In a further step towards a cheque free economy, banks are to phase out the ability to guarantee personal cheques with effect from 30th June 2011.
To help understand the impact and what steps need to be taken as a result, we’ve put together a few Questions & Answers to highlight the issues:
What is a guaranteed cheque?
A guaranteed cheque is one that has been given to the recipient with a debit or credit card which shows a cheque guarantee hologram for £50, £100 or £250. The recipient must have copied the card number onto the back of the cheque as proof that they have seen the card.
Providing that the cheque amount is not higher than the figure detailed on the hologram, and the rules of the scheme have been followed, the bank is bound to pay the cheque on presentation even if there are not sufficient funds available on the account.
Why is the guarantee scheme being scrapped?
With the substantial growth in the use of debit and credit cards to pay for goods and services, the use generally of cheques has fallen dramatically, and the use of guaranteed cheques has similarly fallen away, according to the Payments Council which sets the strategy for payments in the UK. Consequently they set a closing date of 30th June 2011 to remove this facility.
For more information: www.ukpayments.org.uk
I use guaranteed cheques a lot – how will this affect me?
After 30th June 2011 you will not be able to guarantee any cheques you issue, even if your credit or debit card has a cheque guarantee hologram/logo. However, there is nothing to stop you from still writing cheques, which may be accepted as payment by businesses etc without the guarantee.
Can I guarantee a cheque after 30th June if my card has a cheque guarantee hologram?
No. The cheque guarantee scheme will close on 30th June 2011 even if you still hold a credit or debit card which records a cheque guarantee hologram.
Can I still use cheques?
Yes, you can still write out cheques to pay for your goods and services, but the bank will only pay your cheques if you have sufficient money in your bank account when the cheques are presented for payment. Realistically this may mean that businesses will not be prepared to accept your cheque in payment, as they have no guarantee that they will be paid.
What about cheques I have already guaranteed for payment?
Any cheques which have been written out up to 30th June 2011, and are guaranteed per the current rules, will be paid in line with the current scheme arrangements.
What other types of payment can I use after the deadline?
Commonly used alternatives are debit or credit cards, or electronic transfers, standing orders or direct debits. Speak to your bank for more information.
Will I get a new debit card without the cheque guarantee hologram on it?
Debit and credit cards will not be automatically be reissued solely because of this change, so you will receive a new card, without the hologram, when your existing card needs replacing or at its expiry date.
Barclays have advised that any new or replacement cards issued by them from the 15th May 2011 will not feature the cheque guarantee hologram and can not be used to guarantee cheques in the intervening period.
I prefer to pay by cheque because, through disability, I am not so mobile. What alternatives do I have?
You can still pay by cheque but the guarantee facility will not apply. Alternatives could be direct debits, debit cards on their own, online or telephone banking, but you should speak to your bank to see how they can assist you.
Will businesses know that cheque guarantees have been scrapped?
Banks and the Payments Council will be contacting all businesses about this change so that they can make alternative arrangements to accept other forms of payment – such as debit or credit card, subject to their costs.
Businesses will still be able to accept cheques after 30th June 2011, but may be reluctant as the guarantee will not apply thereafter.
Will my cash machine withdrawal limit change as a result?
No – this limit will remain unchanged, and there is no effect on any other aspect of your current cards.
As a businessman, I accept guaranteed cheques at the moment – how does this affect me?
After 30th June 2011 you will not be able to assume that a cheque will be paid, as the guarantee scheme will be scrapped as at that date – even if your customer presents a card which still displays a cheque guarantee hologram. Whilst you may still accept payment by cheque after 30th June 2011, it may be returned to you unpaid if the customer does not have sufficient funds in their account when the cheque is presented for payment.
