Cheque-mate! Banks back down on scrapping cheques

The Payments Council, representing the banks, has announced that it will not be scrapping cheques in 2018 after all. They now say that cheques will be will be kept "as long as customers need them".

This follows major campaigns by Liberal Democrat MPs, charities and organisations representing older people and voluntary groups. We have reported the campaigns here before, and many of our readers will hopefully have signed the petition by Lib Dem MP David Ward.

The BBC has more details here.

Could the banks change their minds about scrapping cheques?

The Payments Council, representing the banks, had a pretty rough ride when they appeared before Parliament's Treasury Select Committee. The Treasury has written to MPs on the Committee saying that they might consider blocking plans to abolish cheques in 2018 if suitable alternatives are not found.

David Ward MP however suspects that the banks may just reduce the level of service - like they've scrapped cheque guarantee cards - until they can quietly stop cheques completely by 2018.

More on this story here

Sign the Save Our Cheque petition here

House of Common committee opposes scrapping cheques

We've reported previously (here and here) about the big banks' intention to get rid of paper cheques.

The Treasury Select Committee has said that plans to phase out cheques should be put on hold because they are still vital for vulnerable people. They have been inundated by letters from members of the public saying that they rely on cheques, so they are reopening an inquiry initially launched last year.

More detail from Yahoo! Finance here.

Another step towards getting rid of cheques

A while ago the banks announced that they wanted to phase out cheques in 2018. What is less well known is that we won't be able to use banks cards to guarantee cheques after the end of June this year.

Cheques are still widely used by older people, small tradesmen by local organisations that require clear financial controls – clubs, small charities and local councils. As recently as 2008, cheques were used six times more frequently than online payments.

The proposed phasing out of cheques in 2018 is squarely based on the costs to the banks, not on any consideration of customers’ needs. Stopping the cheque guarantee card facility in 2011 appears to be a deliberate move to make cheques less attractive to use by transferring risk from banks to customers, so accelerating the decline of cheque use.

The obvious paper-based alternative to a cheque is the postal order. However these are very costly – from £10 upwards the fee is 10% of face value, capped at £10, and they are only available up to a value of £250. They are also much more inconvenient to use because they require a visit to the post office (another facility that is in decline) to purchase them.

Even if the banks do not suggest postal orders as a viable alternative, there must be a concern that that postal orders will set the benchmark for the fees banks would levy for their own alternative.
We're campaigning against a change that is principally for the benefit of the banks, and works against the interests of millions of people and the community organisations they support.

Banks to scrap cheques?

The banks will be voting on 16 Dec about scrapping cheque system by 2018 (see Times article here) - an announcement about it is expected in January. At the moment about 1 payment in 25 is still made by cheque in the UK.

Cheques are inconvenient for banks because they cost more to process than electronic transactions. But how else will one individual be able to send payments to another safely? And do you want to be forced into setting up yet more direct debits?

Small companies are also against stopping the cheque system because of the extra costs they would incur. Apparently the banks have already decided to scrap payment guarantee cards from 2011 - anyone remember them telling us about that decision? Surely that will increase the risks for small tradesmen accepting payments from customers.

The postal order system is also likely to be affected because the secure version - the crossed postal order - can only be paid into a bank account or a PO savings account, unless it's used to pay a bill at a post office. So effectively it's a cheque. Unless of course the Post Office decides to scrap postal orders at the same time?

If you think cheques should stay, please sign the 10 Downing Street petition here.