Even though the use of checks is decreasing, they are still a prefered payment method for many individuals and businesses, so you may still be paid with a check.
Even though most people have a bank account where they can deposit a check, it could take up to a week before you actually see your money. You can always cash the cheque if you need the money or don’t want to wait that long.
When it comes to cheques, if you don’t have a bank account, you’ll have fewer options for what you can do with them, so cashing them becomes more important.
The following are a few possibilities:
Take it to a Retailer
Many large retailers offer cheque cashing services. The benefits of going to a large retailer are that they are more likely to have more cash on hand to give you. Those who offer this service will charge you a small fee for cashing a cheque, which is calculated as a percentage of the amount of money you want to cash.
Take it to the Bank which Issued the Cheque.
You do not have to have an account with the issuing bank to have a cheque cashed there. A bank that has issued a cheque that has been made out to you will, in some cases, cash the cheque for you. However, they will charge you a fee or may even see this as a chance to get your business and try and get you to open an account with them.
Take it to a Payday Lender.
There are payday lender stores in most cities nowadays, and they are convenient facilities for cashing cheques in. Payday loans themselves can be an expensive way of borrowing and cashing cheques in these shops and costly. They will charge you for cashing a cheque, which is often a lot higher than a bank or a large retailer.
Get a Prepaid Debit Card
If you don’t have a bank account but need to get a cheque cashed, you can quickly open a prepaid debit card account. These accounts are easy to open as they don’t require you to have a healthy credit history and therefore aren’t subject to stringent credit checks. This can speed the process up and mean you can get the cheque paid into your account much quicker.
Consider Other Options
Checks can be cashed in a variety of ways. In exchange for the money up front, you can sign the check over to a friend. Additionally, credit unions and building societies may be able to cash your check for a small fee.
Many small businesses don’t have dedicated cheque cashing facilities, but they may be able to help you cash a cheque on the spot if the cheque is returned or blocked.
Pros and Cons of Using Cheques for Business Banking?
Every business relies on steady revenue in order to operate. As a result, having a payment method that is safe and quick is essential. A large number of businesses still prefer to use checks rather than electronic payments or online transactions when it comes to business banking.
The fact that many businesses continue to rely heavily on checks, despite their decline in popularity, suggests that they still have some advantages.
With that said, there are some issues with relying on cheques to conduct business banking.
Pros of using cheques for business banking
Simple to Process
Many businesses, particularly that tiny firms or new start-ups, may not have the facilities to process electronic or online payments. Receiving a cheque as payment is easier for them as they can leave the bank’s processing end.
Funds Leave a Bank Account Slower
Most electronic payments are instantaneous, meaning they leave a company’s bank account as soon as payment is made. For smaller firms with cash flow issues, paying by cheque means the funds will go to their bank account slower, and they have some leeway.
Cheques may Widen a Companies Customer Base.
Even if you have the facility for processing electronic payments, by indicating a willingness to accept cheques, you increase the number of potential customers. If you shut off of one particular avenue for compensation, you may be turning business away as many people are still more comfortable paying by cheque.
Cons of Using Cheques for Business Banking
Cheques can be Stopped or Returned.
This is particularly pertinent when selling goods. If a person pays with a cheque and takes the goods, and that cheque later bounces, you will be out of pocket. In addition, you will also be liable for banking charges due to the returned cheque.
Cheques Take Time to Clear into the Bank Account
Many cheques can take up to five days to clear, meaning you will be made to wait before the funds find their way into your bank account. This is hardly ideal if you need the funds to keep your business going.
Cheques are Open to Fraud
Even with the security pitfalls of online banking, cheque fraud still makes up a sizeable chunk of all financial fraud. Writing and signing a cheque is easy for someone to do and can be pretty difficult to trace. Whether it is someone writing fraudulent cheques from your firm or you are receiving fake cheques for payments, funds are tough to recover once they have been obtained in this way.
Should I Still use Cheques for Business Banking?
The answer to this is not straightforward. It all depends on the size of your operation, what payment facilities you have available to you and what method of payment your customers most prefer. You may feel that cheques are outdated, but if they make business sense, then it may be worth holding on to that cheque book for a while longer.
Are Cheques Still a Popular Form of Payment?
Every generation seems to have their environment wake up when they are suddenly made aware of the damage their behaviour was doing to the planet.
First, we had Sting in the rain forest, then the hole in the ozone and, more recently, global warming and climate change has taken centre stage.
Throughout all this, the push to recycle has been strong, and, in many ways, our rapid journey towards a paper-free society has gathered pace.
However, despite that many businesses are operating in a largely cash-free environment and electronic payments have exploded in the last decade, there appears to be a place for the humble cheque still.
How has Cheque used Declined in the Recent Years?
Despite the fact that cheques have been around for centuries, few people realise that the first cheque was likely written in England in the 17th century.
With nearly every bank account offering a chequebook, and balancing that book becoming just another household chore, they came into their own in the 20th century.
It is naive to believe that cheques are still widely accepted as a form of payment, and it is a method of payment that is on the decline.
Cheque use dropped by 13.5% in 2015, according to a BNP Paribas-commissioned 2017 report, continuing a decade-long decline that has seen paper payment usage more than halve since the dawn of the new century.
Why are fewer people using cheques?
To understand why cheques have fallen in popularity so quickly, it’s not hard to look at the numbers. In the first place, because a check can take longer to clear, more businesses are reluctant to accept them as payment.
The amount of time it took to transfer funds was a significant factor in the decline of cheque use, but it was not the only one.
For all parties involved, processing cheques can be time-consuming and costly, with additional fees for bounced checks being an additional issue to consider.
Why are Some Businesses Still Using Cheques for Payment?
For a variety of reasons, it appears that a sizable number of businesses are still accepting payment via check.
Small and medium-sized businesses are the most common users of cheques. A major reason cited is that it allows them to better plan their finances by delaying the withdrawal of funds from their account.
The majority of small and medium-sized businesses (SMEs) claim that they continue to use cheques as a form of payment because it is the most common method and that many payees still request.
When it comes to smaller sums, many people and businesses still prefer to write a check rather than use cash or an electronic payment method.
Have you paid your employees by check?
Paying your employees’ wages or salary in the form of a check, weekly or monthly, as needed. When it comes to paying someone on a specific date, does using this method of payment count as fulfilling your contractual obligations? If you’re paying by check because you don’t have the employee’s bank account information, have you assumed that they’ll be able to present it?
But indeed, cheques are on their way out?
Well, that was the original idea from the UK Government and the Banks, but as there is no current alternative for those without a bank account, the threat of removing this as a payment method has been removed.
What UK Banks have been working on is speeding up processing cheques to enable a secure and faster process.
Cheques – The Fundamentals
What are the fundamentals we need to know about cheques;
- The Bills of Exchange Act 1882 defines a cheque as a written order from an account holder instructing their bank to pay a specified sum of money to one or more named beneficiaries
- Ever since their inception, it has been the case that cheques are not a promise to pay by the bank, but a request to the bank that it produces, out of the funds deposited by the customer, an amount to a third party. This means that the bank will only honour the cheque if the account holder has sufficient funds to meet it, or it can be covered by an agreed overdraft or another line of credit.
- Cheques are not legal tender and never have been. Even today, if you owe someone money, they are not obliged to accept a cheque. Instead, a creditor is entitled to be paid in legal tender and can refuse payment in any other form.
- Most cheques are crossed as ‘A/C Payee’. The Cheques Act 1992 and Section 81 of the Bills of Exchange Act 1882 give statutory power to the ‘A/C Payee’ crossing when it is used. The rules mean that a cheque that bears the ‘A/C Payee’ crossing can only be paid into an account in the name of the recipient precisely as it appears on the cheque.
- A cheque payable to two people (generally known as a joint account) can only be paid into a report in the name of the two people precisely as they appear on the cheque. The crossing cannot be deleted, nor can the cheque be transferred over to a third party.
Has your agreement to pay your employees on a specific date been discharged if you must pay them by check? Although case law is limited, in Andy Coltrane v Janice Day (2003), the Court of Appeal reevaluated and applied the case law on when the date of payment for Housing Rent should be determined when a payment is made by cheque: If the payee accepts and honours a cheque, the payment is considered to have been made when the cheque is delivered.
If the recipient accepts the cheque, the above appears to say that it is acceptable. A check crossed only ‘A/C Payee’ is not taken into account, however. The recipient may not have a bank account. In other words, they’re unable to hand over the check. Therefore, there has been no payment. As you can see from the table below, converting a check to cash is expensive for the employee unless the company provides another payment option or arranges for local cashing.
Have you paid your employees by check? – the question at the top of the article You have, after all, paid them, but at a price. Whether or not this is morally or legally acceptable, have you not considered other options? Also, keep in mind that a worker’s right to demand payment in cash should not be overlooked.
Alternative to Traditional High Street Banks
If you can’t get a bank account with a traditional high street bank, don’t worry as there are other options and alternative available to you.