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The problem with using cheques at the point-of-sale is that they take (at least) three working days to clear, and may be dishonoured by the bank, if the customer does not have the money to cover the cheque, or has cancelled the cheque in the interim. The cheque may even be stolen or counterfeit - the retailer does not have the means to find this out at point-of-sale. In any case, it is the retailer who left out of pocket. The solution most modern banking systems1 have developed to these problems is the cheque guarantee card.

A cheque guarantee card guarantees to the retailer that the bank will honour cheques written by the bearer, up to a certain cash value, whether or not the bearer actually has the money to cover the cheque or not (even if the cheque is stolen or counterfeit, provided the retailer followed the bank's verification procedures correctly). In effect, it defers the problem of collecting the debt in the case of a bad cheque from the retailer to the issuing bank.

Most banks issue single cards which combine the functions of a debit card, ATM card, and cheque guarantee card. Contained within the guarantee card's magnetic strip is sufficient information for the POS machine to verify the authenticity of the card with the issuing bank electronically; all the cashier need do is swipe the card, and check the signature of the cheque, and the identity of the customer, with the information printed on it. A cheque guarantee card can also be used by hand, by writing the number of the card on the back of the cheque in the presence of the customer.

Cheques written using a guarantee card cannot be later cancelled. A bank will hold the customer responsible for any debts resulting from the use of the card, unless they can show that the card was stolen, or used fraudulently. If you have a cheque guarantee card, it is a good idea to keep it (and anything else with an example of your signature) in a separate place from your chequebook. If your cheque guarantee card or chequebook is stolen, report it to the bank immediately, even before you report it to the police.

1 - IE, everywhere in the western world apart from the USA

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