Cheque guarantee card

Logo of the United Kingdom domestic cheque guarantee card scheme since 1990

A cheque guarantee card is essentially an abbreviated portable letter of credit granted by a bank to a qualified depositor, providing that when he is paying a business by cheque and the retailer writes the card number on the back of the cheque, the cheque is signed in the retailer's presence, and the retailer verifies the signature on the cheque against the signature on the card, then the cheque cannot be stopped and payment cannot be refused by the bank. This arrangement works only for cheques drawn on an account provided by the bank that issues the card and can result in an overdraft with penalty interest.

History

The first such scheme was introduced in the UK in 1965. During the 1980 cheque guarantee cards were often combined with ATM cards for convenience. Usage of cheque guarantee system declined significantly during the 1990s with the introduction of debit cards. In 2001, with the abolition of Eurocheques cheques in Germany and other European countries, the cheque guarantee system also ended in those countries and many retailers stopped accepting cheques altogether. In 2011, after many years of decline, the Payments Council ended the UK cheque guarantee system, leaving Ireland as the last country to continue to operate a cheque guarantee card scheme. The Irish Paper Clearing Company Limited announced that the Irish system would officially cease on 31 December 2011, thus ending the last such scheme in the world.^[1]

Ireland

As of 2010, there were 1.4 million valid cheque guarantee cards in Ireland; however, just 45% of debit cards and 39% of ATM cards held the cheque guarantee function. The Irish cheque guarantee scheme covers sums of up to €130 per cheque. In 2010, the average value of a written cheque was €5,000, and only 1.5% of all cheques were used in conjunction with a guarantee card. Between 2007 and 2010, cheque usage decreased by 30%. In lights of these statistics, the Irish Paper Clearing Company announced in December 2010 that the Republic of Ireland cheque guarantee card scheme would cease on 31 December 2011.^[1]

United Kingdom

In the United Kingdom the scheme was first trialled in 1965 and fully introduced in 1969, with a limit of £30. The limit was increased to £50 in 1977 and then to £100 or £250, at the bank's discretion, in 1989.^[2] As of 2009^[update] the scheme was only used to guarantee 7% of the 1.4 billion cheques issued each year,^[3] a figure which itself is declining due to the popularity of other means of payment such as debit cards. The Payments Council therefore announced a decision in September 2009 to withdraw the cheque guarantee scheme on 30 June 2011.^[3][4]

See also

• Check verification service
• Overdraft protection

References

1. ^ ^{a b} IPSO - Cheque Guarantee Card Scheme to close on December 31st 2011
2. ^ Review of the UK Domestic Cheque Guarantee Card Scheme, Payments Council, June 2009
3. ^ ^{a b} The Cheque Guarantee Card Scheme announces closure date of 30th June 2011, press release from UK Payments Administration, 25 September 2009.
4. ^ King, Mark. Abolition of cheques to be reconsidered, The Guardian, 14 April 2011