Lack of Cheques in Other Countries

Factual Questions
61

In Canada, I haven’t written more than 2 or 3 cheques a year since on-line banking was introduced.

Canada has only 5 major banks which account for most of the consumer banking; they bought up the “Trust Companies” over 20 years ago, about the same time the US ones crashed and burned. There are several provinces where credit unions are popular, but…

Basically, when 5 very large companies dominate the business, it is not difficult to press new technology into use very quickly. Debit has essentially replaced minor cash transactions to a greater extent and by my impression, much earlier than in the USA; and in the last year, the banks are rolling out chip-based cards (credit and debit) so that a PIN number replaces a signature. The old magnetic stripe system was too easy to counterfeit.

Still I avoid debit and use cash because my bank (TD) charges 50 cents a transaction. Bank fees in Canada are ludicrous. I’m sure I could get some special deal with free unlimited debit, but why bother? Cash works. A typical weekly or more withdrawal is $300. Anything over what’s in my pocket goes on Visa. (When TD bought Canada Trust and abandoned no-debit-fees for 50-cents-per, a co-worker of my wife’s suddenly found the family account dinged for $58 the first month.) Canadian bank fees are IMHO much worse than the USA if that is possible. A current Scotiabank add suggests you can do your happy dance because their advisors will help customers save up to $1500/month in bank fees. Holy cow! $125 a month in EXCESS bank fees? What the heck are these guys charging for, besides for everything twice? I know the US-fund conversion can be up to 5% above the going exchange rate…

When I visited the USA from time to time I was amazed how many more businesses too cheques and how many more people used them, versus debit. I attributed this to the fact that the US has (had?) a myriad of tiny banks and some were probably dragged kicking and screaming into the 20th century only in the last decade. (I think of Bert Lance, treating his private bank as a piggy bank for him and his family, playing loose with the money entrusted him.)

To adopt a technology like debit, or chip-and-pin, a big bank has to lead the way; then the other banks have to see an impetus to follow. This is much harder when you need 100 banks or 1000 banks to agree than when you need 5.

Even as early as 1980, to quickly transfer an amount like $8,000 I got the account/branch from the recipient and then went to the local branch in my town, wrote them a cheque and they deposited it right away. To transfer $5,000 from my wife’s old account to our joint, she got a “cashier’s cheque” and walked it from one bank to the other. I’ve paid bills on-line for 10 years or more; before that, I could pay at the bank; another benefit of a limited number of large banks, almost all major utilities had arrangements with all 5 banks for bill payments. (with service fees). Back in the “good old days” I would do a lot of petty mail order stuff (typically $100 or less) with post office money orders, as US denimnated ones cleared through the NYC clearing houses and were good in the USA. Most bank branches offered similar money orders.

Cheques still come from various oprganizations for automatically generated payments - Gov’t income tax refunds, Blue Cross refunds, etc. Many are encouraging direct deposit; account number and bank branch, aka “transit number” is all that’s needed. Same as you find on your printed cheque.

Everyone knows you post cash at your peril. However, unless it’s a relatively thin envelope and the cash can be seen when you hold it up to the light, it’s usually pretty reliable. I would not suggest more than $50 because of the tiny possiblity of loss or theft.

Most plumbers or other servicemen recently have cellular credit/debit readers. I first saw one of tehse on a boat at the Great Barrier Reef - you could buy your scuba photos, printed on board during the long ride back to harbour. A half hour before arrival we were in cellular range and he could accept credit cards. They even bring these terminals to the table in some restaurants now (a necessity when most places switch to chip-and-pin from swipe). Otherwise they mail a bill and I mail a cheque. The bank will deduct and forward property taxes for mortgage, or you can arrange automatic debit or credit card payments for many recurring (fixed) payments with a voided cheque (so they can get the routing and account numbers off the bottom).

If it’s a craft show or whatever - most serious sales people have credit/debit - it’s not difficult to get from the bank; as I understand, you just sign away your first-born and assume all risks. For small minor sales, cash. If I don’t have enough - like the USA, every small store and hotel lobby has an ATM. It’s not that I don’t want to pay by cheque, it’s that I never take my chequebook with me. Plus, bounce fees are $15 to $50 here so merchants have an incentive to use electronic means and private citizens are wary of cheques from strangers who might take the goods and run. “Cerified cheque” from the bank is a common request for say, a used car. Heck, I can even make the down payment on a car with the dealer using Visa, and then arrange the monthly withdrawal automatically for the balance; but when I paid $24,000 “cash” for a car 2 years ago, I wrote the dealer a cheque.

IIRC the Nigerian scam worked because they had a cooperative or criminally complacent bank in Nigeria do the cash transfers out of your account. Bank to bank transfers don’t require as much authorization. By the time the theft was found, the crooks had withdrawn the money, and I assume the Nigerian bank was unlikely to allow transfers back for reimbursement simply because the crooks’ account was empty.

62

In Germany, it depends. The usual* standard “Giro” bank account that people have, you pay a flat fee per month - 4 to 8 Euros - and get a debit card plus transfers plus ATM withdrawals (these may be limited to x per month). So one transfer itself doesn’t cost anything. If your transfers per month are budgeted, or if you hand in a paper form instead of doing it on the service terminal/ telephone/ online, the bank might charge 1 to 2 Euros.

  • Each bank has several different account options, combined with half-a-dozen banks, it’s quite difficult to find out the optimal account type. Consumer advocates claim that the banks are doing this on purposes, to make each account type different so comparision is impossible; furthermore, changing your account from Bank A to bank B is a lot of hassle - because of all the automatic withdrawals set up you have to change - so people tend to stay with their bank even if another one is cheaper.
    So Bank A might offer 6 transfers and 4 ATM payouts per month for 4 Euros fee, while Bank B might give 0.50 Euro payback for each transfer you do online, and Bank C offers you an account without a monthly fee as long as you do everything online. Bank D meanwhile has three account types: standard costs 9 Euro, plus 1 Euro per paper transfer; saving type means they put 25 Euros per month in a saving account, but you have no account fee and get interest; letting stand type means that as long as you have more than 1 500 Euros in your account for more than 15 days each month, you don’t pay a fee, but if you get below the line, you have to pay 9 Euros fee.

Bank D ends up as both the less and most expensive account in consumer reports. (And yes, that bank exists for real).

63

The problem is the checks themselves.

Fresh out of the box, they contain the account number, the account holder’s name, address and (often) their phone number. I’ve seen people be foolish enough to even have their SSN and/or driver license number printed on their checks. Hopefully by now, the check printers catch this, but if a person prints their own checks on their computer, there’s nothing to stop them.

Then, when they write a check, it’s got their signature. What more could a fraudster possibly want, other than a box of their checks?

64

The above was about fees for transfers from my German bank account to another account in a German bank.

As for the fee for international transfers: It used to carry a heavy fee. I remember when - must be around 10 years by now! - I started buying on the internet from the UK, I asked my bank and it would have cost 15 Euros fee up to a certain limit. Paying 15 Euros for an amount of 20 GBP? No way! So I got a MasterCard*, without yearly fee, and later, Paypal.

Recently, however, when the EU changed again some laws to better protect the customers, they declared that banks are not allowed to charge more than some Euros for international transfers if account nr., bank code and ISIN (a hell long nr) are included and the amount is in Euros. Transfering from Euros to the UK is a bit more, but no longer outrageous. Still, I can hardly think of occasions where I would use direct transfer instead of credit card (esp. as they have a bonus system and pay delay for one month).

  • The two most common credit cards in Germany are Master Card and Visa, but MasterCard is more widely accepted in the US. For people who want to appear rich, there’s Diners Club, but that’s only accepted in certain places.
    The most common card in Germany is the EC (Eurocheque) debit card. A backstair kind of joke is that originally, the EC card was introduced as additional safety feature for the Eurocheque, which was guaranteed to an amount of DM 400. But people started using the option of using the EC card - since it was tied to the bank account anyway - as a debit swip card with PIN or signature, and nobody used the cheques any longer. So recently, the EU announced it would stop guaranteeing the safety of the Eurocheques because they no longer considered it necessary: nobody uses them, everybody just uses the EC card. **

** Tech guys are long complaining about the old-fashioned security with the EC card. It’s just a magnetic stripe, which contains a hash of the PIN. Eastern European criminals have started skimming banks by installing card readers with WLAN on ATMs plus hidden cameras to catch the PIN (The code can also be cracked). They copy the information on the stripe onto blank cards and use the new card + PIN in other countries for sales. The customers often get problems with the bank trying to prove they were not 800 km away purchasing things. So the consumer advocates are trying to get banks to add a hardware chip to the card. This would be queried by the reader in the shops for additional authentication, but could not be easily copied by the bad guys. The banks however, since they don’t have to bear the costs of the theft (they always claim that it’s the customers fault for being “sloppy” with his PIN/ card), balk at the few Euros per card this security would cost them.

Hopefully, the EU or High court will give them the necessary smackdown and force them, by reversing the burden of proof.
About safety: theoretically, if you know my account nr. and bank code, you could pretend you have a withdrawal allowance from me. If I order online, companies offer me the option of paying with bill, that is, I get a piece of paper with the information in my shipment; or by withdrawal. If it’s a big company like amazon, I will do the latter, because it’s easier for me; it’s possible that this works only for accredited institutions like in the UK.

However, whenever I get my account statement from the bank, I have three weeks to protest any charges made falsly. I never had problems in real life, so I don’t know how easy or difficult it is to convince the bank on this.

Online banking, when I want to authorize a transfer, requires a TAN - Transfer Authorisation number - which comes on a piece of paper. The reasoning is that a hacker can read all info on my PC, but not on a piece of paper in my room. Each TAN is used exactly once and then crossed off. When you run out, you tell the bank to send you a new list.

65

I’m British, aged 25, and have never written a cheque in my life. It seems solely to be the preserve of the elderly, and paying by cheque in a supermarket or other similar venue seems slightly antisocial to me. Everything is now done via Chip-and-Pin, direct electronic transfers, or via cash.

66

I’m in the U.S. I would never use a check/cheque in the supermarket, but I do use one monthly to pay my house cleaner. I don’t think she’s set up to receive electronic transfers. I presume in the UK she would be?

67

That surprises me. With Irish and UK cheques (checks) all you get is the customer’s name (often only initial and surname) and the account number and branch branch details.

We are expected to use bank forms. You may not create your own cheques, unless they are produced by a security printing firm, in standard size, on specified quality paper to limit forgery. They must have machine readable digits, identifiying the bank, branch and customer account, because most cheques are automatically processed through an industry cheque clearing system.

In legal theory, you can produce your own cheques, but the payee’s bank would reject them. They would send him to your bank branch for payment. Your own branch might pay it, after checking that it was genuine, but they would tell you to stop doing it or move your account.

Finally, in Ireland we pay tax of 50c on each cheque, charged when the bank issues cheque forms to you. Proof of payment is by a “medallion” printed on each cheque form. Unless you prove payment by some means, your bank cannot pay cheques without medallions.

68

It’s the same in Ireland. Many shops and service stations refuse to accept any cheques. Like the UK, most retail purchases are by cash or by Chip-and-PIN card.

Businesses are now the main users of cheques, It’s partly an age thing as you suggest, and partly because of the perceived benefit in delaying payment. However, if everyone’s delaying payment, there’s less money circulating in the economy and everyone loses. That’s why the Irish government increased tax on cheques to 50c to discourage their use.

Each year, fewer cheques are used, and more people move to online payments.

69

Or my “gardener”, ie. the Vietnamese guy who mows my lawn and trims the shrubs. He used to leave a handwritten bill stuffed in the door. He’s graduated to a bill printed out on a PC printer. Said bill still says “Please write a check payable to **** and send to: …”. So, I mail him a check once a month, with the bill.

I pay most bills online through my bank, but I don’t use it for payees like that. I’m not sure that he would get the payment from the bank connected properly to my account (he doesn’t have account numbers). Better I do what he wants, and mail him a check.

My checkbook never leaves the house, but it’s used for things like that. I think we use checks for a lot of things that are cash payments in other places. Here, plumbers and the like, who visit your house to perform some service may not be set up to take credit cards. Call somebody to rooter the drain, and if it isn’t a major chain like Roto-Rooter, but some local outfit with a few guys driving around with vans and snakes, they may not take plastic. You write them a check. I get the impression that would be a cash transaction in a lot of other places.

70

Theoretically anything can be a cheque.

In fact, for decades a cheque has included magnetically/Optically read account and routing numbers for easier machine processing.

In “Catch Me If You Can”, di Caprio - based on a true story - mucks with the routing numbers to send cheques on a round trip across the USA, so the banks take several weeks to find they are bogus, in the days before computer transactions. IIRC that happened in the late 1950’s or early 1960’s.

I strongly suspect a home-made cheque would either be rejected, or you would be told to take it to the branch it was drawn on yourself. Other banks are not obliged to cash your cheques; “in the good old days” before serious computerization, it was not unusual for a bank to refuse to cash the cheque unless it was either your own bank branch, or the bank and branch of the person who wrote the cheque - even if it was a piddling amount, anyone but your own branch would give you the third degree and demand serious ID. Your own branch would either “put a hold on it” until it cleared; or if you had the money to cover it, they would condescend to actually put the money right into your account immediately.

A small town where I once worked, the major industry had gone to direct deposit. They distributed a computer list to each branch in town of the deposit amount, and a transfer for the total would arrive on schedule from the company’s bank. Since they had the list the day before, they would give workers access to their money a day or two early for a fee of $10, back when that was real money…

71

Here, about the only thing in common is that checks are printed on paper and have machine-readable bank and account info. (eg: the MICR numbers at the bottom edge)

Other than that, people are free to buy checks from their bank, or from mail-order places that tend to be cheaper and have more interesting designs than the usual yellow or blue “safety” paper or various flying flags and eagles that come from the bank. Yet another option is buying blank forms at office supply stores and printing your own. Obviously, there’s no standardization or security. I don’t even think the MICR numbers need to be magnetic any more - just need to be in that distinctive font.

72

I use ING Direct for my banking (in the US), and they are really pushing electronic transfers hard for person to person payments. Anyway, it’s a free service–no fees at all.

73

In the USA here

It sounds like you pay more in Europe for your banking, is that correct ? My account here is “free checking” - there are no fees for writing checks, only the cost of the paper check itself (.05 to .10, as said before). That is to say, no monthly fee, and no fee for writing the check itself.

Even people who say they only “online bill pay” might actually be using checks - that system is setup to transfer electronically if the company is setup with the bank, but if not then the bank itself is issuing and mailing a check when you click “pay” online.

I checked and there are currently 7,813 FDIC insured banks in the USA. That is 7813 different companies, not branches, IE Bank of America is 1 bank. And that doesn’t even include Credit Unions which are insured by NCUA (and I couldn’t find a count like I could on the FDIC website).

All a bank here needs to get $ from your account is definitely just your Routing # and Account # - actually all of the payments that I make electronically are setup as a pull system. IE I paid my mortgage from Citi electronically by typing in my Account # and Routing # on their website, and the money came out, with no interaction between me and my bank. Many legitimate companies do a process where they deposit and withdrawal small change and make you verify the amounts, but that is on their end for their own security, not mandated by your bank. Perhaps the difference here is that the ultimate liability for fraud here usually falls on the receiver of funds, so it is the Phone company that loses the cash if you use John Smith’s account #'s, not John Smith, once he reports it.

74

Well it varies from country to country, as has been said, by my impression is that there are fewer fees here. You don’t get charged for issuing cheques (within the UK) or generally for using the ATMs of yours or other banks (there are some exceptions to that), or for having a modest overdraft* (depends on bank and account, but that’s quite common).
I’m sure the banks make their money other ways, like higher penalty charges and worse interest rates for deposits, but there are really no regular fees for operating a UK bank account for routine stuff.

  • [edit] as long as money such as your salary is regularly coming into that account
75

Why would this be the case? I can’t imagine this happening at all. Even if I pay my mum, the amount is debited from my account and credited to hers within 4 hours. There’s certainly no cheque generated, it just appears as a credit in her account. We are with different banks, incidentally. She certainly has never needed to ‘set up’ with the bank - she just gave me her account number and sort code and away we go.

UK here - I don’t pay anything at all for regular banking, including the first £x of my agreed overdraft - I think it’s the first £500. After that I pay debit interest. I also get credit interest on my credit balance, although it’s paltry, and a variety of fairly superfluous benefits, like limited travel insurance. I have got an account that requires a qualification (certain level of investment and/or income going in) though, so I know that some similar accounts have a monthly charge attached, but that’s more for the silly extras I think.

76

When US people talk about online bill pay, the system is generally one of two things: Either they tell each of their utilities, etc, to send a bill to the bank instead of their own home, or they manually enter each payee into the bank website. The difference for us is that the bank only has the payee’s bank account info if they are working with that bank. That is to say, a bill itself from say the cable company doesn’t have banking information on it (usually) just your cable account # and the amount due. So if you enter a payee into online bill pay generally you are just entering a name and address, not account information - so the bank only actually has the account information if they are working with that payee. Although I believe it is possible to enter a person’s name, and account info into some online bill pay, as far I know that is not the common way to do it.

77

Online bill pay and ETF are separate things. Online bill pay is intended to allow you to pay a company who has sent you a bill with account information and a mailing address to send payment to. By “account information” I mean your identification in the company’s billing system, not a bank account. You don’t have a bank account number for them. As noted, if it is not a payee which has registered with the bank to receive electronic bill payments from them, they will get mailed a check by the bank, together with the information you provided.

78

The thing is, in the U.S. it is much more difficult to set up an electronic transfer to an individual.

For example, my account is at one of the biggest banks in the U.S. I just tried to add my father as a payee in my billpay list. Since he is an individual, not a company, it didn’t ask for any account information – just his address and telephone number. If I now send him money through the billpay, the bank will print and mail a paper check. I know, because my father has sent me money the same way.

Now, if I wanted to add a company as a payee things would be different. The bank would look through its long list of companies to see if electronic transfer were possible. In most cases it is. But even there, there are a few companies that apparently cannot take electronic transfers, for example, my condo homeowners association. So they get a bank-printed paper check.

ETA: I guess the point is this: In the UK, it is assumed that everybody that receives money can get it via ETF, so everyone that sends money knows to ask for the account information. Whereas here, it is assumed that only certain entities can get it via ETF, so you have to check each case specifically.

79

At least in the UK, it’s entirely possible to bank without paying any fees whatsoever, if you keep things simple and aren’t a business. This includes setting up regular payments for bills, transferring money between accounts and withdrawing cash from almost all ATMs (there are private ATMs in places like nightclubs and such that charge a fee, but free ones are everywhere).

80

well, that makes me a bit nervous. You mean every time I use a check I am running the risk of anyone who might see it stealing my $? I didn’t know that-nor do I believe it.