 The economics of check floatJames McAndrews and William Roberds Economic Review, 2000, vol. 85, issue Q4, 17-27 Abstract: Checks continue to dominate the market for noncash retail payments in the United States. Each year, U.S. residents write between 65 billion and 70 billion checks, an average of one check per business day per resident. This dependence on checks is unique among developed countries. It is also extremely costly: by switching from checks to other forms of payment, U.S. residents would save between $60 billion and $100 billion dollars per year. ; Why do checks continue to see such wide use within the United States? Economists' explanations have focused on check \"float,\" which is the interest earned by a check writer between the time a check is received as payment and the time the payment is settled. This article explains how check float arises within the U.S. payment system and how float can discourage the adoption of other types of payment. The authors also consider several proposals for reforming the U.S. payment system. While these proposals hold some promise, they are also subject to criticisms. The authors conclude that over the near future, policymakers will need to weigh the drawbacks of these proposals against the benefits of a faster transition to a more efficient payment system. Keywords: Check float; Checks; Payment systems (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fip:fedaer:y:2000:i:q4:p:17-27:n:v.85no.4 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Economic Review from Federal Reserve Bank of Atlanta Contact information at EDIRC. |
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