Professional Documents
Culture Documents
Introduction
This booklet has been produced by APACS
and the Cheque and Credit Clearing Company
to clarify issues about cheques including the
clearing cycle, trends in the use of cheques
and the UK Domestic Cheque Guarantee
Card Scheme.You can download further
copies of this booklet from: www.apacs.org.uk
or www.chequeandcredit.co.uk
APACS is the trade body that gives banks,
building societies* and card companies a
forum where they can work together on noncompetitive issues.APACS helps manage the
way that businesses and individuals in the UK
move their money around this covers cheques,
cash, credit and debit cards and automated
Cheques and
ChequeClearing
Cheques
& Clearing
02
02
04
05
06
10
14
What are
cheques?
Cheques are written orders from account holders instructing their banks to pay specified
sums of money to named beneficiaries.They are not legal tender but are legal
documents and their use is governed by the Bills of Exchange Act 1882, and the Cheques
Acts of 1957 and 1992.
History
The cheque evolved over many years, with the earliest handwritten cheque known to be
in existence dated 16 February 1659. Fully-printed cheques were introduced in the early
1700s, with the first personalised printed cheques produced in 1810.The daily cheque
clearings began around 1770 when bank clerks met at the Five Bells (a tavern in
Lombard Street in the City of London) to exchange all their cheques in one place and
settle the balances in cash.The renting of a room for this purpose first occurred in 1773.
Following the formation of a permanent committee of bankers in 1821 to regulate the
clearings (later known as the Committee of London Clearing Bankers), the first clearing
house building, initially owned by a group of private bankers, was built in Lombard Street
in 1833.Although there were various changes in membership, and settlement in cash
was replaced by settlement across accounts held at the Bank of England, this
arrangement continued for 150 years until the Cheque and Credit Clearing Company
was established in 1985.The Lombard Street clearing house closed in 1994 and the
English exchange centre moved to Alie Street in east London.The Scottish clearing
02
Cheques
& Clearing
became part of the Cheque and Credit Clearing Company in 1996 bringing with it a
Scottish exchange centre.At the end of 2003, the English exchange centre moved
outside London. Sterling cheque settlement still takes place at the Bank of England.
Cheque use increased greatly over the years and peaked in 1990, when 4 billion
personal cheques were processed. Since 1990, cheque volumes have gradually declined
due to the growth of alternative ways to pay. Personal cheque use has halved in the last
ten years, with just 1 billion being written in 2006.
Businesses and consumers have increasingly chosen to pay bills by direct debit and to
use plastic cards to pay for goods and services, whilst many large retailers have taken the
decision to stop accepting cheques.This trend is set to continue, with personal cheque
volumes predicted to drop a further 60% to 392 million by 2016. Despite this trend, the
industry is committed to maintaining the quality and integrity of cheque clearing and to
ensure a high level of customer service and transparency.
03
The 2-4-6
and 2-6-6
changes
There is often confusion about how the clearing system works and the time it takes for
a cheque to clear. In November 2007, changes were introduced to increase clarity and
certainty for all elements of the UK sterling cheque clearing process.These changes
apply to customers paying in UK sterling cheques issued by or deposited in to sterling
accounts with UK banks and building societies.These are sometimes referred to as the
2-4-6 and 2-6-6 changes to cheque clearing processes.The 2-4-6 changes have been
implemented for sterling current and basic bank accounts (see diagram opposite)
whilst the 2-6-6 changes have been implemented for UK sterling savings accounts.The
changes dont alter the central process (described on page 10). However, for customers
it means for the first time after paying in such cheques they can be sure at the end of six
working days that the money is theirs.After this point, the customer is protected from loss
if the cheque subsequently bounces and the money cannot be reclaimed without their
consent unless they are a knowing party to a fraud.
The changes also set maximum timescales for when customers will start earning interest
on the money paid in to their accounts and when it will be available for withdrawal.
These are only the maximum timescales individual banks may compete on when they
will pay interest or allow funds from the cheque paid in to be withdrawn, so customers
should make sure they have an account best suited to their needs.
04
Day
e.g. Monday
The process starts when your bank receives the cheque 1
Day
Day
Day
Cheques
& Clearing
Example
Simon pays in a cheque to his current
account at his bank on Monday morning.
He starts to earn interest on the money
by Wednesday (+2 days), and by Friday
morning (+4 days) his bank will enable
him to withdraw the money from the
cheque from his account, even though
the cheque could still bounce. By the end
of the following Tuesday (+6 days), he can
be certain that the cheque he was given
will not bounce and the money from the
cheque is his.
Footnotes:
1 You can pay in a cheque in a number of ways across a branch counter, at a cash machine, by post or at a post office.This may affect when your bank actually receives the cheque.
You may also need to deposit a cheque before a certain cut-off time, so if certainty is important to you, you should check with your bank.
2 If your account pays interest on credit balances. It is also the point at which this money will reduce the balance on which overdraft interest is charged.
3 Not necessarily for savings accounts.
4 You will be able to withdraw this money from your savings account if the account allows withdrawals.This table sets out the maximum cheque clearing timescales.Your bank may
offer you shorter timescales. Check your terms and conditions. Be wary of accepting high value cheques from someone unless you know and trust them. If you are uncertain about
the status of a cheque you should check with your bank.
05
Customers may deposit (i.e. pay in) a cheque in to their account by a variety of means:
at a branch counter, through a cash machine or other accepting machine, at a post
office or by post. Every bank will make clear to the customer the day a cheque is
considered to have been deposited for the purposes of calculating the elapsed time
before interest is paid, withdrawal allowed and the certainty that the cheque will not be
returned unpaid to the beneficiary customer.
2-4-6 FAQs
Do the 2-4-6 changes mean that cheques are safer from fraud?
No, you should always be wary of accepting high-value cheques or bankers drafts. If you
dont know or trust the person offering you a cheque, you should consider other options
such as a CHAPS payment, a telephone or internet payment or cash.Ask your bank for
advice if youre in any doubt. If your chequebook is stolen and used by a fraudster you
will continue to enjoy full protection from financial loss provided you havent breached
the terms and conditions of your account.You should report a loss or theft as soon as
you notice it.
I sometimes pay in cheques at a post office or send them by post. How will
I know when my bank has got my cheque and the timescales start?
These timescales will be clarified by your bank. If the certainty of a cheque is important,
you should ask.
06
Cheques
& Clearing
How do I know when the sixth day after deposit has been reached?
Do the six days exclude non-working days?
If you are uncertain, you should check with your bank. Saturdays, Sundays and bank
holidays are not included within any calculation of the six day period.
Do the 2-4-6 and 2-6-6 changes to cheque clearing processes apply to all
banks and building societies and all cheques in all situations?
All subscribers to The Banking Code have committed to implementing these changes
and maximum timescales for their customers. In exceptional situations, should they be
unable to deliver on the timescales, they will explain the reason why.
What happens if I dont wait until the end of day 6 and I decide to withdraw
and spend cheque funds before this?
You must be aware that you do so at your own risk and if the cheque subsequently
bounces you may have to return funds to your bank.
Do the 2-4-6 changes impact when I can or should release goods or services
to my clients?
It may do as these changes will give you certainty on cheque funds and clarify when
you can be sure the cheque funds are yours and when you can release goods or
services with confidence.
07
Why dont the same timescales for clearing apply to savings accounts?
Savings accounts are designed to pay interest on funds deposited for a length of time,
and frequency of payments to and from these accounts is generally less.These features
allow customers to benefit from a higher rate of interest. If you want faster access to
cheque funds you should consider paying a cheque in to a current account or basic
bank account.The timescales on saving accounts for earning interest and knowing the
money is yours still apply.
08
Cheques
& Clearing
Why dont all banks allow access to funds on the same day?
The industry has now set maximum timescales but this does not prevent banks beating
those timescales with their own competitive offerings. Under The Banking Code, banks
are required to provide clear details of their policies.
What advice would you offer to customers who are inconvenienced by the
time taken to access cheque funds?
If speed is important you should consider being paid in some other way. If youre a
customer who receives a lot of cheques you should ensure you have an account which
best suits your needs. Some accounts allow early access to funds from cheques, possibly
as early as the day you pay your cheque in. However, you should be aware that if a
cheque were to be returned unpaid after funds have been withdrawn and before the
end of the 6th working day after paying in, then the bank would seek reimbursement
from you.
09
The cheque
clearing
cycle
The way in which the clearing cycle works is explained below.This example is based
on a customer paying a UK sterling cheque issued by a UK bank in to their UK current
account at their branch counter and the account is one where the 2-4-6 maximum
timescales apply.
Day 0 Paying in a cheque
In this example, Mr Smith (whose account is with the paying bank) has written a sterling
cheque payable to Miss Jones who pays it in to her sterling current account at her
branch (the collecting bank) on Monday. Her bank will apply the funds to her account
and update their records that day (some banks apply funds and update their records
later). So the money will show as an entry on her account, but in this example that does
not mean that she will start earning interest or that she can withdraw the funds
straightaway.
At the end of each working day (the central clearing system does not operate on
Saturdays, Sundays and bank holidays) all the cheques that have been paid in to the
various branches of a bank are sent to its clearing centre. So the cheque paid in by Miss
Jones is sent to her banks clearing centre, arriving late Monday night or early on Tuesday
morning or day 1.
10
Cheques
& Clearing
At the clearing centres the cheques are sorted.The sort code, account number and
serial number are captured from the codeline at the bottom of the cheque and these,
together with the amount of the cheque, are sent electronically to the bank on which
the cheque is drawn (the paying bank i.e. Mr Smiths bank) on Tuesday morning (day 1).
The physical cheque is then bundled up with all other cheques drawn on accounts at
Mr Smiths bank and handed over to his bank (the paying bank) at one of the exchange
centres in England or Scotland later on that morning. If the cheque was drawn on a
bank in Northern Ireland it would be sent to Northern Ireland for local processing.
However, it is still possible that the cheque may bounce due to insufficient funds in
Mr Smiths account, if he has forgotten to sign the cheque (or there was some other
technical reason), if Mr Smith were to put a stop on the cheque or the cheque turns out
to be fraudulent. It is very rare for a cheque to bounce, only about 0.5% of the cheques
cleared each day are returned unpaid. If the cheque does bounce, Miss Jones bank
may reclaim the money from her account up until the end of day 6.
If Mr Smiths bank still decides to bounce the cheque, it will return the unpaid cheque to
Miss Jones bank.This is normally done by courier.
As far as the central clearing process is concerned, on Wednesday morning the Cheque
and Credit Clearing Company calculates the net amount the banks must pay to or
receive from each other on the basis of the value of all the cheques exchanged on the
previous day.The net sterling balances are then settled across accounts held at the
Bank of England.
12
Day 6 certainty
By the end of the following Tuesday (six working days after she has paid in the cheque)
Miss Jones can be certain that the cheque funds have cleared, unless the money has
already been debited from her account.This means that providing she hasnt been a
knowing party to a fraud, the money is hers to keep and it cannot be reclaimed without
her consent.This final part of the clearing cycle is sometimes referred to in banking as
clearing for fate.
13
Cheques
& Clearing
UK Domestic
Cheque
Guarantee
Card Scheme
The first cheque card was introduced in October 1965, guaranteeing payment of sterling
cheques up to a value of 30.This limit was raised in 1977 to 50 and two additional limits
of 100 and 250 were introduced in 1989.
In July 1969 the UK Domestic Cheque Guarantee Card Scheme was established to
create common, easily-identifiable design features to simplify acceptance procedures
for retailers and other businesses. Since 1 October 1990 the common theme appearing
on all participating cards has been the bust of William Shakespeare.
Some 5 million adults currently use guaranteed cheques on a regular basis. However,
this figure is expected to continue falling in line with the general trend of declining
cheque use.The Scheme gives retailers greater certainty when accepting cheques.
However, if the conditions of use outlined below are not met, the guarantee is void and
cheques may be returned unpaid.
G
G
14
One cheque per transaction is guaranteed up to the value limit shown on the
accompanying cheque guarantee card.
Cheques must be dated correctly with the actual date of issue (i.e. they must not be
post-dated).
G
G
G
G
G
G
The cheque card number must be written on the reverse of the cheque by the payee
(and not by the paying customer).
Cheques must be signed by the payer (i.e. the account holder) in the presence of the
payee as the guarantee is only valid in a face-to-face environment.
The cheque guarantee card must be valid, i.e. it may only be used prior to reaching its
expiry date and must not have been altered or defaced.
When using cheques to obtain cash, customers are limited to one guaranteed
cheque per day for this purpose. Cashiers use frequency-marking pages (found at the
back of chequebooks) to keep a record of encashments and to ensure that the one
per-day rule is adhered to.
Encashed cheques must be banked no later than 3 days after the date on which the
encashment service is provided.
The Scheme only applies to personal cheques.
The Scheme only applies to sterling cheques drawn on UK banks, for use in the UK (it
also covers those issued or used in Gibraltar, the Isle of Man, and the Channel Islands).
15
Cheques
& Clearing
16
18
19
20
25
Facts and
figures 2006
G
G
G
G
G
G
G
G
G
18
There were just over 4.9 million business and personal cheques issued each day in
2006, compared with 11 million in the peak year for cheque volumes, 1990. By 2016
there will be only 2.3 million per day.
If all the cheques processed in 2006 were laid end-to-end, they would stretch almost
five times round the world.This compares with eight times around in 2001 and 12 times
in 1990.
In 2006 each adult made 1.6 cheque payments per month, compared with 4.3 per
month in 1991.
Adults receive six cheques on average per year.
Only 5 million adults still use guaranteed cheques on a regular basis, compared with
16 million in 1996.
Women make almost 52% more guaranteed cheque payments than men.
Only one in eight regular bills is paid by cheque, compared with one in three as
recently as 1995. By 2016 only one in 22 of regular bills will be paid by cheque.
By 2016 personal cheques will account for only 2.3% of all non-cash payments made
by individuals.
The average value of a personal cheque payment in 2006 was 223.
Only 4% of retail spending is still paid by cheque, compared with over 60% by debit or
credit card.
Business cheque use peaked in 1997. Since 2001 business-to-business cheques have
seen rapid decline as businesses increasingly use automated payments to pay suppliers.
0
1515
1241
19
952
892
840
*2013
*2014
*2015
*2016
2251
3091
Facts
& Advice
1083
1015
*2012
1778
1658
1365
1158
1000
*2011
*2010
*2009
*2008
*2007
2006
2567
3430
3203
2859
2702
2394
2088
1931
2000
2005
2004
2003
2002
2001
2000
1999
3728
3882
3976
3900
3559
3283
2988
3000
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Volumes (millions)
4000
20
Advice for personal and business customers when receiving and paying in cheques:
G Cheques should be paid in to your account as soon as possible to reduce risk of loss
or theft.They should always be paid in within six months, as older ones may be rejected
or returned unpaid.
G Never accept a cheque from someone unless you know and trust them. Be especially
wary when accepting high-value cheques or bankers drafts.
G Be aware that if you decide to withdraw funds or release goods before the end of the
sixth day after paying in a cheque, there is a risk that the money could be reclaimed
if the cheque bounces (i.e. is returned unpaid), or it turns out to be stolen or fraudulent.
G Always consider other types of payment for high-value items such as an automated,
phone, internet or CHAPS payment.There is a charge for a CHAPS payment but it is a
guaranteed, irrevocable, same-day value payment. If the buyer is unwilling to pay the
relatively small cost involved or to split it with you then you need to be on your
guard. From May 2008 a new faster payments service for same day payments will be
available for internet, phone and standing order payments. In some circumstances this
service may provide a good alternative to cheques.
G If you are a knowing party to a fraud your bank may recall funds paid in by cheque
from your account at any time.
21
Facts
& Advice
If certainty is important, before you release your goods you should check your bank
balance at the end of day 6 after paying in a cheque to ensure that it has not
bounced (i.e. been returned unpaid).
If you receive a cheque drawn on an overseas bank, your bank will send it back to
the issuing bank for payment, as foreign cheques cannot be cleared through the UK
clearings.As it can take time and be costly to obtain value for a foreign cheque, you
should seek payment by a different method.
If you receive a euro cheque drawn on a UK bank, your bank will be able to clear this
for you through the euro cheque clearing system, but the 2-4-6 and 2-6-6 timescales
do not apply. If you do not have a euro account, your bank will charge you for
converting the euros into sterling when you pay the cheque in to your sterling account.
22
G
G
G
23
Facts
& Advice
Write cheques using black or blue ballpoints or pens with indelible ink. Do not fold or
staple cheques.
If you need to make amendments, these should be made clearly by crossing through
the error and initialing or signing the correction.
Never pre-sign blank cheques.
When writing cheques, be sure to complete all sections, including the payee name,
and the amount in both words and figures. It is also good practice to include the word
only after writing the amount in words.
It is advisable not to post-date a cheque. It is likely to be outside the terms and
conditions of your account and it may simply be cleared as soon as it is paid in. So if
there are insufficient funds in your account or you have already reached your overdraft
limit, it may bounce.
If you issue a cheque that is not presented within six months, do not assume that it
can no longer be used. It may be cleared when presented, unless there are no funds
in your account, in which case the cheque will be returned unpaid.You may wish to
ask your bank to place a stop on the item (some banks may charge for this service).
Keep cheque guarantee cards separate from chequebooks. If either are lost or stolen,
notify your bank immediately.When a new card is received, the signature strip on the
back should be signed immediately.
To help protect your account from fraud you should report any misuse of cheques as
early as possible. Use chequebook counterfoils to record details of cheques issued
and compare them with bank statements.Any discrepancies should be reported to
your bank immediately.
Although cheques issued by UK banks can be used in Gibraltar, the Isle of Man and
the Channel Islands, customers wishing to make overseas payments are advised to
consult their bank about alternative payment methods.
24
Cheque
fraud be on
your guard!
25
Facts
& Advice
Dont accept a cheque, or bankers draft, from someone unless you know and trust
them. Be especially wary when accepting a high-value cheque for instance if you
are selling a car.
Be aware that, until a cheque has been cleared for fate at the end of the 6th day
after you have paid the cheque in to your account, there is a risk that the money could
be reclaimed IF the cheque turns out to be stolen, fraudulently altered or counterfeit.
It is safer to ask for payment for high-value items to be made by other means an
internet or phone banking payment or a CHAPS payment.There is a charge for a
CHAPS payment but it is a guaranteed same-day value payment. If the buyer is
unwilling to pay the relatively small cost involved or to split it with you then you
really do need to be on your guard.
Be aware that a bankers draft or building society cheque is not necessarily safe from
fraud.They can be stolen or altered like any other cheque, and if altered, stolen or
counterfeit they will not be honoured. If you receive a bankers draft in payment for
goods you should wait until you have certainty of fate at the end of the 6th working
day after youve paid the cheque in to your account before releasing the goods.
If youre not sure when day 6 has passed you should check with your bank.
26
27
Facts
& Advice
28
FAQs
Frequently
Asked
Questions
Why doesnt the banking industry speed up the cheque clearing process?
Market research, undertaken in 2005 and supported by the Office of Fair Trading,
confirmed that there is no case for speeding up the central clearing cycle. Only 13% of
customers placed any value on faster withdrawal and some customers use the current
cycle to their benefit to delay money being taken from their accounts.
30
FAQs
If youre the beneficiary (i.e. payee) of a cheque and you wish to know as soon as
possible whether it will be paid, you can ask your bank to present that cheque specially.
The bank then sends the cheque by first-class post directly to the paying bank,
contacting them by phone on the following working day to confirm whether it will be
paid.You may not receive the funds any sooner, but you will have the knowledge that
the cheque has been paid before the end of day 6.
FAQs
It is common banking practice to reject cheques that are over six months old to protect
the payer, on the basis that payment may already have been made by some other
means or the cheque may have been lost or stolen. However, this is at the discretion of
individual banks. It should not be assumed that cheques in excess of six months old
would automatically be rejected the only certain way to cancel a cheque is to request
that a stop be placed on it. Cheques backed by a cheque guarantee card cannot be
stopped. It is recommended that, if possible, customers in possession of cheques that are
over six months old obtain a replacement. In case of disputes, a cheque remains legally
valid to use to prove a debt for six years.
33
35
FAQs
36
Are bankers drafts and building society cheques as good as cash? How do
they work?
No, they are not as good as cash as they may have been lost or stolen and then
fraudulently used. Bankers drafts and building society cheques are processed in the
same way as ordinary cheques and have to go through the clearing system. So you
should still wait until the end of day 6 to be certain that the money is yours.The comfort
they provide is that they will not be returned unpaid due to lack of funds, as they are
drawn on the account of the actual bank and are paid for in advance by the customer.
These cheques are sometimes issued by card companies to their cardholders and
funds are debited to their credit card account.They can also be referred to as
convenience cheques.The Banking Code includes best practice on how these credit
card cheques are marketed and used.They are cleared in the normal way through the
cheque clearing.
37
I paid by cheque at a retailer and the funds left my account within two days.
Why?
Some large retailers, by special arrangement, may pay cheques directly in to their banks
clearing centre rather than in to their branch at the end of the day, effectively by-passing
part of the clearing cycle.Alternatively, if both the customer and the retailer hold
accounts at the same bank branch the cheque would not have to pass through the
central cheque clearing. It is always important that you make sure you have sufficient
funds in your account before writing a cheque.
38
40 Glossary
49 Useful contacts
Glossary
Glossary
Glossary
2-4-6 and 2-6-6
changes
These changes known as 2-4-6 and 2-6-6 have been implemented by UK banks and
building societies.
2-4-6 covers sterling current and basic bank accounts and business accounts. It has
given customers maximum clearing timescales and increased transparency providing
clarity and certainty when paying in a sterling cheque issued by a UK bank. It refers to 2, 4
and 6 working days after a cheque has been paid in to a current or basic bank account:
G The start of the 2nd working day is the maximum timescale for clearing for value
(see glossary).
G The start of the 4th working day is the maximum timescale for clearing for
withdrawal (see glossary).
G The end of the 6th working day is the maximum timescale for clearing for fate
(see glossary).
2-6-6 applies to sterling savings accounts. It has given customers maximum clearing
timescales and increased transparency providing clarity and certainty when paying in
a sterling cheque issued by a UK bank. It refers to 2, 6 and 6 working days after a cheque
has been paid in to a savings account:
40
G
G
The start of the 2nd working day is the maximum timescale for clearing for value
(see glossary).
The start of the 6th working day is the maximum timescale for clearing for
withdrawal (see glossary) provided withdrawals are allowed under the terms and
conditions of the savings account.
The end of the 6th working day is the maximum timescale for clearing for fate
(see glossary).
Customers may deposit (i.e. pay in) a cheque in to their account by a variety of means:
at a branch counter, for example, through a cash machine or other accepting machine,
at a post office or by post. Every bank will make clear the day a cheque is considered to
have been deposited for the purposes of calculating the elapsed time before interest is
paid, withdrawal allowed and the certainty that the cheque will not be returned unpaid
to the beneficiary customer.
automated
payment
Glossary
The Banking Codes These are voluntary codes, which set standards of good practice for financial institutions
to follow when dealing with personal customers (The Banking Code) and business
customers (The Business Banking Code) in the UK.They provide valuable protection for
bank customers and cover such areas as basic bank accounts, current accounts, card
products, lending, savings and payments, and specifically ensure transparency on the
cheque clearing cycle.
bankers draft and A bankers cheque is a cheque drawn directly on the issuing bank (or building society if
bankers or building it is a building society cheque) rather than on the account of a customer, and signed by
a bank or building society official.A bankers draft is not strictly speaking a cheque but,
society cheque
like a cheque, it is subject to the Bills of Exchange Act 1882, and is cleared in the same
way as a cheque.When issuing a bankers cheque or draft, the bank will debit the
ordering customers account, so that the payee can be assured that the cheque or draft
will not be returned unpaid due to lack of funds.This means that, provided the cheque or
draft is genuine, the recipient can be certain that funds will clear.The timescales for
clearing for value, withdrawal and fate apply.
beneficiary
42
The person or business to whom the cheque is payable.Another term meaning the
same is payee.
The bank that provides the account for the payee of the cheque to which the cheque
is deposited.
bounced
Customers often use this term, whereas the bank refers to a cheque being
returned unpaid.
CHAPS payment
cheques crossed
a/c payee or
account payee
The vast majority of cheques are crossed a/c payee, which means that they must be
paid in to the account of the named beneficiary (i.e. the person to whom the cheque is
made payable).This prevents cheques being cashed or paid in to the accounts of third
parties.The issue of cheques crossed account payee is covered in the Cheques Act of
1992, Section 1 which gives statutory force to the crossing.
The point at which funds from a cheque have cleared and the cheque can no longer
be returned unpaid and the beneficiary can be sure the money is theirs and cannot be
reclaimed from their account (unless they are a knowing party to a fraud). Conversely,
the fate of a cheque may be that it is returned unpaid but the beneficiary will be able
to determine if this is the case by the time clearing for fate or certainty is provided.
Glossary
beneficiary bank
43
clearing for
value or cleared
for value
From a beneficiarys perspective the point at which funds deposited (i.e. paid in) by
cheque start earning credit interest or, if the account is overdrawn, start reducing the
balance on which overdraft interest is charged.Although included in the account
balance and shown on the statement or cash machine slip, the funds may not yet be
available to withdraw. From a cheque issuers perspective, when funds paid by cheque
stop earning credit interest or, if the account is overdrawn, increase the balance on
which overdraft interest is charged.
clearing for
withdrawal or
cleared for
withdrawal
When funds deposited (i.e. paid in) by cheque are available for withdrawal from the
beneficiarys account (either as cash or to fund another payment from the account).
The ability to withdraw is subject to the overall status of the account (e.g. the balance
after the withdrawal remains within an agreed overdraft limit).Also there may be value
limits on the amounts which may be withdrawn by particular methods (e.g. a daily limit
on the value of cash machine withdrawals).The cheque may still bounce and the
beneficiary bank may still reclaim the money from the cheque paid in until clearing for
fate has been reached.
codeline data
Cheque number, bank sort code and account number printed along the bottom of a
cheque and read electronically.
44
collecting bank
The bank where the cheque is deposited (i.e.paid in). It is often, but not necessarily, the
same as the beneficiary bank.
deposited
IBDE (Inter-Bank
Data Exchange)
A secure electronic network used to transmit codeline and amount details of cheques
from the collecting bank to the paying bank.
paid in
Cheques may be deposited (i.e. paid in) to a beneficiarys own account by a variety of
means: at a branch counter, through a cash machine or other accepting machine, at a
post office or by post. Normally for a counter deposit the day of deposit will be the same
day, if deposited before the advertised cut-off time for that counter (and the next working
day if after the cut-off time). For postal deposits it will normally be the day the cheque is
received by the bank. Every bank will make clear the day a cheque is considered to
have been deposited for the purposes of calculating the elapsed time before value,
withdrawal or fate.
Glossary
45
payee
payer
The person or business that writes and issues the cheque, whose name is on the bottom
of the cheque and whose account will be debited when the cheque is paid.
paying bank
The bank where the person or business who issued a cheque holds their account.
returned unpaid
If the paying bank is unwilling to pay the cheque, it will be returned unpaid to the
beneficiary customer via the beneficiary bank.There are a number of reasons why this
may happen. For example, there may be insufficient funds in the payers account, the
cheque may be fraudulent, or it may be wrongly dated or unsigned.When a cheque is
returned unpaid its value may be reclaimed from the beneficiarys account by the
beneficiary bank this may be after the funds have been withdrawn by the beneficiary.
46
Role of the
Cheque
and Credit
Clearing
Company
The Cheque and Credit Clearing Company is a membership-based industry body with
twelve settlement members.The company manages the cheque clearing system in
Great Britain, which processes cheques, bankers drafts, building society cheques,
postal orders, warrants and government payable orders. Its wider remit includes the
management of the systems for clearing paper bank giro credits and euro-denominated
cheques. In Northern Ireland, the processing of cheque and paper credit payments is
managed by the Belfast Bankers Clearing Committee.
Current settlement members of the Cheque and Credit Clearing Company can be
found on www.chequeandcredit.co.uk. Each member is individually responsible for
processing cheques drawn by or credited to accounts of their customers. In addition,
several hundred banks and building societies provide cheque clearing facilities for their
customers and they obtain indirect access to the cheque clearings by means of agency
arrangements with one of the settlement members.
Glossary
47
Useful
contacts
E: press@apacs.org.uk
www.chequeandcredit.co.uk
Glossary
49
50
6 Fredericks Place
London EC2R 8BT
T: 0845 2309694
helpline@bcsb.org.uk
www.bankingcode.org.uk
British BankersAssociation
Payments Council
Pinners Hall
105-108 Old Broad Street
London EC2N 1EX
T: 020 7216 8800
www.bba.org.uk
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it is provided on the basis that APACS (Administration) Limited (and APACS and its members either individually or collectively) accept no responsibility for any
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If you do not accept these provisions then you should inform us by returning the document to us within seven days.This booklet is for information purposes only
and should not be taken as a definitive legal guide.