 2020 • Issue 20:02:01

Check usage down; ACH, card payments up

By Patti Murphy
ProScribes Inc.

Check usage has plummeted, while card and automated clearing house (ACH) payments continue to grow. That's the top line finding disclosed by the latest Federal Reserve report on noncash payments. The Fed collects data on noncash payments (checks, credit and debit cards and ACH) through ongoing research projects, and publishes a comprehensive report on its findings every three years. The latest report, detailing noncash payment trends between 2015 and 2018, was published in December 2019.

In 2018, Americans made 174.2 billion noncash payments, an increase of 30.6 billion over 2015. The value of noncash payments in 2018 totaled $97.04 trillion, a $10.25 trillion increase over 2015, the Fed reported. By number, the growth rate of noncash payments was 6.7 percent a year between 2015 and 2018, outstripping the 5.1 percent annual growth rate charted between 2012 and 2015. By value, the 3.8 percent a year growth rate in noncash payments during that period was slightly higher than the previous three year period (3.6 percent per year).

Excluding checks, growth in noncash payments outstripped growth in U.S. gross domestic product for the three years studied. In 2018, for example, GDP was 2.9 percent. GDP was 2.6 percent in 2017 and 1.6 percent in 2016.

Comparing usage by payment type, it's clear U.S. consumers are shunning checks in favor of electronic alternatives, particularly debit cards and ACH debits. In fact, at 16.6 billion, there were more ACH debit transfers in 2018 than there were check payments (14.5 billion). This was a first in the history of the ACH, which was created nearly 50 years ago as an electronic alternative to paper checks. Twenty years ago, checks outnumber ACH debits by 21 to one (42.6 billion checks to 2.1 billion ACH debits).

Debits are the ACH transaction type that most closely resemble checks, and are often used to support automated consumer online bill payments, although they also can be used for one-time payments. In either scenario, the consumer (or business payer) authorizes the payee's bank to pull funds from their bank account for crediting to the payee's account. This differs from common ACH credit applications (like direct deposit) where the paying party instructs their bank to push funds to the payee's bank account.

ACH credits and debits, combined, grew 6.0 percent a year between 2015 and 2018, while the value of ACH payments grew 7.2 percent a year. In all, the ACH was used to move 28.5 billion transactions with a combined value of $64.16 trillion in 2018, compared to 23.9 billion transactions worth $52.08 trillion three years earlier.

The number of checks that cleared through the banking system fell 7.2 percent a year between 2015 and 2018, representing a much steeper rate of decline than the 2.8 percent a year during the previous survey period. And in a reversal of the upward trend in check values registered between 2012 and 2015, the total value of check payments fell 4 percent a year from 2015 to 2018, the Fed said. The 14.5 billion checks written in 2018 carried a total value of $25.80 trillion.

More debit card use, credit card dollars

Debit card usage has taken off in recent years, although credit cards are preferred for higher-value purchases. Taken together, card payments charted the fastest growth of all noncash payments between 2015 and 2018: 8.9 percent a year by volume and 8.6 percent by value. A total of 131.2 billion card transactions valued at $7.08 trillion were made in 2018, the Fed reported. At $54, the average value of card payments in 2018 was on par with the average in 2015, the Fed said.

Not included in these totals are 5.1 billion ATM withdrawals valued at $800 billion made in 2018, representing slight decreases from 2015. The average value of ATM withdrawals grew, however, from $146 in 2015 to $156 in 2018.

Here's a rundown of key data points regarding credit and debit card payments.

• Debit cards: Traditional debit cards accounted for 55.4 percent of all card payments, by number, in 2018, a negligible decrease from 55.8 percent in 2015. Americans made 72.7 billion debit card payments in 2018, which is roughly equal to the total of noncash payments made in 2000, the first year the Fed issued its triennial payments report. The average value of debit card payments remained unchanged between 2015 and 2018 at $38.
• Prepaid debit cards: Prepaid debit card payments represented 10.5 percent of card transactions in 2018, down from 11.1 percent in 2015. U.S. consumers made 13.8 prepaid card payments totaling $350 billion in 2018, an increase of 1.6 billion payments and $60 billion over 2015. The bulk of payments were made using general purpose prepaid debit cards (6 billion transactions valued at $190 billion), but the average value of these transactions fell from $35 in 2015 to $32 in 2018. Private-label prepaid debit cards accounted for 40.2 percent of prepaid card transactions in 2018, up from 38.9 percent three years earlier. The total value was $100 billion, up from $70 billion in 2015. At 2.2 billion electronic benefit cards made up the smallest share of prepaid debit card payments. The average value of EBT card transactions was $26 in 2018, down from $29 in 2015.
• Credit Cards: Credit card payments made up 34.1 percent of all card payments in 2018, the Fed said. Americans made 44.7 billion credit card payments valued at $3.98 trillion in 2018, up from 33.7 billion payments valued at $3.05 trillion in 2015. The average credit card payment was $89, down from $91 in 2015. The bulk of credit card payments (91.5 percent) were made using general-purpose cards. Private-label credit cards made up just 8.5 percent of all credit card payments in 2018, totaling 3.8 billion valued at $340 billion, reflecting strong double digit growth in both numbers and dollars spent.

  The biggest growth was registered with card-not-present transactions (or what the Fed calls remote payments): 20.5 percent a year from 2015 to 2018. While the number of in-person credit card payments (86.1 billion) continued to outstrip CNP transactions (33.5 billion), total values were nearly identical at $3.3 trillion in card-present transactions and $3.29 trillion in CNP payments in 2018, the Fed reported.

Patti Murphy is senior editor at The Green Sheet and self-described payments maven of the Fourth Estate. Follow her on @GS_PayMaven.

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