One thing that bugs me, when I pay an organisation by debit or credit card, then they get back to me with a refund payment in the form of a cheque. I pay them instantly, their refund takes the time to post out to me and then three days to clear in my bank.
I thought a cheque was pretty simple, a written request by me (or someone paying me) to have a certain sum of money transferred from one account to another. When I pass it to the cashier, surely its simple for the banks to see who’s writing the cheque from their account no. and sort code, then ask their bank if the money’s there and transfer it over. I’ve transferred money electronically between banks before instantly, but cheques take three days, why? Is there a good reason or is it something held over from days gone by that they’ve not gotten round to changing?
The antiquated principle is that the cheque is returned to the issuing bank, for them to release the funds. It’s a push system, in the same way that an electronic transfer is (your bank sends the money to the other, who can’t take it otherwise).
Yes, they could speed the system up a huge amount, but it’d cost them money, and because it would have to be a unilateral implementation, it would be of no commercial benefit to any single bank.
I suppose when requesting a refund, you could try a “we do not accept cheques” policy, and demand a transfer instead. I’ve got an overpayment of a water bill, so I might try that
I may be wrong about this, but I have a feeling this is something that the credit card companies frown upon, and by ‘frown upon’, I mean state within their T&C something to the effect ‘If you want to use our facility for charging your customers, you can’t do X, Y and Z’.
If it’s just a straight reversal of a single transaction, I’m sure you should be able to insist that it happens in the same form as the original payment. If it’s a case of a credit balance that has built up in an account with a utility company, as a result of multiple overpayments, then it’s probably a bit different.
It was a refund on a tax disc that I paid with a debit card and an insurance payment from a company I paid with a direct debit. The tax refund was fairly inconsequential in comparison to the insurance payout, I wanted to ask about the latter but I was unaware the cheque was in the post to me
Although you can send money instantly from one bank to another using CHAPS, the norm is for these transfers to also take three days as they go through effectively the same cycle as a cheque.
Check out this link if you are interested in finding out why cheques take three days to clear:
