The HSBC bank has announced that it is to reduce the cheque guarantee limit on selected debit cards. This is likely to affect around 300,000 customers of the bank, who will see their card guarantee limit fall from £250, down to just £100. The move was welcomed by debt advice specialists, who see this as the removal of an unnecessary temptation; one that has caused consumers to spend irresponsibly in the past, and end up in financial difficulty with an unmanageable overdraft.

The Bank said that it was talking the steps in order to reduce the number of customers getting into debt and also to cut its losses on cheque fraud.

The banking industry plans to phase out the cheque guarantee system in around two years time. Already many retailers refuse to accept cheques in exchange for goods and services, and last year only 7% of cheques issued were covered by the guarantee scheme.

Around 88% of all customers in the UK have cheque cards with limits of £50 or £100 only. The HSBC is targeting the reduction in cheque guarantee limits at those people that had requested an increase in their limit in the past.

The move could stop some consumers from becoming overcommitted. A cheque book containing 30 cheques, accompanied with a £250 guarantee card, allows the user to rack up a £7,000 overdraft, without having to request it. By reducing the guarantee to £100 per cheque, this reduces the potential damage to an overdraft of just £3,000.

Consumers get into financial difficulty for a number of reasons. Sometimes it’s irresponsible borrowing on the part of the consumer, and sometimes it can be down to a change in circumstances, such as the loss of a job for example. In many cases it’s down to irresponsible lending from the banks, by simply making borrowing money and getting into debt too easy.