Wednesday, 16 December 2009

Bouncing cheques

Should we get rid of cheques?

I listened with interest to the debate on the Today programme. Apparently a timetable has now been set for their withdrawal. A method of payment for over 300 years it is now deemed out-of-date, old-fashioned and possible to surpass with other methods.

To a large extent they are right. It is more cost-efficient to use credit or debit cards and (believe it or not) cash is still a valid method of payment. Transactions can be made on-line, and they are quick, often immediate, and with the use of passwords can be checked and authorised in seconds. Cheques are slow and costly, requiring more training for banking staff and careful perusal of signatures to validate.

But do we really have to dispose of cheques all together?

The arguments on the radio were that it would upset the elderly most: people who have always used cheques and are not used to cards, chip&pin and cash machines. Despite the wave of silver-surfers, many elderly are not online, or would find it difficult to catch up with the technology required to run their bank accounts in that fashion.

To take away something that they are comfortable with and (more importantly) safe with seems foolish. And by safe I mean that they do not have to remember a pin number - an inherently unsafe thing, likely to be written down in obvious places or muttered under their breath; they are less likely to lose or misplace a cheque book than a credit card that can get lost in amongst papers; and given they may replace it with cash instead, safer than withdrawing large sums of money to pay for items and thus being a target for robbery.

Of the six million cheques written each day at present, how many are by the elderly?

Personally - and I am only elderly in my children's eyes - I write lots of cheques. I have gone through three cheque books in the last eight months. Most of our banking is done by direct debit; when out shopping I tend to use cash or credit/debit cards; I have and use internet banking. So why do I use lots of cheques?

School. I write cheques for school milk, school trips, school dinners. The easiest way to pay the PTA for the prizes I win (how do I do this?) is by cheque. I pay the trombone teacher. I pay for after-school dance, circuit-training, tennis, drama, swimming.

I suspect all these could be paid in cash or by bank transfer. In my limited experience, paying by bank transfer for one-off or irregular payments is quite arduous. Bank details need to be accurately given and received, and even then transactions are often lost by the recipient on their statement and thus queried.

And how do you deal with emergency issues, such as the boiler breaking down. Am I supposed to keep £200 (or more...) to one side just in case I have to call someone to urgently repair the boiler/ broken pipe/ electric fault? The tradesmen will want payment immediately: am I supposed to pay it on-line?

Of course, the other alternative is that everyone has a credit card machine. But, as I am often warned at shops, there is a 2.5% cost for these, and it is the retailer who bears that burden. Thus, in my basic economics, if cheques were to disappear altogether we should expect an immediate 2.5% inflation of prices. Big companies can absorb this, but small ones will struggle.

To my mind, the only people who really benefit from the complete withdrawal of cheques are the banks with cost-savings and efficiencies. The cost is transferred to cards, and in turn to retailers and thus to us.

What do you think? Is it an inevitable advancement in technologies or a move purely motivated by profit? Do cheques still have a use today?


Brit in Bosnia / Fraught Mummy said...

I heard that piece too - and thought the same as you. I use my cheques! Often. for the itty bitty type things that you describe. Admitedly paying them in can be a pain, but I'd be lost without them. Save the Cheque! (preferably one addressed to me)

Mark said...

I'm not so sure. I think Cheques have had their day and probably do need to phased out - phasing being important. Cheques are also inherently less secure than chip / pin - think of what can happen when a cheqe book and card are stolen together.

But I agree that something is missing between the extremes of cash and card - we need a fast and easy way to pay for those purchases that don't lend themselves to either (the builder, school lunches etc). In Swindon, there was trial a few years back of a system called Mondex - a sort of prepaid card that you could swipe for purchases at retailers - maybe a variant on that would fill the gap?

Mum's Survival Guide said...

I don't carry cash so when someone needs paying that doesn't have card facilities then I can't pay them. I wont be forced into withdrawing cash for this purpose either. I will be skint in no time.

Troy said...

I think they are giving it until 2018 and I suspect by then that "money" will be stored on mobile phones - rub yours against the plumber's for example to pay for the repair (you know what I mean so no giggling!). I think there will also be banking software on mobile phones to make payments.
We'll still have a nostagic fondness for them though.

Catharine Withenay said...

BiB: Paying them in is a pain, that's true... but they are nice to receive!

Mark: I haven't heard of Mondex. I do agree that if there is a suitable alternative then that would be okay, but I cannot think what that might be! I shall have to put my thinking cap on - if I get the right solution it could be worth a bob or two!

MSG: I am so impressed that you never carry cash. Often I don't, but that is due to running out rather than principle. For small things, cash remains the easiest option to me.

Troy: oh, ha ha! You do make me giggle! Maybe mobiles are the way forward (though I question whether that is an improvement on cheques for the elderly: seeing my own father's incompetence with the technology I don't think his life would be improved.) And don't get me wrong: I don't believe nostalgia is the reason to keep cheques. I am just uncertain what practical alternatives there are.

Working Mum said...

I write lots of cheques, but, like you, always to school. However, school are looking at having another method, like we have for the kids in the bookshop, where parents pay in an amount to their account and then small amounts are taken by school as needed for trips, photos, etc.

As I understood it, they have set a date for withdrawal of cheques in order to force an alternative. The interview I heard on the radio said that they would not withdraw them unless there were easy, viable alternatives for the elderly, schools, societies and small businesses who rely on cheques at the moment. I wait to see what they come up with......

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