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Saturday 21 November 2009

Don’t let them kill off the cheque

Ross Clark laments the decline of cheques

Next month I will break the habit of a lifetime and wait until the red reminder before paying my telephone bill. I will do so because BT has decided to charge me £33 a year for the audacity of paying my bill by cheque.

BT is penalising people who pay by cheque because it wants us all to pay by direct debit. As it happens, I’m happy enough to pay by direct debit for some things: namely bills which are for a fixed amount of money every month. I would be perfectly happy to pay my telephone bill online, too, so long as I was in control of the transaction. What I refuse to do is to open my bank account to BT and say: ‘Here, take what you like.’ If someone intercepts my phone line and fraudulently redirects all my calls via Moldova I want to know about it first — not after BT has emptied my bank account.

Businesses love direct debits because they are cheap and because we frequently forget to stop them, meaning that we end up paying for goods and services that we really intended to cancel but never quite got round to doing so. But there is another reason why large firms are engaged in a war against the cheque — Marks & Spencer is the latest retailer to say it will no longer accept payment by cheque, joining Asda, Boots, Sainsbury’s, Next and many others. For large businesses, elimination of the cheque from the entire banking system would be a wonderful way of driving out smaller competitors. The retail giants know full well that there are many small companies whom we would hesitate to ring up and read our credit card details. You see an advert for pot plants in the Sunday supplement: it is only a little business, which you have never heard of and which operates from a PO box in Lancashire. You would quite happily send it a cheque, but would you pay over the phone by debit card? You hesitate, of course, because you don’t know who you’re dealing with.

Some mail-order businesses are too small to justify the expense of setting up a merchant account and taking payments by credit card. For them, cheques are essential. Other than by cheque, how do you pay your B&B in remote Wales, miles from the nearest cashpoint? Or the local builder who put in your bathroom? There is PayPal perhaps; the electronic payment offshoot of eBay, but it isn’t easy to use, it requires the setting up of an eBay account, and it’s by no means immune to internet fraud.

While no bank has yet announced that it will no longer issue chequebooks to its account holders, one senses that it won’t be too far away. Already one or two — Cahoot, the online offshoot of Abbey, for example — are offering accounts which pay higher rates if you agree not to have a chequebook. It was a couple of years ago that I first noticed my chequebooks were taking longer and longer to arrive. Instead of a fresh one turning up when I was halfway through the last one, I would reach the end of the book and still no replacement was to hand, forcing me to ring up and demand one, which would arrive about 10 days later. When I accused the bank of deliberately trying to make me pay by other means it denied that it was trying to phase out cheques — but then it would hardly announce such a major change in policy to a solitary, disgruntled customer like me.

It is a disgrace on the banking system that cheques — which can never have been said to be fraud-proof — have been usurped by electronic means of payment which are far less secure. If direct debit is the ‘modern way to pay’, as my utility bills like to put it, why has it made us so much more susceptible to fraud? As for paying by credit card, in 2005–06 Britons were defrauded on their cards to the tune of £430 million — a threefold increase over a decade. Surely electronic payment ought to be safer, given that every transaction leaves a data trail. But for some reason things haven’t worked out that way.

The cheque, I suspect, will not be killed off entirely without resistance. In fact the decline in the number of cheques being written in Britain has been accompanied by a remarkable and little-known explosion in the amount of cash in circulation. Over the past decade the total value of banknotes in Britain has doubled to £40 billion — that is, £700 per person. Given that most of us rarely have more than £50 in our wallets, this is an astonishing amount. It can’t all be down the back of our sofas, or in the hands of drug-dealers. Britons are thumbing their noses at the chance to pay for goods electronically and going back to good old cash. I can’t say I blame them. If my phone bill goes up any more, I may well join them: I’ll tell BT to take out their line and I’ll use a cash-paid pre-pay mobile instead.

More articles from: Ross Clark | this section

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