Long before banks started putting branches inside supermarkets, grocery stores acted as informal financial establishments, cashing payroll checks and personal checks to provide ready cash for their customers. That's starting to change.

Whole Foods Market Inc. is considering banning the use of personal checks at its stores and this month stopped accepting checks at two stores in Los Angeles County and one in Arizona as a test. Fresh & Easy Neighborhood Market, the California division of British retailing giant Tesco, won't take personal checks at any of the 70 stores it operates in California.

"Supermarkets used to be a repository of checking, cashing payroll and personal checks, but in an age of direct deposit and debit cards, that's not something that is relevant to their customers anymore," said Mac Brand, a Chicago food industry consultant. The heads of these chains see check processing as a time-consuming and expensive service at a time when the industry wants to drive down business costs, he said. But such a move carries risk.

"Every time you take something away, you run the risk of severing your relationship with a customer," Brand said.

Such policies would irritate shopper Kerry Showalter of Newbury Park.

"Grocery stores are a dime a dozen. If the Albertsons where I shop stopped accepting checks, I would just go to Vons," he said.

The new policy would also be hard on many seniors, who have been slow to adopt the use of debit cards, said Gail Hillebrand, a lawyer and financial services expert for the nonprofit Consumers Union.

But a widespread move by the grocery industry to ban personal checks would not upset shoppers such as Sharon Fern of Placentia.

"I haven't written or carried a checkbook in many years," she said. "Wouldn't bother me a bit." Debit cards are far more convenient, she said.

Vons, Albertsons and Ralphs -- the stores most likely to have a bank branch within their locations -- continue to accept checks.

They also cash payroll checks, although the chains typically charge a service  fee of about $1 to about 1% of the check amount, depending on the municipal regulations of the city where the store is located.

Representatives of the chains said there were no plans to end the services, and one supermarket industry executive questioned why, in an environment of increasing competition for shoppers, a company would add a barrier to potential sales.

Fresh & Easy, which started opening stores two years ago, has only self-service checkout. It doesn't take checks or manufacturers' coupons.

"We keep our systems as simple as possible, keeping prices low for customers. We do accept cash, credit and debit cards and also have an ATM in-store," said Brendan Wonnacott, a spokesman for the chain.

Bill Jordan, Whole Foods' regional vice president, said prohibiting personal checks should improve service.

"Since most of our customers pay with cash, debit cards or credit cards, we want them to be able to check out as quickly as possible. This pilot program was put in place to see if personal check users would make the switch to debit cards or another form of payment."

So far, only the store in El Segundo, one in Los Angeles on 3rd Street near Fairfax Avenue and a store in Tempe, Ariz., have stopped accepting checks. The chain had already stopped cashing payroll checks.

Jordan said Whole Foods would evaluate consumer reaction before rolling out the change to other stores.

A recent rise in bad checks also factors into the new policy, he said. "That unfortunately makes it more difficult for the remaining customers who prefer to pay this way. To help reduce fraud, we have a several-step personal check approval process that can often inconvenience other customers in line," Jordan said.

The chain prefers cash, debit cards and credit cards because they can be processed quickly and "come with added protections" that safeguard the interests of the consumer and the retailer, Jordan said.

This new trend brings up the question: Could paper cash be the next obsolete monetary manifestation?

--Jerry Hirsh

Photo credit: Irfan Khan