Checking out the current accounts

Customers paying cheques into nearly half of all current accounts have to wait three working days before earning interest on their cash, new research from MoneyExpert.com shows. And some accounts make you wait five working days, analysis shows.

Research from the independent financial comparison site shows 44 per cent of accounts on the market make you wait three working days before you earn interest while another 28 per cent insist on two working days.

The research comes as more store groups stop taking cheques at the check-out – supermarket group Sainsbury’s is the latest following the lead of other high street giants including Asda, Boots, BP, Shell, Morrison’s and WH Smith. London Underground has also announced it will no longer take cheques in payment.

Cheques are still big business – around £164 billion worth were written by consumers last year, according to APACS. But the value used in shops has dropped to £7 billion in 2006 from £11 billion in 2004.

Not all banks make you wait to earn interest on cheque deposits – Lloyds TSB, for instance, starts paying interest on a cheque deposit on the same day.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “The death of the cheque is probably much exaggerated and £164 billion worth written last year shows they are still pretty popular.

“But consumers should think carefully about asking for electronic payments if possible. You’ll earn interest almost straight away with most electronic payments and even with cash payments while in many cases you’ll have to wait three working days with a cheque payment.

“The big store groups such as Sainsbury’s have made it clear that processing cheque payments costs them and they are insisting on debit cards or cash. That’s good news as it should speed up the checkouts as you’ll only have to worry about the person in front remembering their PIN and not have to wait for them to write a cheque.

“We don’t all have the clout of the store groups and can’t insist on electronic payments. But it is a subject worth thinking about if you want to maximise interest earned.”

Banks justify delays in paying interest on cheque deposits as they face a risk that a cheque might bounce. MoneyExpert.com analysis shows customers have to wait around four working days before a cheque is cleared in their account.

However banks do impose fees for bounced cheques – on average if you bounce a cheque you’ll be charged £32.35. The cost of stopping a cheque is around £4.62 on average.