9. Cheques

Cheques authorise payment from your account. All cheques contain the same type of information albeit with different artistic styles.

The three key numbers are always at the bottom:

• Cheque number
• Sort code - every bank has a unique code
• Account number

It makes use of a standardised font that banks have been developed to allow cheques to be machine readable. The ink used is also magnetic to make the machine-reading even less error prone.

In the UK cheques go through a clearing house for processing, which is why it can take several days for the transaction to take place.

At the clearing house, a magnetic ink character recognition reader (MICR) is used to capture the numbers. The value of the cheque is detected by an Optical Character Recognition reader, this value is recorded to complete the transaction. Cheques are then grouped by sort code for forwarding to the originating bank.

For many years cheques have been in decline - people prefer to use their credit and debit cards. Many retailers such as supermarkets now refuse to accept cheques - cash or card only.

But they do still have a place.

• Some merchants prefer them as they do not have to pay the credit card fee (although there is still a bank handling charge)
• They are very useful to pay by post.
• Sometimes you are not inclined to reveal your credit card details to unfamiliar merchants and so a cheque is preferable.
• Sole traders and individuals who do not have a credit card payment facility

There is a proposal in the UK to phase out cheques all together by October 2018 but only if there is an alternative in place by then. For instance 'Contactless technology' or using your mobile phone to make micro payments.