Frequently asked questions on the closure of the cheque system

Late last year the Payments Council, an industry body with responsibility for setting the strategy of UK payment systems, announced a provisional target date to close the Cheque and Credit Clearing system by 31 October 2018. These FAQs explain more.

Are cheques being phased out? When?
The Payments Council has provisionally decided to set a target date for closing the Cheque and Credit Clearing System, the system that settles accounts between banks, by 31 October 2018. It will not, however, take a final decision until 2016. The final decision will depend on whether adequate alternatives to the cheque are in place.

What is the Payments Council?
The Payments Council is independent of Government. It was created in 2007 to set the strategy for payments in the UK, including cheques. Further information is available at the address below.

What is the Government doing?
The Government believes that it will be necessary to have suitable alternatives in place for all users of cheques before the system can be phased out. This is particularly important for those who are dependent on cheques - like the elderly, small businesses and the Third Sector. The Government is engaging with the Payments Council and other groups to ensure this happens. It will be necessary for the banks to implement a strategy to develop, and make users aware of,
alternative payment methods, and to help them to switch to the alternatives. The Payments
Council will report on this and the Government is monitoring progress.

Why are cheques being phased out?
The Payments Council believes that the cheque clearing system is becoming unsustainable, and that it is better to manage its decline than to risk it collapsing. This could happen if individual banks decided that it was no longer viable for them to participate. However, banks have now
committed to maintain the service until there are adequate alternatives in place.

Cheque use has been falling for many years. It fell by 40% over the five years to 1999. Cheque use has fallen from a peak of 4 billion in 1990 to less than 1 billion in 2009. It is expected to fall to 0.5bn by 2018. The Government is aware that, although there are declining numbers, 54% of
adults still write cheques. This is why suitable alternatives need to be in place before a final decision is taken to close the system.

What does this mean for me?
You will see no change in the foreseeable future. You can contribute your views, using the contact details below.
Further ahead, the picture will be clearer on the practical alternatives to cheques. The Payments Council is preparing an information campaign about this.

What is the Payments Council doing?
The Council has set up liaison groups to help it. There are groups to represent the views and interests of consumers, charities and the Third Sector, and small and large businesses. Another group will identify new ideas and help think of possible alternatives to cheques. The members of
all these groups will advise the Council and ensure that the needs of their sectors are understood and are met. Progress reports are available on the Payments Council's website at the address below.

Does this decision affect other methods of payment?
No. The decision only affects the cheque clearing system. However, the Payments Council is researching improvements to other payment methods as well.

What does this mean for cheque clearing times?
There are no changes to clearing times. Customers and business can be sure that:

- they start earning interest on a cheque two working days after paying it in;
- they can withdraw funds against a cheque four working days after paying it in or six working days after paying it into a savings account; and
- the cheque will not bounce six working days after it has been deposited unless the customer or business was a knowing party to fraud.