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Different Methods of
Payment
IntroductionIntroduction
Thousands of years ago people had no system of money as we know it today.
They used the barter system of trading.
Barter is the exchange of a good or service for another good or service:
e.g. a bag of rice for a bag of beans.
Hire purchaseHire
purchase
ChequeCheque
Debit card
Debit card
Credit card
Credit card CashCash
OverdraftOverdraft
Bank loanBank loan
Interest-free
credit
Interest-free
credit
Standing order
Standing order
Methods of
Payment
Methods of
Payment
CashCash
Coins and notes are exchanged for goods and services.
Cash is normally used for most small purchases, such as food, newspapers and bus tickets.
Carrying a lot of cash around is quite risky as it can be lost or stolen.
ChequesCheques
Cheques are one of the most popular methods for
paying large bills.
A cheque is an official slip detailing an amount to
be
paid in exchange for goods and services.
The sum of money is taken from the consumer’s
current account.
The counterfoil is used as a record of how money
was
spent and is a form of receipt.
Cheques cont.Cheques cont.
When you pay by cheque, the supplier will usually
ask
for your I.D. card.
If you have doubts that your chequebook or
cheque
has been stolen or lost you must inform your
branch
immediately.
Remember: Never write a ‘blank cheque’.
Cards (Plastic money)Cards (Plastic money)
There are a variety of cards a consumer can apply for to use instead of cash.
These cards can mainly be divided into:
o Credit cards o Debit cards.
1.1. Credit CardsCredit Cards
There are many different credit cards.
Credit cards allow the consumer to buy goods and services without the need for cash (like giving a loan).
They allow the holder to borrow to a pre-set limit.
1.1. Credit Cards cont.Credit Cards cont.
Consumers must satisfy certain requirements before being issued with a credit card.
Credit cards can be used at the Automated Teller Machines (ATMs) or some points of sales terminals.
When withdrawing cash from ATMs the bank will start charging interest straight away.
2. Debit Cards2. Debit Cards
Debit cards allow you to pay for goods using funds transferred directly from your bank account.
The balance in your bank account is automatically checked before each transaction.
2. Debit Cards cont.2. Debit Cards cont.
The transaction will be effected only if there is enough money in the account.
With a debit card you can withdraw cash from an ATM from funds which you already hold in your account.
Some Useful TipsSome Useful Tips
Sign the card and write your I.D.
card number immediately
Memorise the PIN number
Keep card in a secure place
Keep a list or photocopy of all
cards
Never lend your cards to others
Always take ATM receipts with you
Understand all applicable terms
and conditions
Never give your credit card number over
the phone
Never respond to e-mails requesting
your credit card number
Use secure sites when giving credit
card details over the internet
Check the amount on the credit card chit
before signing it
Settle any credit card bills on time
Hire PurchaseHire Purchase
Hire purchase is used to buy expensive items which a person cannot afford to pay outright: e.g. a car
A down payment is usually paid and the balance is paid over several months (monthly instalments).
Hire Purchase cont.Hire Purchase cont.
There could be an additional charge (interest) for this service.
The finance company owns the item until payments have been completed
If you fail to keep up your payments, the lender may reclaim the good.
Standing OrderStanding Order
A Standing Order is an instruction to your bank to
pay a certain amount of money, regularly, on a
specific date, to a certain person or company.
Debts are paid directly from your account by your
bank.
Standing Order cont.Standing Order cont.
Standing orders can be used to pay rent, hire
purchase instalments, insurances etc.
This process saves you time.
It also saves you the trouble of remembering
when the amount has to be paid.
Interest-free creditInterest-free credit
A number of large stores offer interest-free
credit on items bought.
Goods purchased are paid over several
months.
No interest is paid on the money owed, unless
consumers do not pay within the agreed term.
Bank LoanBank Loan
There are various loans that banks offer, such as
home loans, computer loans, car loans, flexi-credit
etc.
A bank loan is granted to consumers who have made
special arrangements with the bank.
Monthly repayments are made over a
stated period of time.
Interest is charged on the balance of
the money owed and depending on the
type of loan taken.
Overdraft Overdraft
This is another service offered by the bank.
Consumers can take out more money than they have in their account, up to an agreed amount.
Interest is usually payable on money overdrawn.
Sometimes, banks will agree a modest overdraft limit on which no interest is payable.
Used mostly to avoid unnecessary debt because of short-term problems: e.g. unexpected medical expenses.
What we spoke about today
Cash ChequesCredit cardsDebit cardsHire purchaseStanding orderInterest-free creditBank loanOverdraft