HSBC cuts cheque guarantee limit

Cheque use has been in rapid decline

The bank HSBC is cutting the cheque guarantee limit on some of its customers' debit cards.

About 300,000 customers have a £250 guarantee limit on their cards, which is now being reduced to the standard £100 limit for most other customers.

HSBC said it wanted to cut losses from cheque fraud and to discourage people from spending money they did not have.

The banking industry intends to phase out the cheque guarantee associated with bank cards from mid-2011.

Many retailers no longer accept cheques in their shops and stores, and last year just 7% of all cheques written had been backed by a guarantee card.

HSBC's move applies to cheque payments only; debit card payments up to £250 will still be guaranteed.

No problem

HSBC said there was no particular problem with its cards being misused among its 10 million current account customers in the UK.

"It is about reducing risk from a mechanism that allows a customer to continue to make purchases from their current account when they know they don't have the funds or an approved overdraft," said a bank spokesman.

"Customers can certainly still write cheques for more than £100, but the cheque guarantee only covers cheques to that value," he added.

About 88% of all cheques in the UK have a £50 or £100 guarantee limit.

The HSBC customers affected are those who typically asked in the past for a cheque guarantee limit that was larger.

They were warned last year that this change might be introduced when the bank moved its debit cards from the Maestro system to that of its rival Visa.

That changeover has been taking place in batches since the start of the year.

Still useful

Earlier this year saw the 350th anniversary of the first cheque used in the UK.

But their use, by value, has been falling steadily since 1999.

But they are still popular for paying bills, such as for credit cards, utility companies, and for paying tradesmen.

Last year only £7.1bn was spent by people using cheques in High Street shops and for online shopping, just 3% of the total.

By contrast debit card use has boomed in recent years.

Terry Martin, a BBC Working Lunch viewer from Somerset, said guaranteed cheques were still very useful.

"The problem is, I do very occasionally deal with a retailer or a restaurant which doesn't take a credit or a debit card," he said.

"A restaurant along the coast that I use just takes cash or cheques - if I went in there with a family of four, £100 is not going to cover the bill."