Fed Raises Check Fees as Businesses Keep Writing Them
Paper checks remain a way of life for some of the businesses where banks have the most room to convert supplier payments.
Small- to medium-sized businesses (SMBs) operating for at least 20 years made 54% of their vendor and supplier payments by check, the PYMNTS Intelligence report “Ready for Change: Why Nearly Half of SMBs Want to Ditch Cash and Checks” found in February. Checks accounted for 41% of payments in construction and utilities and 40% in professional services.
The Federal Reserve’s Thursday (Nov. 12) announcement on fees tied to check processing may spur banks to hasten a shift away from paper-based payments.
The PYMNTS Intelligence report “Ready and Willing: B2B Payments Are Headed for Real-Time Rails. Here’s How They’re Getting There” examined in May how much room there is to shift payments within existing bank relationships. It found that 59% of businesses surveyed used checks for B2B payments in the preceding year and 57% used regular ACH. Checks represented 13% of payments on average in that sample.
The studies measured different groups, and together they show why a bank’s opportunity depends on its customers. A client already paying some vendors by ACH can extend that process to eligible check payments. A contractor still using checks for much of its payables has more suppliers to enroll and more payment records to reconcile.
Where the Fee Increase Changes the Bill
The Fed projects a 5.4% average increase in check-service prices starting Jan. 1. The increases fall in part on the services banks use to receive checks and handle problems. The Fed’s pricing notice raises the FedReceipt Daily per-item charge from $0.0005 to $0.0015, adding $100 per 100,000 items billed at that rate. The earliest premium delivery fee rises by a full cent, from 4.8 cents to 5.8 cents per item, and standard rejected-item repair goes from 30 cents to 36 cents. The monthly Check 21 participation charge stays at $100 to $1,100 depending on tier for institutions that receive qualifying volume. As those volumes fall, the same fixed charge is spread across fewer checks. Commercial checks sent to the Reserve Banks for collection fell 8.7% through August from a year earlier.
The cost of collecting a check also depends on when it reaches the Fed. A standard batch of 1,000 images drawn on Tier 1 institutions costs the depositing bank $11.50 at the 9 p.m. Eastern deadline or $67.50 at the 7:30 a.m. deadline under rates that carry over from 2026. The same number of regular ACH originations carries $3.50 in base item fees before monthly charges or discounts. Regular ACH makes the strongest price case for scheduled invoices when the bank can use its existing ACH service, and the supplier can accept and identify the payment.
Which Payments Are Worth Moving Faster
At the FedACH schedule’s listed rates, 1,000 Same Day ACH payments incur $56.50 in sending-side charges before monthly fees and discounts, including the 5.2 cents per payment that goes to the receiving bank. The FedNow® Service schedule lists $45 for 1,000 transfers to another institution before credits. FedNow will end its automatic discount on the first 2,500 eligible monthly transfers and replace it with conditional statement credits. A bank’s actual bill therefore depends on volume and eligibility as well as the posted rate.
ACH already has a base in supplier payments. Nacha reported nearly 2.3 billion B2B ACH payments in the third quarter, up 9.7% year over year. Same Day ACH volume across all uses rose 36.7%. Nacha will raise the Same Day ACH limit from $1 million to $10 million in September 2027, which will make larger invoices eligible.
Instant payments have a separate use when a supplier needs funds outside banking-day settlement windows. There may be further adoption of these payments beginning in May, when the Fed extends its usual weekend check-processing shutdown from 16 to 39 hours.
The new fees land on banks first. Whether suppliers see any change depends on what their banks and customers do next. A bank can use the savings on routine payments to make ACH more attractive to business clients, while a buyer can reduce check handling by enrolling repeat suppliers and sending invoice details with the transfer. The strongest case for moving a payment is where these steps are already within reach. That is where a higher cost of processing checks gives the bank and its client a reason to change how the next invoice is paid.
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