Ready to go back to school for a history lesson? Don’t worry we promise this won’t be painful.
You never know when information like this will come in handy. You could end up impressing your friends while watching Jeopardy! or playing a game of Trivial Pursuit.
What if you find yourself in the hot-seat on Who Wants to Be a Millionaire and a question about the history of checks comes up – but you’re all out of lifelines?
So let us throw some knowledge at you!
The Beginning of Checks
Checks are the oldest type of non-cash payment. Early forms of checks have been around almost as long as the banking system itself – and that’s a long time. Ancient Romans are believed to have used the earliest form of a check in the first century B.C.
Although were not sure if you could get in to see a showdown at the Colosseum using a check.
Way back in the 3rd Century A.D., banks in the Persian empire used letters of credit referred to as chak.
Muslim traders used a similar system in the 9th century. And the Knights of Templar developed a check system for European Christians traveling to the Holy Land or across the continent. Travelers could deposit money at one “bank” then withdraw it from another after showing a paper representation of their claim.
These types of early check systems helped people avoid the problems that came with carrying large amounts of cash while on a long journey.
It’s widely believed the first sign of personal checks widely used as a payment came sometime in the 1500s in Holland and spread across Europe from there.
It was in England in 1700s that the first printed forms of checks were used to replace handwritten checks. Printing cheques (as they’re reffered to in Europe) on paper was the first innovation used to deter check fraud.
This is where things really start taking off for checks!
In 1811 the Commercial Bank of Scotland is thought to be the first bank to create real personal checks customized with an account holder’s name printed on the document. In 1830, the Bank of England started creating actual books of checks in 50, 100, or 2000, which were bound and stitched together.
Across the pond in the United States, the first person to use a check probably used business checks. In 1681, a Boston business man wrote checks when he mortgaged land to a fund and wrote checks against it.
Checks Reach Their Peak
By the 1950s, checks started to get some competition. The first charge card (Diner’s Club) came on the scene in 1950. But checks were also becoming more efficient.
In 1959, the MICR (magnetic ink character recognition) code was developed and patented in the U.S. for routing and account numbers on personal and business checks. This gave banks the ability to use automated reading and sorting machines to make the check clearing process faster.
During the 1960s, the volume of checks being written was getting so high that there were concerns about a dramatic increase in the number of check payments and how financial institutions would handle it all. So the ACH was developed. The Automated Clearing House payments allowed for conveniences like direct deposit of payroll and mortgage payments. These types of payments increased in the 1980s and 1990s.
In 1979 – checks represented more than 85% of all non-cash retail payments. But the ’70s are also when credit and debit cards started to become more widely used.
The Future of Checks
After at least 500 years of being the best alternative to cash. Things have started to slow down for the check. Some European nations are even eliminating checks completely. But it ain’t over until the fat lady sings.
In 2004, the Check Clearing for the 21st Century Act – or Check 21 – became law. It allows checks to be transformed into digital versions of the original check called a substitute check. It’s made the check clearing process much easier for banks and credit unions in the U.S.
Today people can order checks online and find personal checks that fit their personality. I bet the Knights of Templar wish they would have thought of that one.
In addition to the rise in the use of electronic payments like credit and debit cards, online banking and even more recently mobile banking have been added to the mix.
But personal and business checks are still finding a way to remain part of the equation. For instance, Chase Bank customers can use an iPhone application to deposit checks with their smart phone by simply snapping a picture.
It’s believed checks will still be a reasonable payment option for years to come. A study by the Federal Reserve indicates that 67% of Americans write 10 personal checks every month. That means most households continue to use personal checks along with other types of payment options.
While technology has brought some competition for checks, it’s also made them easier to use. There may be a final chapter in the history of personal checks, but it won’t be written for quite some time. You can take that to the bank!
Image Credit: Diliff
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