different methods of payments

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