Personal Finance
The U.S. government is phasing out paper checks. What that means for you
Checks are printed at the U.S. Treasury Philadelphia Finance Center in Philadelphia, Pennsylvania.
Dennis Brack | Bloomberg | Getty Images
Paper checks were already dying a slow death.
President Donald Trump on March 25 signed an executive order mandating that all federal departments and agencies end their use of paper checks and switch to electronic payments by Sept. 30.
The U.S. Treasury now has about six months to phase out the paper checks it uses for various purposes, including tax refunds and the roughly 456,000 Social Security checks that are mailed monthly.
The executive order will “modernize how the government handles money, switching from old-fashioned paper-based payments to fast, secure electronic payments,” the administration said in a fact sheet on the order.
“Paper-based payments, such as checks and money orders, impose unnecessary costs, delays, and risks of fraud, lost payments, theft, and inefficiencies,” the White House said.
Under the order, all government departments and agencies will have to issue disbursements via electronic transfer methods, like direct deposit, debit or credit card payments, digital wallets and real-time transfers.
Consumers will have until then to set up an online bank account or some form of digital payment option, with limited exceptions for those who do not have access to banking services or electronic payment systems.
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Banking groups applauded the move.
“We welcome President Trump’s executive order mandating that the federal government cease issuing paper checks for all disbursements, including government benefits and tax refunds,” Rob Nichols, president and CEO of the American Bankers Association said in a statement. “Despite a continued decline in business and consumer use of checks, check fraud has continued to rise.”
Check fraud, mail theft and identity scams have exploded in recent years, according to Haywood Talcove, CEO of LexisNexis Risk Solutions’ government group. A 2024 report from the U.S. Government Accountability Office estimated that the federal government could lose between $233 billion and $521 billion a year to fraud.
“Checks aren’t safe anymore,” Talcove said. “It’s where the criminal groups are feasting.”
As part of the executive order, payments made to the federal government — such as fees, fines, loans and tax refunds — must also be made electronically.
With significant advancements in security — thanks to authentication, monitoring and data encryption — retailers’ and consumers’ shift to contactless and digital payment methods will only continue to grow, accelerating the move toward a “check zero” world, according to Scott Anchin, vice president of operational risk and payments policy for the Independent Community Bankers of America.
However, there are still certain groups that rely on paper checks, including some of the nation’s most vulnerable populations such as social security beneficiaries and those who receive rental assistance, or Temporary Assistance for Needy Families.
Check writers generally skew older and are likely at the margins of the banking community, according to Anchin. Americans over the age of 55 were most likely to write checks every month, the survey from GoBankingRates found.
But these groups are also most at risk of being targeted by scammers, Talcove said. “The elderly are significantly disadvantaged by the antiquated systems and you have to get them into digital payments.”
The death of checks
Although checks, as we know them today, first originated in the 11th century, they didn’t become mainstream until the early 20th century following the Federal Reserve Act of 1913, according to a historical survey by the Federal Reserve Bank of Atlanta.
But back then, “everyday people didn’t have checking accounts, that was for rich people,” Stephen Quinn, professor of economics at Texas Christian University and co-author of the Atlanta Fed’s report, previously told CNBC. “It wasn’t until after World War II that checking accounts were a common thing.”
Postwar prosperity greatly expanded the use of checking accounts to middle-class households, making checks the most widely used noncash payment method in the U.S., according to the Atlanta Fed.
Personal checks continued to gain steam until the mid-1990s, when credit and debit cards largely took over. Since 2000, check-writing has plummeted by nearly 75%, according to the U.S. Federal Reserve Board of Governors.
Despite the rapid decline, “a form of payment with a thousand-year history is unlikely to vanish overnight,” the Atlanta Fed report said.
And yet, today’s young adults are increasingly eschewing the traditional banking and credit infrastructure altogether in favor of peer-to-peer payment apps.
Quinn said his students rely almost exclusively on digital wallet payments such as Apple Pay, Venmo and Zelle — hardly anyone carries cash, and it’s likely that few even know how to write a check.
Mobile payment apps have become de facto bank accounts even though, unlike banks or credit unions, these financial services are not FDIC-insured.
Still, there remains a place for personal checks, Quinn said.
“The paper check might linger where it began, at the high end — for large one-off payments,” he said, such as charitable donations or real estate transactions. “In this way, checks might hold on for some time.”
Fg Trade | E+ | Getty Images
Meanwhile, J.P. Morgan raised its odds for a U.S. and global recession to 60%, by year end, up from 40% previously.
“Disruptive U.S. policies has been recognized as the biggest risk to the global outlook all year,” J.P. Morgan strategists said in a research note on Thursday.
Allianz’s Chief Economic Advisor Mohamed El-Erian also warned on Friday that the risk of a U.S. recession “has become uncomfortably high.”
‘There is some nervous energy’
“There is some nervous energy there,” said certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York, of the conversations he is having with his clients.
Even though stocks took a beating on Friday, “we advise them to focus on fundamentals and what they can control, which means maintaining a strong cash reserve and discipline around cash flow so that they can stay in the market and feel confident about taking advantage of buying opportunities,” said Boneparth, a member of the CNBC Financial Advisor Council.
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Recession or not, maintaining a consistent cash flow and investment strategy is key, other experts say.
“The best way to manage these moments is to maximize your current and future selves is to block out noise that doesn’t apply to your plan,” said CFP Preston Cherry, founder and president of Concurrent Financial Planning in Green Bay, Wisconsin.
Letting emotions get in the way is one of “the greatest threats to life and money plans,” said Cherry, who is also a member of the CNBC Advisor Council.
When it comes to volatility tolerance, sharp drops in the market are to be expected, the advisors say.
“The stock market is unpredictable, but historically, there’s a trend in how the market recovers,” Cherry said.
“In years with market corrections and pullbacks, these are the worst days, which are followed by the best days,” he added.
In fact, the 10 best trading days by percentage gain for the S&P 500 over the past three decades all occurred during recessions, often in close proximity to the worst days, according to a Wells Fargo analysis published last year.
“Being out of the market and missing the best days and cycles after recessions significantly hurt portfolios in the long run,” Cherry said.
Boneparth said his clients also “know volatility and uncertainty is part of the game and, most importantly, know not to sell into chaos.”
Jamie Grill | Getty Images
As U.S. markets continue to suffer steep declines in the wake of the Trump administration’s new tariff policies, you may be wondering what the next best move is when it comes to your retirement portfolio and other investments.
Behavioral finance experts warn now is the worst time to make any drastic moves.
“It is dangerous for you — unless you can read what is going to happen next in the political world, in the economic world — to make a decision,” said Meir Statman, a professor of finance at Santa Clara University.
“It is more likely to be driven by emotion and, in this case, emotion that is going to act against you rather than for you,” said Statman, who is author of the book, “A Wealth of Well-Being: A Holistic Approach to Behavioral Finance.”
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That may sound easier said than done when headlines show stocks are sliding into bear market territory while J.P. Morgan is raising the chances of a recession this year to 60% from 40%.
“When the market drops, we have sort of a herd instinct,” said Bradley Klontz, a psychologist, certified financial planner and managing principal of YMW Advisors in Boulder, Colorado. Klontz is also a member of the CNBC FA Council.
That survival instinct to run towards safety and away from danger dates back to humans’ hunter gatherer days, Klontz said. Back then, following those cues was necessary for survival.
But when it comes to investing, those impulses can backfire, he said.
“It’s an internal panic, and we’re just sort of wired to sell at the absolute worst times,” Klontz said.
‘Never trust your instincts when it comes to investing’
When conditions are stressful, our frame of reference narrows to today, tomorrow and what’s going to happen, Klontz said.
It may be tempting to come up with a story for why taking action now makes sense, Klontz said.
“Never trust your instincts when it comes to investing,” said Klontz, particularly when you’re excited or scared.
Meanwhile, many investors are likely in a fight or flight response mode now, said Danielle Labotka, behavioral scientist at Morningstar.
“The problem with that, in acting right away, is that we’re going to be relying on what we call fast thinking,” Labotka said.
Instead, investors would be wise to slow down, she said.
Just as grief requires moving through emotional stages in order to eventually feel good, it’s impossible to jump to a good investing decision, Labotka said.
Good investment decisions take time, she said.
What should be guiding your decisions now
Many investors have experienced market drops before, whether it be during the Covid pandemic, the financial crisis of 2008 or the dot-com bust.
Even though we’ve experienced volatility before, it feels different every time, Labotka said.
That can make it difficult to heed to the advice to stay the course, she said.
Investors would be wise to ask themselves whether their reasons for investing and the goals they’re trying to achieve have changed, experts say.
“Even though the markets have changed, why you’re invested, your values and your goals probably haven’t,” Labotka said. “These are the things that should be guiding your investments.”
While there is the notion that life well-being is based on financial well-being, it helps to take a broader view, Statman said.
At any moment, no one has everything perfect when it comes to their finances, family and health. In life, as in an investment portfolio, all stocks don’t necessarily go up, and it’s helpful to learn to live with the good and the bad, he said.
“Things are never perfect for anyone,” Statman said.
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