/ Money

Cheque ban being reconsidered – what’s the alternative?

Woman writing cheque

The planned abolition of cheques has caused huge controversy – and 92% of you voted to keep them in our poll. Now cheques might get a reprieve, as the Treasury Select Committee reopens it’s inquiry into their future…

When the UK Payments Council announced back in 2009 that it was intending to phase out cheques by 2018, I think it’s safe to say it wasn’t expecting too much in the way of opposition to the plan.

After all, we were told, the cheque is in ‘terminal decline’ – with just 4m written in 2009, compared with the 11m that were used in 1990. Meanwhile, internet banking seemingly gets more sophisticated by the day, and there are vast swathes of people pottering about the country who have never written, nor received, a cheque.

Not everyone’s an ex-chequer

Yet ever since the Payments Council first revealed its plan, there has been a grumbling swell of protest from consumers, businesses and charities about what this might mean in practice.

Age UK has argued that pensioners may be particularly hard hit by the demise of the cheque, while companies have pointed out that the cost of processing debit and credit card payments will eat into their profits.

Which? Conversation readers came out firmly in favour of keeping the cheque when we asked for your views in November. Of the 1,311 people who took part in our poll, 50% had written a cheque in the previous month, 76% had used one within the past year and one in five of you had sent a cheque to a friend or relative as a gift.

Treasury to think twice

Now, it seems some MPs are also concerned about the UK Payment’s Council’s proposed abolition of cheques. Andrew Tyrie MP, chairman of the Treasury Select Committee, has said:

‘The Payments Council had seemingly forgotten about the millions of people who remain less at ease with the latest technology. Since our last inquiry we have been inundated by letters from the public telling us that they rely on cheques.’

Consequently, the Committee is now seeking evidence on how many people are likely to use cheques over the next few years, and what the impact of sticking to the Payments Council’s original decision might be.

What’s the alternative?

Cheques may be in decline but clearly, millions of us still use them every year, whether it’s to pay for tradesmen, for a school trip or as gifts to loved ones. So what else would we use if they disappeared?

This need for a decent alternative is our main concern, as our Chief Executive Peter Vicary-Smith says:

‘The Treasury Select Committee’s focus should be on ensuring that alternative payment methods, that all consumers are comfortable with, are in place before cheques are consigned to the scrapheap.’

So do you think the Committee is right to reconsider the demise of cheques – and if not, what alternative method of payment would you like to see in place before they disappear?

Martin Bailey says:
15 April 2011

The decision to abolish cheques was taken before the collapse of our banking system, and was based almost entirely on the idea that electronic, automated systems of transferring money are cheaper (and therefore more profitable) for the banks themselves. No proper weight was given to the convenience and indeed reassurance of the actual customers. Small traders complain that credit card companies rip them off, and that the actual mechanics of accepting cards can present problems. Cheques are simple for sending as presents, for sending as mail order payments. They are far more efficient than credit cards at giving you a proper record of expenditure.

We all know how insecure on-line financial transactions can be.

They should for once listen to their customers and keep the cheque.

Stephen R says:
15 June 2011

Cheques can also be returned unpaid, so retailers are reluctant to accept them, they can be negotiated to a third party and thus are not in any way a safe method of transmitting money and take days to clear, so the payee does not have access to the funds for that time. Taking payment by credit card means that the reatiler has cleared funds (albeit not the same day, but they know the payment won’t bounce) they give the consumer huge protection through section 75 of the Consumer Credit Act and are as safe, if not safer than cheques. As ever, people hate change and always baulk when faced with it. If we had to pay for the true cost of transmitting cheques, we would soon embrace other payment methods.

Cheques have only been accepted with a cheque guarantee card, at most outlets, for years now.
Much harder for a fraudster to use cheques and obtain a guarantee card to use with it, than it is to skim a credit/debit card and make purchases with fake card.

Taking payment by credit/debit card gives the retailer cleared funds – as does a cheque with a guarantee card number.
Banks cannot be trusted to run accounts in a suitable manner when it means more profit for them in charges. Only last week, my son’s bank reused money taken from his balance and set aside for an authorised card payment, to cover in part a direct debit.
The reason for the bank doing this (without permission) was that a non paid direct debit raised a £35 charge (unenforceable but that’s another discussion) where as an “unauthourised card payment” and “unauthourised overdraft” charges resulted in £60 worth of charges being applied.
This process is also illegal under the fraud act!

The retailer has the funds either by card or by cheque.

section 75 of the Consumer Credit Act only comes into play for sales of more than £100. Have you tried claiming money back from using a credit card in this way?
I have and its not an easy thing to do. There are a whole host of time delays, conditions, to be met, it was even suggested to me by the issuing bank, that it was upto the cardholder to prove that the advertising they had bought with their card, had not been advertised!

It’s not that people hate change I think, it is more to do with no sensible system being in place to replace it.
I’d wager good money that the banks are looking to get rid of cheques for anything that will allow them to make more money.
Many people use cheques to donate to charity or pay a bill, they also have the three day safeguard to cancel the cheque if they so wish, an option not available with cards.
I’d rather be able to cancel a cheque after a couple of days – with a simple phone call or branch visit- than spend days/weeks/months chasing up a card refund of money the company had already taken from my account.

I engaged fully in the conversation on this topic last Autumn, and I said everything I have to say on the subject in great detail there.

Briefly, though, I’ll repeat my main points again here:

1.) Cheques are cheaper than any type of card when it comes to the processing charges applied by the banks. For this reason millions of smaller businesses, one-man traders and charities will never be able to afford to accept cards (especially since banks penalise those who accept cards and then don’t conduct “enough” transactions per month). Unless the law forces banks to stop charging these profit-making fees, most especially the penalty charges, it will always be immoral to abolish the cheque. (Not that morals count for anything at all with the banks.)

2.) A very significant (minority) proportion of the population cannot get the banks to let them have accounts with debit cards, and since the banking crisis there is a welcome reduction in the number of people being given credit cards who cannot afford to have them. For these people the cheque is often the only alternative to carrying cash on their person. In the same way that pre-payment energy meters penalise the poorest by charging them more, removing the cheque from circulation will penalise the poorest again.

3.) As Age Concern and many others point out, a significant number of people, predominantly older people but also many with some degree of disability, find it confusing, difficult or simply unnerving to use cards. Why should the banks be allowed to discriminate agains these people?

4.) The PIN system implemented in the UK is vastly flawed. This was known by the banks before it was implemented. They persist in trying to tell us that PIN is more secure than signature. This is a lie. In Mainland Europe, and many other parts of the world the PIN system in use was vastly more expensive **for the banks** to implement and is similarly more expensive to run. That system IS more secure than signatures. Our system is the cheap option, to ensure that the banks make more profit. It is again immoral for the banks to be allowed to force more people to use cards, after they, the banks, have made the card system insecure.

5.) IN recent months we have seen the VISA and Mastercard systems under attack by what might be called “cyber terrorists”. Despite Visa’s hollow assurances that their system would not be vulnerable, just hours after they said this the system did crash. Visa is the system preferred by most banks over Mastercard, both for Credit and Debit cards. Neither system is immune from more similar attacks. The predominant system has failed once. If we force everyone to use cards the system will be under greater load all the time, and will be more vulnerable to attacks a) because the attackers know the chaos it will cause and b) because the system will need less of a “push” to make it crash. What do the banks expect us to to then? For anyone who was in a supermarket checkout queue when Visa crashed and saw the chaos, terror, confusion and plain anger, followed by the war-like scene of abandoned shopping trollies full of food, it doesn’t take that much to see that relying wholly on cards is inviting trouble (and that’s before we consider what happens in a humber power cut!).

The Treasury Select Committee’s announcement is most welcome and deserves cross party and overwhelming public support.

The bank show no remorse what ever for the way they crashed the economy and it is time they were reigned in. This could just be the first, very small, step towards making them take some responsibility for once.

I J T says:
16 April 2011

I don’t understand why the depositor’s bank can’t deal with cheques electronically, thus avoiding the clearance system.

Stephen R says:
15 June 2011

Er – because they need to verify the signature on the cheque!!! Also, cheques can be returned unpaid and the physical piece of paper is returned.

ISC says:
17 April 2011

Personally I don’t have a problem with cheques being phased out. Splitting the costs between everyone was fine when everyone used cheques. However fewer and fewer people use cheques these days, and I’ve not written a cheque for 18 months; I don’t particularly see why I should subsidise the costs for other users. Surely the answer is that those who want to carry on using cheques should be allowed to do so, as long as they cover the costs. That would keep the option open, but those who found them getting more expensive could then make informed purchasing decisions (as they do with most other transactions in life) about whether they wanted to stick with this method, or find an alternative.

I’m confused: ISC doesn’t see why he or she shoudl subsidise the cheque system when he or she no longer uses cheques. Fair comment though personally one I find selfish and short sighted, however what puzzles me is this: the accepted wisdom from all types of commentator from posters on here to representatives of the high street bansk and teh government is that cheques cost almost nothing an dthat card payments cost a great deal more to process. I know (from professional, first hand, experience) that processing debit cards costs the retailers huge sums of money per year. The retailers add that cost to the markup on goods and every customer has to pay this inflated price. Why should my mother, who refuses to pay by any method at all except cash, as she has for the last 70 years, have to subsidise ISC and all other card users (including me)? Why should I subsidise ISC when I choose to pay for a small purchase by cash rather than card, to speed up the queue (See also post below from “Cheque+online user”). THe answer to these last two questions is simple: because we all know and accept that in order to keep a flexible system which offers a proper choice to all users all end up paying for services that we don’t personally use. I think ISC needs to keep this in mind and be a bit more of a team player – and if he or she happens to be a ConDem supporter, don’t forget that it being a team player is part of Cameron’s Big Society too !!

All that said I am still confused as to how ISC reckons that Cheques are costing anything worth quibbling over anyway when cards cost so many times more to use.

Cheque+online user says:
17 April 2011

Why are the banks looking for an alternative to cheques? If it ain’t broke, don’t fix it! On Money Box on BBC Radio 4 yesterday I heard (thankfully) that the committee looking into this accepts that some form of paper payment method is needed for many people – birthday gifts for children, charity donations, paying the plumber or milkman. The alternative had a complicated name but sounded exactly like a cheque. What a pointless waste of time. The only sensible improvement would be for the bank receiving the cheque to process it electronically to save time (and cost).

Use of cheques is not (and never has been) an issue for the elderly alone. I use online methods, telephone banking, branches and cheques for different purposes. Why should I not be able to pass someone a piece of paper instructing my bank to pay them when this is the most convenient method? It’s my money, and the banks make enough investing it when I am in credit (and charging me for any overdraft).

And for those who haven’t used one for a while, how much of this is because many high street stores now refuse to accept them? The stores are forcing our hands to speed up their queues. Asking how many people would prefer to use cheques if they could might give a more realistic view of the amount of need for cheques.

Knightie says:
18 April 2011

As someone who runs a small business, we rely heavily on cheques AND ON THE GUARANTEE that will cease at the end of June. We cannot justify the cost of a card processing machine. This may put us out of business.

evie says:
18 April 2011

This must be reviewed properly before any decision is taken. Many tradesmen (plumbers, window cleaners, gardeners etc) are paid almost entirely by cheque, and for such as these card payment is simply uneconomic, even if customers were happy to oblige. Any how many of us hold enough cash in the house to pay a bill of £50 -£100? I have heard mention of some type of voucher – but surely that is exactly what a cheque is?

Cee says:
20 April 2011

I write a cheque weekly for private consultations.
My disabled friend pays me for her shopping by cheque. Otherwise she would have to 1 pay extra for delevery or 2 keep money in her home overnigh as due to work pressure I connot always keep to our arrangements.
My hairdesser is a small business who cannot afford to have a debit machine.
My postal service is dishonest so birthday/ christmas gifts are all by cheque. Gift cards frequently went missing so choice was send by recorded delevery more expense.

Keep the cheques.

J Tout says:
20 April 2011

Many small clubs and associations run their bank account with a 2 signature requirement. How will this be catered for with electronic payment?

I agree with the customer who says if it aint fixed don’t change it. As an OAP I find my cheque book really useful and use it at least once a week to pay tradespeople, order goods etc.
It costs more to pay by card, and benefits the banks not the customer. Banks should serve the customer and follow their wishes, not impose their choices on customers.

Marcia Marriott says:
20 April 2011

I manage my mother’s money jointly with my sister as my mother ticked the joint power of attormey box, rather than ‘jointly and severally’. This means we are unable to have a debit card or use internet banking and our only means of paying for things for my mother (like all the care she needs) is via a cheque signed by both of us. I have no idea what we would do if cheques were abolished.

I use cheques to pay small businesses, charity subscriptions, presents for my many great nieces and nephews and this afternoon needed to write out a cheque for a service provided by my G.P. How are clubs and charities going to cope with the demise of the cheque? Previously having been a treasurer of an association it would have been impossible to run the accounts without a cheque book facility. The idea is crazy.

Why not just leave things alone? I wrote a cheque yesterday, the first for nearly a year, but it was, without doubt, the BEST method for the purchase I was making.

Cheques have pretty-much phased themselves out, but why kill them altogether? I haven’t seen any compelling arguments that they should go. At the very least, allow individual banks to decide for themselves whether they’ll ‘use’ cheques. The savvy banks (and building societies) will keep what best suits their customers.

I have just been accepted to go on a driver awareness course at £80 run by TTC2000 for speeding (35mph on a 30mph road). The only way to not incurr a charge is to pay by cheque, debit and credit cards are charged at £1.00. Why should I have to pay any additional amount?
Until this situation where the only method to pay for free is a cheque then they should remain.

As a minor bean-counter on my amateur club’s finance committee I can say that cash payments are a pain to keep track of, inconvenient for distant members and have an associated risk of theft. So far we have not been able to see how a credit or debit card system could work for us without permanent staff being available, quite apart from the cost incurred due to low throughput and the difficulty of relating payments to the event or the service provided. Cheques by contrast provide a paper trail that is easily checked by club and member. Each year there are problems needing this form of resolution.

Sue Thomas says:
25 April 2011

I think the banks are nothing short of bullies and want to elliminate cheques for their convenience.
I see no real reason for cheques to be abolished.

Steve says:
25 April 2011

I run a small business and have an arrangement with my bank that I can bank 20 cheques per month and incur no charges. If I have to change to cards I will be charged for each transaction.
So, one cheque of £60 costs me nothing to bank, a credit card payment of £60 will cost me £1.50.
20 cheques of £60 costs me nothing, 20 credit card payments of £60 will cost me £50!
Of course the banks want to get rid of cheques.

It goes back to a point that I made last year: until banks are legally forced to stop charging retailers to accept cards, or for the hire or purchase of the terminals needed and possibly even legally forced to PAY retailers for the telephone charges incurred by using the card terminal (not to mention the electricity), then there is no morally acceptable alternative to keeping cheques.

Of course morals and banks is an oxymoron on monumental proportions ……………………..

(Or maybe bankers are just morons???)

Step F says:
3 May 2011

I agree with so much of what has been said above against the discontinuation of cheques.
We use cheques each year to give presents to our children, young relatives and some charities and to pay some bills.
They are convenient and I am not sure what the alternatives would be. Certainly I don’t wish to go to the trouble of determining each year the account details of everyone for a direct bank transfer.
As someone said above “if it ain’t broke – don’t fix it”.

richard says:
22 May 2011

The first bank to announce that it guarantees to keep cheques and not phase them out will do 2 things…firstly it will get a lot of business from people transferring their accounts to that bank, secondly it will put a marker down for the other banks that they will need to stay in the system to keep market share. And if the other banks don’t follow all those wanting to use cheques will all maintain an account with the “cheque bank”

Angela Bellwood says:
23 May 2011

I am Secretary to a Retired Employees Association and organise various visits and events. These are paid for by cheque. I cannot think of any method of payment which would not involve giving out details of the Association’s bank account details. This is not a good idea from the security point of view.

I also belong to various small clubs whose annual membership is paid by cheque. These are gradually changing to Standing Orders but these can cause problems when the payment goes up.

I also pay for quite a few visits by cheque and some small charities do not take donations by credit card.

So if there is an alternative, and there must be because other countries have done away with cheques, it had better be a good one.