/ Home & Energy, Money

Why am I refunded by cheque?

Cheque

You’ll usually find a coin or two when you clean out your sofa, but I was recently surprised to find an uncashed cheque. Unfortunately it was too old to cash in, so I had to let it go unclaimed – all seven pence of it.

That’s right: someone once sent me a cheque for seven pence. Not a stingy relative, I hasten to add, but a bank. This bank had closed my account and offered to refund me the money that was left in it. I offered to send them bank details, but for some reason they posted a cheque instead.

This is annoying, of course – who has the time or inclination to cash a cheque for seven pence? Some people who regularly visit their bank perhaps, but I simply let the cheque languish in a pile of papers and eventually recycled it.

Cheque refunds from energy suppliers

I’ve had similar refunds from energy companies. If I’ve switched my gas and electricity with a surplus on my account, I’ve received cheques for the balance. One company actually sent two cheques – one for the gas and one for the electricity.

When I discussed this issue with a colleague, he told me he’d once been given a very low-value cheque from an energy company, but the cheque itself was so huge it wouldn’t fit into the ‘auto-payment’ machines in the bank. Ten minutes of queuing later, he finally got his few pennies.

Refund it into my bank account

Now, I appreciate that money’s money and all payment systems are technically equal. A pound in cash will, after all, buy no more or less than a pound in my bank account. However, I can’t be alone in thinking that if I’ve paid someone in a certain way, I’d like the option to have my refund in the same way too.

I pay for almost everything either by card or by direct debit. Having brushed the dust off my chequebook I see the last one I wrote was about eighteen months ago. So why should companies send me refunds by cheque?

I so rarely visit a bank branch that it hardly seems worth making a special trip for a cheque for such a small amount. But I’m sure it’s far worse for people who struggle to get to their bank at all, such as people who live far away or have trouble travelling.

Have you been refunded by cheque when you would have preferred the money to put straight into your account? And would you ever cash a cheque for seven pence?

Comments
Member

I was due a £2 refund from SSE a few months ago. I asked them to just give the £2 to Dogs Trust but they said they NEEDED to send me a cheque out……it’s still on my desk as I’m looking at it now lol

We are in 2013 now. No reason for cheque’s when bank transfers are fine.

Member
Nigel Whitfield says:
16 October 2013

I’ve had similar, and with nPower when they overcharged people and were told they had to pay money back by Ofgem, they did even worse.

They sent a letter with a bar code, that had to be taken to the post office, where it would be scanned and you’d get cash. It said you had to do it within six months; I seldom go near the post office, and when I did, it was just under the deadline, but I was still told that it was too late.

On querying with nPower, they told me the expiry date wasn’t six months from the date on my letter, but from the date they first started sending them out; having a surname beginning with W, mine was one of the last sent out.

This sort of thing – refund cheques included – is a cynical ploy by companies to hold on to our money for as long as possible. In the case of energy companies, they very often have our bank details, allowing them to help themselves to the money whenever they like by direct debit.

They could, therefore, use those same details to pay the refunds in. To use a cheque instead is almost certainly going to cost them more, for each cheque that is actually paid in and processed. That they choose to use a cheque even so suggests to me that they know many people will lose it, forget to pay it in in time, or not claim the money they are owed for some other reason.

If they really cared about their customers, they would hand us back our money immediately via a BACS payment. Quite simply, they don’t care.

Member
Colin Samson says:
21 October 2013

You have SIX YEARS to get back to nPower and request repayment (from the date you were due to receive the money). Just because the bar code letter expired, it does NOT mean that they no longer owe you the money. It is YOUR MONEY, not theirs!

Get back to nPower straight away (& Ofgem if necessary) & say that you still require a refund of THE MONEY THEY OWE YOU. They could possibly be justified in making a small (must be reasonable) administration charge for this. However, as nPower misled you about the six months limit, I would insist that they refunded you in full, promptly & without any reduction.

Member

I refuse to accept cheques from anyone. The onus should be on the payer, and not the payee, to get the money into my bank account. Why should I have to make a special trip to the bank, where I never go during its opening hours? This is particularly objectionable when it’s a very small amount because the time and effort is disproportionate to the amount.

Therefore if a company wants to reimburse me for something, I give them a variety of payment methods, primarily bank transfer, but also cash by registered post (at their expense), PayPal (even though I despise PayPal), or they can deposit the cheque into my bank account themselves (by post or in a branch). If a company sends me a cheque, I tell them to cancel it and use another method.

It is even more absurd that some companies levy a surcharge if one doesn’t pay by direct debit, but those same companies will pay refunds by cheque. If they do so, they really ought to add their non direct debit surcharge to the amount of the cheque.

It is not acceptable that in this day and age companies still make payees jump through hoops in order to receive a payment, particularly a small one. Given that the banks’ plans to abolish cheques have been shelved, we ought to have legislation that prevents payment by cheque unless both the payer and payee explicitly agree to it.

Member

That’s really interesting, NFH – I have tried to ask for refunds via bank transfer before but still been sent cheques. Have you had luck with companies when you’ve asked them to cancel the cheque and refund you using another method? I might have to try this myself!

Member

Yes, several times I have refused payment by cheque and companies eventually give in. I use various tactics such as insisting that they send the cheque directly to my bank’s address or that they add a paper payment surcharge of £3 to the cheque to cover my time and expense of visiting the bank. Some companies are happy with the former, but not with the latter.

There was one occasion when I argued with a company by e-mail for six weeks. They had already agreed to reimburse the £3.92 postage costs of my returning faulty goods to them. They assured me that they would reimburse me via the same method as my original purchase, which had been bank transfer. They then insisted on reimbursing me by cheque, which I refused. The time and effort I spent on the e-mails was still a lot less time and effort than visiting my bank during working hours. Eventually they gave in and made the payment via bank transfer. Given that the amount was only £3.92, the six-week wait wasn’t a problem.

Even if I have to spend time on refusing to accept cheques, I remind myself that it’s less time than visiting the bank!

Member

If a company does send a cheque, tell them that you never received it and that they should send a bank transfer instead. Alternatively tell them that you have sent the cheque back to them but shred it instead. When a cheque appears to be lost in the post, some companies are more willing to do a bank transfer instead.

Member

NFH – Are you seriously suggesting that we tell lies just because we have been sent a cheque?

I would prefer companies not to send me cheques. If I do receive one, I put it in an envelope with a paying-in slip and put in the letterbox of my bank next time I am passing. If they persisted in sending cheques, I would ask for electronic transfers, but have not had to do this.

Member

I agree that one shouldn’t have to lie. The main point to convey is that the cheque is not in one’s possession (whether it be lost in the post or shredded). The circumstances causing this do not change the fact that the payer still needs to send the payment. Some “lies” are acceptable. For example if I’m speaking to a call centre and they want to give me information, they often ask “Do you have a pen?” and I respond “yes” even though I haven’t got a pen to hand and will instead type whatever they tell me into my laptop. Sometimes it is easier to keep things simple and omit superfluous information.

Member
Rob Lee says:
10 December 2014

I do find it somewhat hypocritical for energy companies and others to charge for payment by cheque etc….but seem to think it’s fine to return excess money they have collected using direct debit by a cheque.

Of course there is the argument they can return the payment if you keep the direct debit mandate in place…but any savvy consumer will cancel a direct debit the moment it has been abused.

The cynic in my would say it’s because cheques unlike BACS or faster payments require the recipient to visit their local bank during working hours to cash it thus reducing the amount they ultimately pay back.

Perhaps Which could campaign to have BACS/Faster payments as a mandatory method of refund for customers who have been deprived of their hard earned cash.

Alternatively remember the direct debit guarantee, in particular point 3 –

“If an error is made in the payment of your Direct Debit, by the organisation or your bank or building society, you are entitled to a full and immediate refund of the amount paid from your bank or building society”

Contact you bank and ask for all debits that took you into credit with the supplier at the close of the account to be refunded….I’ve just done this with MandS Energy who are just an SSE white label supplier.

Member

Companies use cheques for the same reason supermarkets issue vouchers, you’ll remember you had the “money” but not everyone will cash them in or use them, thus saving the company money.

It’s high time that practice was banned, if they want to give me money give it to me and don’t make me jump through hoops to get it.

Member
Jeremy Yap says:
18 October 2013

After complaining about Talk Talk’s extremely poor service to an independent adjudicator appointed by the regulator, I finally received a small compensation cheque except my name was mis-spelt. I hadn’t even seen the cheque because it was sent to me by recorded delivery when I wasn’t at home & ended up at the sorting office. But I knew my name was mis-spelt from the separate letter notifying me of the cheque. When I phoned up Talk Talk to point out the error, I asked for the payment to be made directly into my bank account but my request was refused without any explanation. At least they offered to send me a replacement cheque by ordinary post which saved me a trip to the sorting office!

Member
Roy Carrier says:
19 October 2013

My Britannia Cash ISA is due to mature at the end of this month. I was stunned to learn that if I wish to withdraw all or part of this investment and have the sum to be withdrawn transferred to my bank account a charge of £20 will be made. Is it Britannia’s way of thanking me for investing in its product? However, there will no charge if the repayment is made by cheque but of course Britannia get the benefit of the use of the sum in question from the date of maturity until the cheque is paid into my bank account. I assume that this is one of the ways Britannia will try recoup some of the losses made as a result of its calamitous investment strategies.

Member

£20 is a typical charge for a CHAPS payment, only form of same-day payment (telegraphic transfer) that existed before Faster Payments Service. Therefore my guess is that Britannia are only thinking of CHAPS and not FPS. Whether or not they can do FPS is another question.

Member
Roy Carrier says:
20 October 2013

A charge of £20 will have to be paid by me whatever method Britannia chooses to send the repayment due to me to my bank.

Member
Colin Samson says:
21 October 2013

You have SIX YEARS to get back to nPower and request repayment (from the date you were due to receive the money). Just because the bar code letter expired, it does NOT mean that they no longer owe you the money. It is YOUR MONEY, not theirs!

Get back to nPower straight away (& Ofgem if necessary) & say that you still require a refund of THE MONEY THEY OWE YOU. They could possibly be justified in making a small (must be reasonable) administration charge for this. However, as nPower misled you about the six months limit, I would insist that they refunded you in full, promptly & without any reduction.

Member
Nigel Whitfield says:
21 October 2013

Don’t worry – I did get the money from them, and ditched them for the Co-Op as well.

But it was a fine example of a company applying shocking double standards to hang on to my money for as long as they possibly could.

I wonder if Which? could make a rough calculation as to the value of refund cheques and other ‘slow’ methods people recieve each year, and the average time people take to pay them in, then work out the interest these companies are earning by not just putting the cash back in the same account they took it from via BACS.

It’s probably a small amount per customer, but over a year, and millions of customers, that’s a lot of cash they have at hand.

Member
Sophie Gilbert says:
17 November 2013

I understand that being refunded by cheque can be less convenient for some of us, but I’d be worried about moaning about being refunded by cheque after having helped Which campaign against banks ditching cheques altogether. That could add fuel to the enemy’s fire.

Member
Anonymous says:
12 January 2014

Maybe there is a cost to the business. The bank charges for my business are such that I can send a cheque for a lot less than a pound, but for a faster payment they charge me £4, and won’t let me send a Bank Giro payment from the account in which clients’ money is held. If you send a lot of payments, that’s a lot of bank charges and given that the bank pays next to nothing interest on the substantial amounts of client money held from day to day, I know who it is who is benefitting by me sending money by cheque and it staying in my account as long as possible, and it isn’t me! Part of the reason why I’m switching banks imminently.

Member

I don’t mean to start a fight here Anonymous. But I feel energy companies make so much money they could eat up the cost of sending a bank transfer.

BTW My business bank account is with Barclays and I never pay anything extra to send a bank transfer. So not sure why you would be charged?

Member
Rob Lee says:
10 December 2014

@Anonymous I’d change your bank account ASAP, virtually all business bank accounts now offer faster payments for less than a cheque.

I suspect as has been pointed out not everyone cashes cheques due to the hassle, where as if it went in by Faster Payment or BACS the pay out rate would be 100% as opposed to something like 60% (based on the the anecdote of cheques I have going back 10 years I’ve not chased in time and then not wanted the hassle to get re-issued).

Rob

Member
Simon says:
29 June 2015

I’m sure a lot of companies send cheques as standard because then they make interest by keeping peoples money in their bank for a bit longer. Although this doesn’t make sense for small amounts I this it might why their routines are set up that way. When you accumulate this for a lot of customers it will make a significant difference especially if some customers don’t psy in the cheques at all. Scandalous.

Member

I am just experiencing this with Castle Cover for a refund of my late mothers home insurance. The added complication being that they say they CANNOT send a transfer, despite all payments having been made by DD because they have no card details on record. Mum never paid by card. There is no way that a company cannot make a BACS for this ludicrous reason. The assistant, who I got really short with, kept saying we must have the card details on record, &, if you pay by card in the shop you have the refund back to a card that’s the way it works. Of course it does in retail. But this is madness. Especially for an executor who then has estate money in their own name & has to transfer it back & show in accounts for the other beneficiaries & probate.

After a while on hold the young girl said to send it back & they could see what they can do as an exception. So they don’t need the card details at all. Blowing their case right out of the water. Today’s date, December 24th. Happy ** Xmas.

Member
Ms Warren says:
7 April 2017

I bought tickets for a show using cash. The show was cancelled and I’ve been told I can only be refunded by cheque and that it will take at least a week for the cheque to be sent out. Is this legal or do I have a right to be refunded in the same way that I paid? I think that I should be repaid with cash.