Cheque Payment Myths

C&CCC comments on some of the most popular cheque payment myths that have been voiced throughout 2009.

Myth 1

Cheques can now be processed on the same day through the Faster Payments Service.

Fact: The Faster Payments Service only relates to standing order or phone or internet payments – all fully automated payments.  Cheques however, are paper items, which need to be physically transferred between banks so that they can be examined by the paying bank for security and fraud prevention purposes.  This process takes time and cannot be done on the same day.

Top Tip: If you can make a Faster Payment, but need to check whether the person receiving your payment can, visit www.canipayfaster.co.uk to test their sort code number. Remember to always double check you have used the correct account number and sort code, because a Faster Payment is irrevocable.

Myth 2

Changes to the cheque clearing process in November 2007, known as 2-4-6, have speeded up the clearing process.

Fact: Essentially changes to the cheque clearing process in 2007 have done two things- given customers maximum clearing timescales and certainty, rather than speeding up the clearing process.

Research* revealed that only 13% of customers placed value on quicker withdrawals. Instead, clarity on what was happening at each of the stages of the cheque clearing process was deemed to be more important, as well as certainty that by the end of the sixth day after paying in a cheque, it could no longer bounce and the funds could not be reclaimed from the beneficiary if the cheque turned out to be fraudulent. This is provided that they are not a knowing party to a fraud.

The 2-4-6 changes clarified the process that two days after a cheque has been paid into your bank account you will begin to earn interest, four days after you can withdraw funds (or six days after if it is paid into a savings account that allows withdrawals), and by the end of the sixth day you can be sure that the money will remain yours.

Myth 3

It is fine to use post-dated cheques.

Fact: It is advisable not to post-date a cheque, as it is likely to be outside the terms and conditions of your account and it may simply be cleared as soon as it is paid in. If there are insufficient funds in your account or you have already reached your overdraft limit, it may bounce and you may get charged.

*The research was undertaken in 2005 and supported by the Office of Fair Trading.  It confirmed that there is no case for speeding up the central clearing cycle.  Only 13% of customers placed any value on faster withdrawal and some customers use the current cycle to their benefit to delay money being taken from their accounts.