Bounced Cheques

If a cheque is backed by a guarantee card, it must be honoured by your bank even if there isn't enough money in your account. But without the back-up of a guarantee card, the bank is not legally obliged to pay out a penny more than the amount in your account. In practice, the bank will often pay out if only a small amount is involved, or if you're a trusted customer, or if they know money is shortly to be paid in. If there's enough money in the account to meet some cheques but not others the bank manager is entitled to decide which should be paid and which bounced - he'll try to pay those which seem most important, and ideally he'll get in contact with you before deciding.

WARNING Never assume that your bank will let you run up an overdraft if you haven't arranged it first - it might not. And bear in mind that deliberately to write cheques backed by a guarantee card when you know there's not enough money in your account could be construed as theft in England or fraud under Scottish law.

Note In Scotland, special rules apply if your bank decides not to pay out on cheques written against an account with insufficient money in it. The real problem arises where several cheques arrive at once - the bank is obliged to pay out on none of them and to transfer any money in your account to a special 'suspense account'. This happens even if you have enough money to meet at least some of the cheques. The money can be released from the suspense account only if you pay into your current account enough money to meet all the cheques, or the holders of the cheques give up their claims on you, or five years have passed, or there's a legal ruling about the account. So dipping into the red in Scotland can seriously disrupt your finances.

Stopping cheques If you've written a cheque but then decide you don't want to pay after all - for example, if you've bought goods that turn out to be faulty or don't turn up - you can ask your bank to stop the cheque. You'll need to act quickly - an initial phone call to the bank should put the cheque on hold. You should then put your instructions in writing and send them to the bank. There's usually a charge for stopping a cheque.

WARNING

You can't stop a cheque backed by a cheque guarantee card.


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Crossed Cheques

A source of great confusion is the use and meaning of a crossing on a cheque. Crossed cheques (which are now standard for most personal cheque books) must be paid into bank accounts - they can't just be exchanged for cash. Cheques are always transferable - you can pass on a cheque made out to you to someone else for them to pay into their account as long as you endorse the cheque with your signature. But you can write Not negotiable' on a cheque which means that whoever it's passed on to can't have a better right to payment than the person who passed it on had - so if it's a stolen or forged cheque,... see: Crossed Cheques


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