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No cheques or bank balances?
5:18pm Tuesday 5th July 2011 in News
Nobody has a clue what might replace them, but cheques have almost certainly moved a step closer to extinction amid angry accusations that High Street banks want to kill them off to boost profits – and fatten their bonuses.
From June 30, Cheque Guarantee Cards were no longer valid to guarantee a cheque. The system previously ensured any cheque up to £250 was guaranteed by the bank, if an issuer couldn't honour it.
Dr Ros Altmann, director-general of Saga, is furious: “Obviously the banks are withholding their guarantee as a prelude to weaning people off cheques. It might work for young people, but people in advanced years can’t easily adjust- and can’t always afford to get online,” she says.
“This is really a young person’s agenda which is being forced on older people much too soon.”
It is a significant step. A Which? survey found that paying tradesmen or suppliers is the most commonly cited usage for cheques (two out of five). Now, if a cheque bounces, the person who took it must pursue the issuer themselves.
“This action by the banks,” says Prue Watson, spokesman for the Federation of Small Businesses, “could seriously damage the cashflow of small businesses at a time when money is extremely tight.”
But if small businesses demand cash, householders will surely be at greater risk too – as they take the money home from the bank.
Charities fear the loss of cheques, but that might not be enough to save them.
In 1991, we wrote more than 1.1 billion cheques backed by the banks’ guarantee out of a total 4 billion cheques, the highest number in history. The first cheque (for £400) was written more than three centuries earlier, in 1659.
In 2010, only 82 million cheques were written with the backing of the guarantee in a total of just 1.1 billion, barely a quarter of the volume of 20 years ago.
Obviously, there are other ways of paying these days. But even 1.1 billion cheques a year represents three million cheques each day of the year – including Sundays and Christmas Day!
Dr Altmann says: “Many over-50s find the convenience of writing cheques very important in the managing of finances, and keeping track of dwindling pensions and savings income.
“Cheques are a lifeline, literally, for many older people who cannot use internet banking and cannot arrange online services like direct debits and so on.
“Our recent survey of 13,000 over-50s found two thirds of them (67per cent) fundamentally disagreed with the plan to withdraw cheques. One in ten feared they could not pay some bills if cheques were withdrawn.”
While small companies mull over a response, some big battalions have instantly turned their backs on cheques.
South West Trains announced a complete ban, as The Association of Train Operating Companies (ATOC) warned that, without guarantees, cheques could be ‘too dangerous’ to use.
Many big retailers stopped taking cheques in 2005, quickly followed by petrol stations.
They usually claim to be following the wishes of customers – but customers are rarely consulted. The suspicion remains that big business wants computerised methods of payment which are easier to administer.
The Payments Council has long indicated that cheques are on the way out. But it plays down the significance of this latest move.
Its spokesman says: “Many guarantee cards had a limit of £50-£100, which would have been exceeded by many rail ticket purchases.
“Where purchases by cheque did rely on the guarantee, a debit card is one option from now on. Cash is another.”
The Payments Council claims the average value of a personal cheque is £392 – far beyond the limit of most Cheque Guarantee cards. It says 88 per cent of cards had a limit of £100 or less on their guarantee anyway.
Sandra Quinn, director of communications at the Payments Council says: “Although consumers can no longer guarantee a cheque, they can still use a cheque.
“We won’t take a decision about the future of cheques until 2016, and only then if we find acceptable alternatives.”
However, the plan to dump cheques altogether by 2018 has become a delicate political issue following a warning from Andrew Tyrie, Financial Secretary to the Treasury, that the proposal is causing “uncertainty and alarm across the country”.
Mr Tyrie is chairman of the Treasury Select Committee which decided in April to reopen its inquiry into the proposed abolition of cheques – noting no sensible or realistic alternative has yet been found.