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Cheque guarantee cards disappear early
Alan O'Sullivan, This is Money
7 September 2009, 10:56am Reader comments (4) | Chat
The removal of cheque guarantees on debit cards will begin much earlier than expected as some Abbey customers will lose the capability from next month.
Blank cheque: if banks do not guarantee cheques, the risk if passed to the trader.
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The Payments Council, which polices payment services in the UK, announced recently it will withdraw the cheque guarantee scheme by mid-2011, which could have a serious impact on sole traders that rely on the guarantees. For example, if an emergency plumber accepts a cheque for their services, they can check if it is guaranteed against the payee's debit card and will receive up to £250 from the payee's bank even if they do not have the funds to pay.
However, the Council believes that banks have already started to phase out debit cards carrying cheque guarantees.
Abbey confirmed to This is Money it will began to phase out cheque guarantees for those customers whose cards have expired from next month.
It is unclear which banks will follow suit, although the Payments Council said it plans to issue an exact deadline for the complete removal of cheque guarantee cards and possibly a list of when each of the main UK banks intend to begin phasing them out later this month.
A spokesman for the Payments Council said 'alternatives' would be in place for sole traders by the time the scheme was finally phased out in 2011.
However, none are currently in place. If a sole trader is currently presented with a debit card without a guarantee, they will be forced to take on the risk themselves, or demand payment in cash.
The news follows an announcement by HSBC last month, which is reducing the guarantee limit for approximately 300,000 of its customers from £250 to the standard £100 guarantee. Approximately 88% of all cheques in the UK have a £50 or £100 guarantee limit.
The withdrawal of the national cheque guarantee scheme, which has been in place since 1969, mirrors the decline in cheque use in recent years: last year, just 7% of all cheques used were backed by a guarantee card, and just 3% of High Street and online spending involved cheques.
Sandra Quinn, from the Payments Council, said: 'We became aware that there were less cheque guaranteed debit cards in circulation and that this caused a problem for those accepting the cards during payments.
'For instance, if some were guaranteed and others weren't, people might get confused and think they were all able to guarantee cheques. The reason why we brought in this concerted withdrawal was to make it much simpler for everyone.'
What to do when accepting a guaranteed cheque...
• Always look for the Shakespere hologram – all cheque guarantee debit cards carry a Shakespere-related hologram on them
• Make sure the cheque does not carry a warning say it should not be used in conjunction with a cheque guarantee card
• Check the person presenting the card matches the name on the card
• Make sure the payee records the debit card number on the back of the cheque, not you.
• If the words 'code number' appear on the card, ensure this number matches the 'sort code' shown on the cheque
Alan O'Sullivan, This is Money
7 September 2009, 10:56am Reader comments (4) | Chat
The removal of cheque guarantees on debit cards will begin much earlier than expected as some Abbey customers will lose the capability from next month.
Blank cheque: if banks do not guarantee cheques, the risk if passed to the trader. WANT TO KNOW MORE?- How long to clear a cheque?
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SAVINGS TABLES Find the best savings account to suit you from our entirely independent comparison tables:>> Top savings rates
SAVINGS SAFETY We explain how to make sure all your savings are covered by compensation.>> Safer savings
The Payments Council, which polices payment services in the UK, announced recently it will withdraw the cheque guarantee scheme by mid-2011, which could have a serious impact on sole traders that rely on the guarantees. For example, if an emergency plumber accepts a cheque for their services, they can check if it is guaranteed against the payee's debit card and will receive up to £250 from the payee's bank even if they do not have the funds to pay.
However, the Council believes that banks have already started to phase out debit cards carrying cheque guarantees.
Abbey confirmed to This is Money it will began to phase out cheque guarantees for those customers whose cards have expired from next month.
It is unclear which banks will follow suit, although the Payments Council said it plans to issue an exact deadline for the complete removal of cheque guarantee cards and possibly a list of when each of the main UK banks intend to begin phasing them out later this month.
A spokesman for the Payments Council said 'alternatives' would be in place for sole traders by the time the scheme was finally phased out in 2011.
However, none are currently in place. If a sole trader is currently presented with a debit card without a guarantee, they will be forced to take on the risk themselves, or demand payment in cash.
The news follows an announcement by HSBC last month, which is reducing the guarantee limit for approximately 300,000 of its customers from £250 to the standard £100 guarantee. Approximately 88% of all cheques in the UK have a £50 or £100 guarantee limit.
The withdrawal of the national cheque guarantee scheme, which has been in place since 1969, mirrors the decline in cheque use in recent years: last year, just 7% of all cheques used were backed by a guarantee card, and just 3% of High Street and online spending involved cheques.
Sandra Quinn, from the Payments Council, said: 'We became aware that there were less cheque guaranteed debit cards in circulation and that this caused a problem for those accepting the cards during payments.
'For instance, if some were guaranteed and others weren't, people might get confused and think they were all able to guarantee cheques. The reason why we brought in this concerted withdrawal was to make it much simpler for everyone.'
What to do when accepting a guaranteed cheque...
• Always look for the Shakespere hologram – all cheque guarantee debit cards carry a Shakespere-related hologram on them
• Make sure the cheque does not carry a warning say it should not be used in conjunction with a cheque guarantee card
• Check the person presenting the card matches the name on the card
• Make sure the payee records the debit card number on the back of the cheque, not you.
• If the words 'code number' appear on the card, ensure this number matches the 'sort code' shown on the cheque
