Payment of services via check vs electronic transfers 1

[Ingenuity]

In this day-and-age of electronic 'everything', why is it that payment for services to engineers/architects/consultants/contractors from clients is predominantly via a paper check?

Mainly talking about US-based payment system. Maybe it is just me and the region where I practice, but why are checks still used?

In Australia, by way on example, payment to everyone (companies, suppliers, individuals etc) is via electronic transfer undertaken by the PAYER without assistance from their bank. And that has been the system for at least the last 5 years, possibly more than 10 years. Even international payments can be undertaken by PAYERS without the banks assistance (the bank does provide the online portal).

I was at our US bank a few days ago asking why I cannot do the same here and they looked at me like I had two heads. Do I need to change banks, or is that the norm in the US?

 

[glass99]

Ingenuity: In a typical year I receive ~50 paper checks and one wire. Overseas clients usually pay by wire.

For recurring payments, Chase Bank have their Quickpay service. The recipient has to have a Chase account, and the person paying has to register with Chase. I use that for a few things like paying my monthly maintenance to my co-op for my apartment. Its super clunky, and is no good for one time payments.

I don't know why electronic payments are not more readily available because checks are usually offered free by banks and they are more expensive to process than electronic transactions. Banks have no economic motive to hold up that train. I think the issue is that Americans are conservative romantics about their transactions. There have been no design changes to the dollar bills in over a century. Is it possible that a greenback could be another than green? Unthinkable! What about those giant 6ft long checks they hand over to lottery winners? Shooting someone a quick SMS to let em know they are millionaires is not the same thing.

 

[IRstuff]

"Employees typically get paid with payroll service like ADP or PayChex which are electronic services. "

Sure, electronic deposit, but paper paystub with voided check. I suppose there's probably a couple of people who actually receive an unvoided check.

"There have been no design changes to the dollar bills in over a century. Is it possible that a greenback could be another than green? Unthinkable! "

Perhaps you're only referring to the one dollar bill, but the 100 dollar bill just got a redesign only 6 years ago. Part of the reasoning for not making massive changes is that the dollar bill, unlike, say, the Croatian kuna

http://upload.wikimedia.org/wikipedia/commons/9/94/New100front.jpg

is the lingua franca of both legitimate and illegitimate money transactions, since it is a very stable currency. Because of its stability, changes are undesirable, since historically, changes to currency have often been tied to devaluations.

Nevertheless, the US one dollar bill had a design change in 1964. US troops in WWII in Europe were paid with a different dollar bill, in case they needed to void the currency when captured.


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[Ingenuity]

When I travel back to AUSTRALIA with US currency of significant amount (more than $1k, but less than $10k) I have to make sure my US bank gives $100 bills printed after 2006. My Aussie bank will not accept US currency before 2006 due to ease of counterfeit.

 

[glass99]

IRStuff: maybe you are right, the reason the euro is falling apart is they change their bank note design too much. Doesn't matter what some bureaucrat in Brussels says, if the man on the street can't picture what a euro is then you are lost.

Ingenuity: They may have buffed the $100 bill a bit in 2006, but its still green and still has Mr Benjamin Franklin on it. Changing either of these two things would be tantamount to ending capitalism.

Does anyone accept bitcoin? Its a bit out there, but its much cheaper for currency exchange. Banks charge ~2% and bitcoin is essentially free.

 

[GregLocock]

Ingenuity, do you not have a foreign exchange debit card? We get them free from the post office, you just load them up (electronically) with native currency, pop them into an atm at your destination, or use them like a credit card.

Cheers

Greg Locock


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[zdas04]

I've got a debit card from an institution that doesn't have ATM's so all ATM fees are waived and it has a great exchange rate. I've used it at ATM's all over the world and it works well everywhere. The biggest difference between it and a pre-paid card is that the bank ATM fee is deducted from the amount you loaded on the pre-paid card.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[IRstuff]

Bitcoin sounds good, in principle, but after the couple of debacles such as the loss of bitcoins at Mt. Gox last year to the tune of $25M. I certainly wouldn't touch it. Bad enough that my checking account is essentially in virtual dollars, but at least, it's recoverable, due to the pile of documentation that comes with it. With bitcoin, for whatever reason, the virtualness of the money seems to be easily converted to vaporware. Almost a good reason to convert everything into a pile of Ben Franklins and stick them under my bed.

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[zdas04]

Bitcoin reminds me of the days when every bank could issue currency and they were required to have adequate gold or silver reserves to redeem their certificates. Most banks were diligent about this and turning the certificates in for tangible metals was honored when demanded. Some weren't. In bank specie or Bitcoin you are simply trusting the integrity of the issuer. With government issued specie you are relying on the integrity of the government. I think I trust Bitcoin providers more than the government, but I know that the Interwebz is the dream venue for crooks and con men (just like Washington DC, come to think of it) so I have been unwilling to jump in yet.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[berkshire]

Greg,
These foreign exchange Debit cards? Are you getting these in Australia or the UK ? I have not heard of them in the UK . Unless you are talking about the post office Money Card.
I have a Bank issued debit card from a UK bank , but they bang me for a 2.99% service fee for any foreign exchange transaction.
The post office in the UK will do Pounds to Euros over the counter, they too have credit card which also charges you that same 2.99% fee.
B.E.

You are judged not by what you know, but by what you can do.

 

[GregLocock]

Australia.

http://auspost.com.au/travel-id/travel-cards.html

Cheers

Greg Locock


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[hokie66]

I gave up on prepaid cards a few years ago. I had one, deposited money into it just before I left for Europe, but the first time I went to withdraw from it, it was declined, and several times more. Finally I went into a bank, waited an hour or so for someone who spoke English and could assist me, only to find out that the card had expired. The bank was happy to take the funds on the expired card, but I had to wait until returning to Australia before I could get the money back. I just carry cash and credit cards. In some countries, on my chest.

 

[glass99]

Any card based foreign currency exchange has not only the ~2% charge they actually show you on your credit/debit card statement, but they give you bad exchange rate too. The spread between buy and sell for currencies is another ~4% (i.e. another 2% when you buy something). Banks really rip you off for foreign currency transfers without you even knowing it. Trillions of dollars change hands on global foreign exchanges daily with fees measured in few basis points, but consumers get stuck with 4%. Its maddening.

Bitcoin is potentially the ultimate currency trading platform because you bypass the whole stupid bank ripoff and go to a private exchange. Unfortunately the exchanges are a bit sketchy right now, but the potential is there.

 

[beej67]

My two largest clients are big engineering firms, and both pay me by electronic transfer.

I deposit paper checks by taking pictures of them with my phone in my bank's app.


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[zdas04]

Glass,
I think it really depends on the bank. When I use my Fidelity debit card, I can look up the exchange rate in the WSJ and the rate is get is really close to the $100 million quantity exchange rate and no ATM fees or foreign transaction fees. AmEX is about 5% worse exchange rate than Fidelity (and it doesn't work in ATM's). With Wells Fargo Visa it is closer to the airport kiosk rate and they pass on local bank ATM fee plus add a per-use ATM fee of their own. Chase is somewhere in between (I have two Chase cards, one of them is pretty close to the AmEx rate and no fee, the other is often worse than the airport kiosk rate plus they charge a 2% fee for all foreign transactions, I made a mistake and used that card in South Africa and a $500 purchase ended up costing me nearly $700). The difference in the two Chase cards seems to be that the crappy exchange-rate card does not have an annual fee and the other one has a $400 annual fee (the fee gets me into airport business class lounges even when I don't fly business class, some other benefits that seem to be worth the fee to me).

The variation between banks and products within a bank are pretty significant. My son had a Capital One card that he used once at the PX in Baghdad for a U.S. dollar denominated transaction on a U.S. Army facility, the add-on fees and exchange rates (they converted it to Iraqi and back to USD, each step with a fee and a crappy exchange rate) took up a page of the bill and ended up tripling the cost of the item. I was handling his bills while he was deployed and when I saw that bill I got him a new card from Chase and the minute he told me he had it I cancelled the Capital One card (he's a bomb tech and he sent me a photograph of the card sitting on a large pile of confiscated ordinance, next picture was a very large explosion, I guess that was one truly destroyed card).

With as much time as I spend out of the country, I've paid considerable attention to credit card/exchange rate/fee schedules and some of the terms are really appalling.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[glass99]

beej67: do you get paid by wire transfer? Does you bank charge a fee for receiving wires? They hit me with $15 for domestic wires.

zdas: I will have to look into a Fidelity card. And yes, ripping off servicemen in war zones is a classic move.

 

[zdas04]

Wires are a fee plus tax. ACH transfers are free. My clients in the U.S. use ACH (even though a couple of the call it "wire transfer"). I have a client in Australia who set up a U.S. bank account so that they can save the $35-50 wire-origination fee plus getting billed for the $15 at the other end. They say that setting up the account was free and with a minimum deposit level there aren't any fees. They picked a U.S. bank that has some sort of arrangement with their Brisbane bank so bank-to-bank transfers are also free. I don't know the details, but it is a sweet arrangement from my end.

David Simpson, PE
MuleShoe Engineering

In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual. Galileo Galilei, Italian Physicist

 

[berkshire]

Greg, So the card you have is issued by the Australian post office. It looks pretty much the same as the one issued by the British post office.
B.E.

You are judged not by what you know, but by what you can do.

 

[brandonbw]

We have been paid exactly once by ACH. Our Wells account didn't charge a fee and it felt amazing to know we were getting paid on the spot. Otherwise I generally use the phone app to deposit checks.

This thread is reminding me we got 1099'd for a project we only proposed on. I almost feel forced to just lump it into our taxes and pay it to not cause havoc with the system.

I have a USAA atm card and it gives $25/month on ATM fees which includes most foreign machines. It really depends on how the machines charge for using them. Have used it so far in 17 countries, mostly third world, with no issues. I wonder what my mined Litecoins are worth now? Maybe it can buy me a Big Mac?

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