Cheques, postal orders and banks before online payments

bank cheque - small icon

This page describes how money was paid, sent and received before the electronic methods of today. It is about how ordinary people experienced postal orders, cheques and bank accounts and does not go into technology.


By the webmaster, based on living and working with pre-decimal currency over many years and with firsthand contributions

There have always been banks in some form or another, but in far distant times they were seen as a service for the wealthy few. Even by the early 1900s, ordinary people still did not have bank accounts. They dealt directly with cash when going shopping and paying at the door for deliveries. Going shopping involved making sure they had enough coins and banknotes to pay for everything they might buy. This was how it was in my childhood in the 1940s and almost certainly in my parents' time and their parents' time before them.

Postal orders for sending money in the post

There was, of course, no digital money transfer for sending money any distance. Post offices sold what was called 'postal orders' for sending money by post in an ordinary envelope, usually accompanied by a letter or explanatory note. These postal orders were certificates with their value printed on them, with the name of the purchaser and recipient written at the time of purchase. When received, they could be exchanged for cash at any Post Office, usually the local one where the recipient lived.

The cost to buy a postal order was a small amount more than the face value.

Post Office savings accounts for anyone

In September 1861 the Post Office opened savings banks, so setting in motion what were effectively bank accounts for ordinary people. It was a great hit as people were attracted by the idea that this new bank was secured by the government.

When I was growing up, every child seemed to have their own Post Office savings account, used largely for birthday money sent by relatives.

The Post Office even offered government stocks and bonds and war savings during WW1. In 1956 it introduced the premium savings bonds which are still widely-used today.

Bank accounts become common

As the century progressed more and more ordinary people got their own bank accounts with banks, and employers paid wages and salaries directly into employees' bank accounts.

However, this was by no means universal. Coins and notes in small brown envelopes were still the common form of wages payment. When as a teenager, I had a Saturday job in the mid-1950s, this was how my wages were paid.

Cheques and cheque books

Every person who opened a bank account was provided with an easy way of paying money to tradesmen, etc, directly from their bank account. Essentially there was a small form on which they entered the name of the person to be paid and how much. This was then handed over in exchange for the goods being bought. The form was called a cheque.

a cheque

A cheque

Cheques could be sent by post.

Banks provided cheques bound into books, all identical apart from their identifying number, with designated places for the name of the person to be paid, the amount both in words and numbers, the date and the signature of the account holder. Each cheque was pre-printed with the account details and the name of the account holder.

Each page of the cheque book was a tear-off cheque on the right and a permanent stub on the left. The stubs were for keeping records of the cheques, the name of the person being paid and the amount.

When the person being paid was given or sent such a cheque, they would hand it to their own bank which would then transfer across the amount stated on the cheque, either over the counter as cash or into the recipient's bank account. But it took time for the receiving bank to check with the sending bank that the money existed. The process was called clearing. It took roughly three days for a cheque to clear, and the recipient could not get access to the money until the cheque had cleared.

A new cheque book arrived though the post when the bank's records showed that the older one was nearing its end. The cost was debited to the customer's account, as explained on the page about stamp duty.

People with bank accounts found it very simple and convenient to pay by cheque rather than cash for their goods and services. Not all tradesmen, though, liked the methods, because it meant giving goods over and waiting for payment, and losing out if the cheque was faulty, described as bouncing.

The rest of this page goes into some detail about paying by cheque. This seems appropriate on a website about life in bygone times because cheques were used far more widely in the middle-to-late 20th century than they are today. Indeed there have been calls to discontinue them and by the time you read this they may have been discontinued. Some companies have already refused to accept them. For why, read on. Consequently, this page describes what was rather than what is, even though some practices may still be in existence as you read.

Open cheques and crossed cheques

Cheques in cheque books could be 'open' or 'crossed'. The 'crossed' was two parallel lines between which the sender could write the name of the person or company to be paid. This was regarded as a safety measure as crossed cheques could only be paid through a bank. A sender with an open version could put their own crossing on it, to give added security that it would only be credited to the payee written thereon. (I usually did so). If not crossed, it was possible for the named recipient to pass it to a debtor of their own, and sign it on the reverse. This would then be paid to that last recipient. One could also 'open' a crossed cheque by writing 'open' over the crossing, and signing the endorsement.

Pay cash cheques

A cheque could also be written 'Pay cash', which meant there was no entry on the recipient's statement, as they would ask for the cash over the counter - useful for recipients with no bank accounts.

Eventually, open versions were phased out, and the crossed version became the norm. Similarly, the 'pay cash' arrangement was discontinued, apart from getting cash out of one's own account.

Early cheque books and work by bank staff

In the days before cheque books were printed with the name of the account holder, the bank staff would have to keep a record of the cheque book numbers sent to a client requesting a new book. If there was an occasional oversight, there would be a hue and cry after cashing-up time, plumbing staff memories as to whom the errant book had been sent. Likewise, there was an insistence in those days that staff could not go home until the accounts reconciled. Every cheque was examined for its signature, which the home bank quickly learned to recognise. How different from now, when most cheques don't even get sent to the home bank, but are processed electronically, any odd fraud being offset against the time saved in all the previous staff-time checking.

It is clear from my own statements from the 1960s that each customer's statement was put into a typewriter at the end of a day, and the latest entry and updated balance added. Sometimes the lines of type are at an angle, where the sheet was not inserted squarely. It was usual then for a typewriter to have a dual-coloured ribbon, red and black, and if the account went 'into the red', the updated balance did, indeed, appear in red type.

Banks used to close to customers at 3 o'clock the mid-afternoon to allow time for all the checking and other administration. At that time banks also opened on Saturday mornings, and it was only after considerable industrial action from staff, that Saturday closing became the norm. How ironic, then, that a number of banks have re-introduced some Saturday opening, but often only for advice purposes. (That is, if your bank hasn't withdrawn its branch from your High Street!)

James Baker

Proof of payment by cheque

Every so often - quarterly I seem to remember - banks returned cashed cheques to their customers. These cashed cheques were rubber stamped with 'Paid' so that the customer could check that their cheques had been submitted for payment and that the bank had paid out on them.

Eventually this practice proved too expensive for banks, and the return of cashed cheques was discontinued. I think this was in the 1960s but can't be sure. Do you know? From then on, banks expected their customers to conduct their own checks against their bank statements which were posted to them.

Household management of cheques

In my experience the man of the family paid the family's bills monthly and he wrote out the cheques to do it. These were either posted to the recipient, or the man's wife would deliver them herself. Of course there must have been exceptions to this practice, but it in the 1940s and 50s it was not usual for married women to write cheques. Husbands provided wives with housekeeping money as cash. Writing cheques was a man's job. My mother never wrote a cheque until the 1970s when she became a widow. I remember how stressful it was for her and how she needed me to watch over her while she did it.

Cashing cheques - bouncing and clearing

Recipients of cheques had to take them to their banks to pay them into their accounts.

For large commercial companies it was normal for a member of staff to have to visit the company's bank at least once every working day. It was straightforward but labour intensive.

Occasionally a bank might refuse to pay on a particular cheque, either because the sender's account was overdrawn or because the cheque was simply fraudulent. When this happened, the cheque was returned to the sender with a letter explaining why it could not be paid. In everyday speech, this was described as the cheque 'bouncing'.

Recipients of cheques could never be sure whether or not a cheque would bounce until they had allowed a sufficient time for their own bank to submit the cheque to the sender's bank and receive notice that it would be paid. The delay was known as 'clearing'. It normally took about three days for a cheque to clear and people were often left on tenterhooks waiting for confirmation that a cheque had indeed cleared.

Because of the uncertainty of whether or not cheques would clear, they tended to be used for paying for on-going services, like gas, electricity and water where the provider of the services could cut off the supply until payment was made.

Shopping and the acceptability of cheques

Most of the shops in high streets were small retailers, rather than large chain stories, and they did not like being paid by cheque. One reason was the uncertainty of letting customers take goods away with them while not knowing that their cheques would in fact clear. Retailers accepting cheques could so easily find themselves out of pocket if cheques bounced. There were no bank guarantee cards.

Another reason why small retailers disliked cheques was because of the nuisance of having to visit the bank to pay them in. So shops tended only to accept cheques from regular and apparently reasonably affluent customers or customers who had accounts with them and paid monthly. Even then, this was primarily to prevent these customers from shopping elsewhere.

It was of course quite usual to ask a shopkeeper, "Would you take a cheque?" but equally usual for the reply to be, "Sorry, no we don't". Only occasionally a shopkeeper might like the look of a person and agree rather than lose the sale.

So ordinary people could not shop around or buy on impulse unless they carried large amounts of cash. While I was growing up in the 1940s and 50s, my parents always went to the bank or building society to draw out sufficient cash if they were going shopping for something expensive. In fact, even after I married in the 1960s, my husband and I did the same thing for a few years when we set up home.

The beginning of the end for cheques

Electronic payment signalled the beginning of the end for cheques.

With electronic payment, the person being paid has the payment confirmed almost instantly, so avoiding the delay of cheque clearance. Neither does the person being paid have to spend time actually visiting their bank to pay a cheque in.

With electronic payment, the person paying also benefits. By avoiding the delay of cheque clearance, goods bought online can be dispatched immediately and so arrive more quickly.

If you have an old postal order, cheque book or cheque, I would be grateful for a copy. I can digitally remove personal information. Thank you. Contact.

sources: early 20th century material      sources: ww2 home front and other material     contact
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