3.3 How To Make Payments And The Advantages And Disadvantages Of Each Payment Method Flashcards
What are the different types of payment methods ?
Card transactions
Cheques
Money in hand
Loans
Monthly payments
What is meant by cheques and the advantages and disadvantages ?
Cheques is a document which requests that a certain amount of money has to be paid from the payers account to the payee.
Advantage to the payer :
- They can be sent by post.
- Large amounts of cash does not need to be carried.
- There’s a record of this payment happening.
Disadvantage :
- There needs to be 2 people that sign this for authorisation, this can be time consuming.
Advantage to the payee :
- It’s safer to carry a cheque rather than cash to the bank
Disadvantage :
- Cheques can bounce meaning the payer does not have sufficient funds.
- Cheques need to be clear before funds can be assessed.
- Cheques have to be paid into the bank account which can be inconvenient.
- Any errors on the cheque can delay payment.
What is meant by credit cards and the advantages and disadvantages ?
Allows individuals or businesses to make payments however they are borrowing the money from the cards company.
Advantage to the payer :
- Payers can purchase things even if they do not have enough funds.
- Customers can use CC for online purchases.
- There’s a degree of protection from customer fraud.
Disadvantages :
- The payer is charged with interest if they do not pay in time.
- Some businesses charge processing fees.
Advantage to the payee :
- The payee is guaranteed to receive payment because it’s authorised by the CC company.
- Payments can be made online.
Disadvantages :
- payees may have to pay a processing fee.
What is meant by debit cards and the advantages and disadvantages ?
A debit card allows a business to directly transfer from their bank account to the payee.
Advantages to the payer :
- Quick method of payment due to contactless.
- Can be used for online purchases.
- Large amounts of cash does not need to be handled.
Disadvantages :
- If you do not have sufficient funds then it won’t be authorised.
- Debit card fraud is increasing.
- Some charges may be incurred due to using a debit card.
Advantages to the payee :
- Can be used online.
- Once transaction has been authorised your guaranteed to receive the money.
Disadvantages :
- Appropriate technology needs to be purchased to manage these payments.
- Processing fee may apply.
What is meant by online digital payment ?
This is becoming a bigger factor as more people are purchasing things online through the use of cards and PayPal
Good for small businesses as they will receive money as authorised.
Payment methods may not require the payer to keep entering their details as it may be saved.
What is meant by bank payments ?
Paying in slip :
If a individual or business want to put money in the bank they need to complete a paying slip.
Electronic transfer :
This is the electronic movement of funds from one account to another.
What is meant by standing order and direct debit ?
Standing order :
An instruction given by an account holder to the back to pay a specific amount to another account.
Direct debit :
An instruction given to the bank to allow another account holder to withdraw funds from their account.
