Cheque guarantee card
Encyclopedia
A cheque guarantee card is essentially an abbreviated portable letter of credit
Letter of credit
A standard, commercial letter of credit is a document issued mostly by a financial institution, used primarily in trade finance, which usually provides an irrevocable payment undertaking....

 granted by a bank to a qualified depositor, providing that when he is paying a business by cheque
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...

 and the retailer writes the card number on the back of the cheque, the cheque is signed in the retailer's presence, and the retailer verifies the signature on the cheque against the signature on the card, then the cheque cannot be stopped and payment cannot be refused by the bank. This arrangement works only for cheques drawn on an account provided by the bank that issues the card and can result in an overdraft
Overdraft
An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft...

 with penalty interest.

History

The first such scheme was introduced in the UK in 1965. During the 1980 cheque guarantee cards were often combined with ATM card
ATM card
An ATM card is a card issued by a bank, credit union or building society that can be used at an ATM for deposits, withdrawals, account information, and other types of transactions, often through interbank networks.Some ATM cards can also be used:* at a branch, as identification for in-person...

s for convenience. Usage of cheque guarantee system declined significantly during the 1990s with the introduction of debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...

s. In 2001, with the abolition of Eurocheque
Eurocheque
The Eurocheque was a type of cheque used in Europe that was accepted across national borders and which could be written in a variety of currencies....

s cheques in Germany and other European countries, the cheque guarantee system also ended in those countries and many retailers stopped accepting cheques altogether. In 2011, after many years of decline, the Payments Council
Payments Council
The Payments Council is an organisation of financial institutions in the United Kingdom that sets strategy for UK payment mechanisms.-History:...

 ended the UK cheque guarantee system, leaving Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...

 as the last country to continue to operate a cheque guarantee card scheme. The Irish Paper Clearing Company Limited announced that the Irish system would officially cease on 31 December 2011, thus ending the last such scheme in the world.

Ireland

As of 2010, there were 1.4 million valid cheque guarantee cards in Ireland; however, just 45% of debit cards and 39% of ATM cards held the cheque guarantee function. The Irish cheque guarantee scheme covers sums of up to €130 per cheque. In 2010, the average value of a written cheque was €5,000, and only 1.5% of all cheques were used in conjunction with a guarantee card. Between 2007 and 2010, cheque usage decreased by 30%. In lights of these statistics, the Irish Paper Clearing Company announced in December 2010 that the Republic of Ireland
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...

 cheque guarantee card scheme would cease on 31 December 2011.

United Kingdom

In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 the scheme was first trialled in 1965 and fully introduced in 1969, with a limit of £30. The limit was increased to £50 in 1977 and then to £100 or £250, at the bank's discretion, in 1989. the scheme was only used to guarantee 7% of the 1.4 billion cheques issued each year, a figure which itself is declining due to the popularity of other means of payment such as debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...

s. The Payments Council
Payments Council
The Payments Council is an organisation of financial institutions in the United Kingdom that sets strategy for UK payment mechanisms.-History:...

therefore announced a decision in September 2009 to withdraw the cheque guarantee scheme on 30 June 2011.
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