What the death of the cheque means for your wallet

Wave goodbye to your cheque book - it will gone in a couple of years. John Fitzsimons looks at why cheques are being phased out, and what will take their place.

The Xmas period is a good time for cheques. Many of us will get a fair few cards from family across the globe that has a cheque in it. It's a lot easier than posting a present, that's for sure.

But cheques are at death's door, as they are to be phased out by 2018 - just eight years away.

Bye bye chequebook

This is all thanks to the UK Payments Council, who reckon cheques are beyond the point of rescue.

Only 54% of us (around 26 million people) still write cheques each year, with cheque use falling 40% over the past five years. The council argues that doesn't justify the £1.4bn banks spend processing cheques each year.

When did you last write a cheque?

This news got me thinking - when do I write a cheque? And the answer is, not very often. The odd one to family or friends to pay them for something they may have got me, but that's about it.

And it's not surprising their use has somewhat fallen off a cliff - it's been years since most high street retailers were happy to accept them.

But a quick survey of the lovemoney.com team revealed far more regular use, all sorts from paying for newspaper and milk deliveries and to legal fees and for plumbing work.

I'd never even thought of it like that, but without cheques, how are you supposed to pay a milkman? Leave cash on the doorstep? Or are they going to have knock on the door at 5am?

Charities are also likely to be adversely affected, as a lot of the money they receive in donations come in the form of cheques. And what about schools? Are children going to have to start carrying large amounts of cash around to pay for their lunches and school trips?

The worst affected

It's not just organisations and firms that are affected - a number of charities for elderly people have highlighted that older people rely on cheques, and have not exactly embraced the technology of chip and pin. As anyone who's ever stood behind an old dearie in a queue, waiting for her to remember her pin, will know.

There is a genuine risk that older people will instead opt to keep large sums of cash in their home just in case, making them an even bigger target for thieves and scammers.

So what's the answer?

We need some alternatives

One of the main reasons for the death of the cheque is the comparative success of the debit card - in 2008 alone, the use of debit cards for payments rose 9%, to £245bn. That represents around three quarters of all spending on plastic.

There are now more than 75 million debit cards in circulation, and for many of us they are our default method of payment.

The credit card is also still a trusty tool when it comes to making payments, accounting for £126bn of payments last year, with a further 71 million cards in use across the UK.

And you've always got good old-fashioned cash to rely on. Still, if cheques are to disappear, something will need to replace them. But what?

Can I pay by mobile phone?

You can already take photos, use the internet and listen to music on your mobile phone. The next step will be paying for stuff.

Advocates of developing this capability on phones point to its use in Africa, particularly in countries with ropey infrastructure. The grand plan seems to be that you will be able to essentially pay by text message, with the text causing money to transfer from your account into that of whomever you are paying.

Frankly, the idea of banking by mobile phone is one which fills me with dread, something I've blogged about before.

Other touted ideas are so vague as to be almost laughable - one report speculated on the development of a chip that, when pressed against a sensor, will cause money to be transferred. Now that sounds suspiciously like what happens with a debit or credit card now, but with the absence of entering a pin. Hardly secure!

However, there's still time for other alternatives to be developed - the full and final review of the phasing out of cheques will take place in 2016.

What does it mean for you?

In the short-term, probably not a lot. Chances are tradesmen and other firms that already rely on cheques will continue to do so for a couple of years at least.

For many of us, the existing options are more than sufficient, so the death of the cheque is more notable for nostalgic reasons. And the technological replacements, such as paying by text message, are only likely to lighten the load of your wallet.

However, there will need to be a more physical replacement for the cheque to cater for the needs of older people who don't pay by plastic as it is, and are unlikely to embrace using a mobile phone. That is the area where the pressure really is on, and for now there are no answers.

We are waving goodbye to the cheque, a system of payment that has worked perfectly fine for 350 years, and have little or no idea what to replace it with. The clock is ticking.... What do you think will happen? Share your thoughts using the comments box below! 

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