A seemingly cleared cheque could be recalled months later
Bank customers have been advised to avoid accepting cheques after it emerged that many are cancelled long after people think the money is safe for them to spend.
Cheques may bounce because of cash-flow problems or fraud but customers normally expect banks to spot this within a few days.
But if problems are noticed later in the clearing process banks are still cancelling the payments leaving customers angry and frustrated.
The Association of Payment Clearing Services has now recommended avoiding cheques whenever possible and using electronic payments between bank accounts instead.
Money Box listener Jack told the programme how he had paid a wages cheque for £2,500 into his Abbey bank account.
It showed up on his statement within a few days. But three weeks later the bank identified that something was wrong, cancelled the cheque and took the money out of his account.
Jack said: "It was an absolute shock. I could not believe they could do that 23 days after the money had apparently cleared."
Abbey wrote to Jack and said the actual time for a cheque to clear can now vary between two days and six months. And in extreme cases Abbey said it can take even longer.
Another listener, Ian Roberts, told the programme how he is also suffering as a result of confusion over how long it can take for cheque payments to become cleared and guaranteed.
He recently launched a rare books business over the internet and has found many customers want to pay by cheque.
But Ian's bank, Nat West, has told him cheque payments will never be guaranteed and can always be cancelled later.
Ian said: "It has undermined the ability of any business to accept payment by cheque. And whilst the system exists where customers can pay you by cheque, it puts businesses in a totally impossible position."
Within the banking system guidelines it states that - except where there is fraud - banks must decide whether to honour cheques within four or five days.
But when Money Box spoke to the clearing banks who process cheques, each confirmed they will never guarantee that seemingly cleared cheques will not be declared void much later.
Former banker and Director of the Campaign for Community Banking Derek French told Money Box he believes banks are breaching the industry's own standards.
He said: 'There are rules to the clearing system, and if they are going to breach them to that extent it makes an absolute nonsense of what is written down...
But Sandra Quinn, Director of Apacs, the organisation which runs the cheque clearing process for banks, said they must do everything they can to protect themselves and their customers' money.
She said that arranging electronic payments between bank accounts is quicker and more secure.
Speaking to the programme she said:
"If you want to make sure you have got funds... There are irrevocable means of receiving a payment. Use those instead of a cheque."
BBC Radio 4's Money Box was broadcast on Saturday, 2 October, 2004 at 1204 BST.
The programme was repeated on Sunday, 3 October, at 2102 BST.