A tale of a cheque
July 27th 04:06 PM
One thing that never stops amazing me is the eagerness of US companies to use cheques as a payment method. I mean, we have been using online banks for more than a decade now, and still the default way of paying a contractor is sending him a cheque.
Sure, the buyer wins some time (and thus a few days’ worth of interest) but for the receiver of the payment it goes like this:
- Wait for the cheque to arrive in mail. This normally takes about a week.
- Walk to a bank and get stared at like a lunatic, because you’re considered a remnant from the era of ball chairs. Stand in line for half an hour because banks have cut their counter workers to a minimum (since no one – except for pensioners – goes to a bank persionally these days, and pensioners have time to wait).
- Wait another week for the cheque to be cashed and the money to arrive on your account.
Now let’s compare this to the process of a bank wire:
- ... there is no step 1. You just wait and after about a week since the customer sends the money it’s on your account.
Now as if this wasn’t enough, here’s what just happened with a cheque I received a couple of months ago. When I got the cheque, the dollar rate was near it’s all-time low (around $1.35/€1), so I decided I’d wait for a while for it to stabilize. That turned out to be just a pipe dream so I bit the bullet and walked into a bank this week. No problem.
Today I got a call from the bank. They told me they have a 70-day limit in cashing cheques in the normal fashion (which costs me about €12). Since they don’t want to take the risk of being denied by the US bank that issued the cheque, the only way to cash it now is as a CAD (cash against documents) cheque, which, coincidentally, is going to cost me around €50. Just great.
For a reality check, I decided to call another bank and ask how it would work there. The person with whom I talked obviously wasn’t prepared to answer such a hard question as “How much does cashing a cheque cost?”, so I had to wait on hold for a while until she came back with the answer. And what an answer that was:
“The bank has the option to deny cashing the cheque as its will, and the cost is always at least €90.” Geez. I called back to the original bank and told them to go ahead with the cashing. It seems the banks in Finland have at least as bad an aversion to cheques as I do.
From no on, please don’t offer to pay me by a cheque.
There is another advantage to the sender in using a check rather than a wire – banks (at least in the U.S.) charge a fairly hefty fee for sending a wire, while cheques are included in the base account fee. On my business account, for example, it can cost me an additional $25 to wire money, while at a former employer the wire fee was $50.
So what we have here is two different banking cultures clashing over which services to overcharge for, I think.
I hate checks as well and since I moved back to the states I can’t believe how much checks are still an important way of life here.
As Mike says international wire transfers are really expensive here, but it’s not just that. There is no easy way of doing bank transfers within the US. (It’s possible, it’s just not that easy to figure out how to do it). So no one knows how to do it. These are really expensive as well. The best way of doing it is PayPal really.
The last problem is that checks are what people are used to. Most Americans have never done or even heard of an international wire transfer outside of watching someone wiring a $10 million ransom fee to a Cayman Islands bank account in a B-movie. Many people don’t even realize there are other options.
My recommendation is to see if you can use PayPal (maybe offer to accept the fees) in the future (and also get payment method specified in the contract). I’m not sure what the payment limits are with PayPal, but you should be able to use it. It will definitely save a lot of hassle.
I should clarify that no one has insisted on using cheques, it’s just surprised me a few times that it really is the default.
Mike, I know it costs money to wire money, but the question is why should the burden be by default on the recipient? We actually have used bank wires and it’s been around $50 from US to EU at BofA. There might be cheaper banks, though. The upside even for the payer is that there’s no paperwork or manual labor involved.
It’s clear that it’s a difference in the cultures but that’s really what amazes me. I hardly ever go to a bank for any reason, basically anything can be done online. Since last year all intra-EU wires cost the same as domestic ones, i.e. less than €1. My parents remember well the same culture here that you have in US from the 70’s, partly amused and partly in horror. So I really wonder, at which point (and why) did the banks in US drop from the internet train?