In the 1960s, when millions of credit cards poured into the hands of consumers and major advances were made in electronic technology, many bankers and futurologists predicted that paper checks and cash would be obsolete by the mid-1980s.
Not only has a ``checkless-cashless society`` not become a reality, but the use of checks also has continued to grow.
Americans wrote an estimated 40 billion to 45 billion checks in 1985, up about 5 percent from 1984, said Paul M. Connolly, check product manager of the Federal Reserve System.
``Nobody really knows the exact number,`` he said. ``Our figure is based on what goes through the Fed. But there are nearly 40,000 deposit institutions in the country, and some handle checks between themselves.``
His estimate compares with check volumes of about 32 billion in 1979 and 1980, the last time a study was made by the Fed and the American Bankers Association.
The number of payments made electronically through a nationwide network of automated clearinghouses, by contrast, rose to an estimated 586 million last year, up 20 percent from 1984, according to a survey by the American Banker, a trade publication.
The 1985 clearinghouse volume was less than 1.5 percent of the number of paper checks written. Moreover, the increase in checks alone was three times greater than the number of transactions handled by automated clearinghouses.
``People like checks very much,`` Connolly said. ``They`ve been using them hundreds of years. They know that, by and large, the system works. And it gives them a feeling of control over the timing of their payments.``
Paper money was introduced in the Middle Ages, a recent study by the Federal Reserve Bank of Atlanta says. Checks were first used in the United States in the late 1600s.
Automated clearinghouses grew out of a concern among the Fed and the banking industry that traditional facilities for processing and clearing checks, which involve manual and mechanical functions, would be swamped by the enormous increase in paper check use that began in the 1960s.
The first clearinghouse opened in October, 1972, in California after several years of development. Today, 31 interconnected clearinghouses serve more than 16,000 financial institutions and 34,000 corporations nationwide.
Businesses use the clearinghouses to pay employees through direct payroll deposit to their banks or savings institutions. A growing number of consumers have not only their salaries, but also government checks, such as Social Security payments, deposited directly.
Some consumers also use automated clearinghouses, even if they may not be aware of it, when they authorize their bank to make monthly mortgage, auto loan, utility and insurance payments that could be paid by check.
``We originally thought that the growing use of electronic payments would gradually cut into check volumes,`` Connolly said. ``The rate of check growth did moderate for a while in the early 1980s. But it has increased again in the last few years, though we can`t be sure by how much.``
In the Midwest, the Federal Reserve Bank of Chicago processed 1.9 billion checks valued at $1 trillion last year, up from 1.8 billion in each of the previous three years. Continental Illinois National Bank and Trust Co. of Chicago handled another 2 billion checks in its giant processing center. First National Bank of Chicago, American National Bank & Trust Co. and Harris Trust and Savings Bank also process large numbers of checks for themselves and correspondent banks.
The volume of electronic payments at the Chicago automated clearinghouse also rose--to 92.3 million transactions valued at $456.2 billion in 1985 from 68.5 million transactions worth $314.8 billion in 1984, according to the Chicago Fed`s annual report. In 1982, the Chicago clearinghouse handled 42 million transactions worth $99.6 billion.
``We are increasing our volume, but it`s a very gradual evolution,`` said Robert Fitzgerald, Chicago clearinghouse president. ``It`s still a new concept, and there`s a lot of educational work to be done.``
But Fitzgerald, who also heads the Chicago Clearinghouse Association, which handles the movement of checks between major banks here, pointed out that the facilities used to process paper items also have been greatly improved in the last few years.
As the equipment that reads and sorts checks improves and the cost to process each item declines, there is less incentive for financial institutions to invest time and money to automate payments.
``I don`t really think we`ve noticed much of an increase in the use of checks,`` said William Kundert, vice president in the personal banking department at Continental. ``More and more people are starting to use direct debits from their accounts to pay their bills.``
Connolly, however, cited several factors that may contribute to the growing use of checks nationwide.