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How many £s does it take to cash a 1p cheque?

Talking of small change…last week I received this cheque in the mail for a single penny.

 1-penny-cheque.jpg     I had to check it twice just to make sure that it was actually a 1-penny cheque.

I cannot help wondering how many man-hours have been wasted (and are going to be wasted) on issuing and processing this cheque.

My estimate is around 2-man hours (at least) which translates into well over £12 (or $24) at the minimum wage rate in UK.

Any one else cares to venture a guess?

Long live the “traditional” way of doing business!

P.S. Coincidentally came across this BBC report which suggests that “the cost to a bank of processing a cheque was 44p” (Note that this is simply the cost to the bank – it does not include cost to the issuer and the beneficiary – in terms of time).

This site suggests that the cost of “processing paper cheques” may be as much as “between $15 to $25”. Wow. 

June 14th, 2007 Posted by | Economics, Miscellaneous | 4 comments

4 Comments »

  1. Shantanu: I am sure you will agree that the cost to the banks of issuing and processing this cheque for 1p is certainly far less than what they will incur if NOT paying you this money and NOT having a written instruction from you about what to do with this 1p is deemed a financial irregularity by the powers that be.

    Unlike the Inland Revenue, the bank cannot obviously assume that they will have ongoing interaction with you. The IRS keeps hold of sums, say as small as 10p, to be settled in future tax filings. One could argue they pay no interest and are therefore using the float to their benefit! But then again I think those arguments are reserved for profit making institutions only. I am sure we could open a whole new Pandora’s box of different rules for different institutions.

    Comment by Shefaly Yogendra | June 16, 2007

  2. Good point!
    The strange thing in this case though was that I still have a current account with the institution and it would have taken only one call/email/letter to find out if I would have preferred transferring the money to my other account with them…

    or am I missing something?

    Comment by Shantanu Bhagwat | June 17, 2007

  3. Shantanu: The action you suggest they could have taken requires an organisation with a unified view of the customer. Unless they sent you this cheque about another bank account, in which case this reflects rather badly on the bank (and I shall forward the post to some people!), this may be reflecting that the organisation does not really have that view available. Also I think retail banks have not yet sorted how to devise an incentive system that rewards cross-selling using such a unified view. So the average employee is not really bothered about thinking creatively and taking initiative. Now that is a different question I think 🙂

    Comment by Shefaly | June 18, 2007

  4. […] My friend Shantanu’s reflection on ‘How many pounds does it take to cash a 1p cheque‘ […]

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