Breadcrumb

Cashing Foreign Cheques in the UK

Written by

The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedJan 20222 min read

What happens if you’ve received a foreign cheque as payment? You not only have to think about the currency conversion rates, but also the global differences in banking systems. Although cashing foreign cheques in UK banks can be a bit more involved than other payment methods, it’s far from impossible. Here’s what to consider when cashing foreign currency cheques.

How the clearing process works

Whether foreign or domestic, all cheques must go through the bank’s clearing process before they can be deposited into your account. This normally takes anywhere from one to six working days, but the timings can be far longer when cashing foreign cheques in UK banks.

The cheque clearing process ensures that the correct amount written on the cheque is transferred between the original sender’s account and the cheque recipient’s account. The two banks must communicate with one another, and currency conversions can complicate matters. This extends the cheque cashing process to several weeks, rather than days.

How are foreign cheques paid?

Whether cashing foreign cheques at the post office or your local bank branch, there are two processing methods that might be used.

1. Payments by negotiation

Payment by negotiation is the quicker of the two processing methods. In this case, the bank will credit your account with the appropriate funds within a matter of days, not weeks. However, the caveat is that if the cheque then bounces, the money will be removed from your account. This option is only available when the foreign cheque’s currency matches its country of origin. For example, an US-based cheque written out in USD. However, if a US-based sender wrote the cheque in a different currency, such as euros, it wouldn’t be suitable for negotiation. You can also expect to pay a fee for this type of payment processing.

2. Payments by collection

The second option for cashing foreign cheques in the UK is through collection. This applies when the country and currency don’t match, or if the cheque comes from a country classified as higher risk by the bank. With payment by collection, the bank will wait until the cheque has fully cleared before crediting your bank account. The process can take several weeks, and as with payment by negotiation you’ll need to pay a processing fee.

Exchange rates and cashing foreign currency cheques

Currency exchange rate fluctuations could impact the final GBP value deposited into your bank account. There are two reasons for this:

UK banks set their own currency exchange rates, which differ between institutions.
Currency exchange rates can change during the time it takes to clear a foreign cheque.

When your cheque is paid by collection, the amount received in your account won’t reflect the exchange rate on the day it’s written. Instead, it will reflect the exchange rate of the day it’s cleared and deposited into your account. This may or may not work out in your favour – if the GBP is stronger, you’ll be paid more money. However, the opposite can also be true if the value of the GBP plummets.

Alternatives to cashing foreign cheques

If your business deals with an international customer base, you’ll need to be able to accept cross-border payments. As you can see, cashing foreign cheques in the UK can be a lengthy process. There are several alternative payment methods to save your business time and money.

International bank transfers – Customers can make a transfer using your International Bank Account Number (IBAN) and Bank Identifier Code (BIC). Although this method still incurs fees, transfer times are greatly reduced in comparison to cashing foreign cheques.
Specialty currency brokers – A second option is to use a specialist broker, who often has access to better rates than local banks. They’ll also be able to offer faster transfer times. However, these are usually only available for larger sums of money so may not apply to smaller purchases or transfers.

For a far more convenient alternative to cashing foreign cheques in the UK, GoCardless can help facilitate international payments. Funds are converted into the end currency of your choice and deposited directly into your bank account. You can collect recurring payments with a local bank debit payment option from other 30 countries, all at the real exchange rate.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.