I’ve been very pleased by the response to last month’s article comparing our transaction costs for bank cards vs. gift cards or cash. A lot of people were surprised by how much a simple thing like payment method can affect our bottom line on small purchases.

One method of payment I didn’t address was checks. A member writes:

I would like to know what it costs the Co-op to process a personal check (assume it won't bounce). Currently, we use the Gift Card and re-charge it once a month using our credit card, usually adding $400 at a time. Under this scenario, I am curious to know which method of recharging the gift card (personal check or credit card) would cost the Co-op the least to process.

In short, the personal check would cost less, much less, and checks are a very good way overall to pay for your purchases at the Co-op. Keep reading to learn how this is so.
Personal checks do cost us a little to process, but not much. Our bank charges us 6.5 cents to 8 cents per check, depending on how far away your bank is from ours. Most checks cost us 7 cents.

That's the cost of a good check. The cost for a bad check is much more significant. We have not found it worthwhile to go after bad check writers ourselves, because the labor cost to recover the debt would exceed what we are owed. Instead we have contracted with a collection service that pays us a percentage of any check they recover for us. On average, we end up with about half the amount and our agent keeps the rest. Thankfully, bad checks are very rare compared to the overall number of checks we receive.

To compare the costs of checks vs. bank cards, I'll assume your average shopping trip is around $20 (this is the Co-op's average "cart"). We pay 13.5 cents + 1.25% on a typical credit card purchase, and 37 cents on debit cards.

The savings would be even more if you tended to make smaller purchases.