Cheque guarantee cards to be abolished on June 30

The cheque may have been given a stay of execution last week - but its slow demise looks set to be hastened by the abolition of the cheque guarantee card.

From next week (June 30th) banks will no longer offer this scheme.

Previously businesses accepting cheques - often for relatively small amounts - knew that if it was backed by a guarantee card the bank would not bounce the cheque and they would be paid in full.

Campaigners said they feared that this would cause some smaller businesses to stop accepting cheques - causing further difficulties for many consumers, particularly the elderly who tend to rely more on this payment method.

Last week ministers were highly critical of plans by banks to abolish the cheque clearing system by October 2018.

Mark Hoban, the Financial Secretary to the Treasury, said that cheques could not be scrapped until “a suitable alternative is found”.

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He added that ministers would “intervene… if there is any threat that cheques may be withdrawn without suitable alternatives being put in place at all”, he said.

However, cheque usage has fallen dramatically over the past decade.

Last year 1.1bn cheques were written, compared to 4bn 20 years ago. Of those cheques written last year only 7pc (82m cheques) were supported by a guarantee card according to the Payments Council.

Most major retailers - including all supermarkets and most petrol stations – now no longer accept cheques. However, they are still widely used by small businesses and charities who may not pay for expensive card processing equipment. They are also still used for personal payments.

But the Payments Council said the average value of a personal cheque is £392. However, the maximum guarantee limit on a card was £250, and the vast majority of cards (88pc) only had a guaranteed limit of £100 or under.

Sandra Quinn, Director of Communications for the Payments Council, commented: “The only thing that’s changing is that from 1 July you will no longer be able to guarantee a cheque using a cheque guarantee card, but it doesn't mean that you can no longer pay by cheque! The use of cheque guarantee cards has been in a steady decline, and many of them were written in situations where the guarantee was void [for example if a cheque was sent through the post].