Different methods of payment - ASAP Flashcards
What is Cash?
This is the notes and coins (money) issued by the federal government. Consumers normally use cash to pay
for relatively inexpensive items such as a newspaper, bus fare or soft drink. Consumers rarely use cash for
expensive items such as a car or a house.
Advantages of Cash:
- it is accepted almost everywhere
- some stores offer a discount for cash
- there are no hidden costs (for example, interest charges)
- there is reduced risk of getting into debt.
Disadvantages of Cash:
- it can be easily lost or stolen
- it may not be safe to carry around
- if no ATM is available, a consumer may not be able to make a desired purchase if they don’t have
enough cash on them.
What is Credit?
Credit is the supply of money now in return for the promise of paying it back later. Credit allows you to
buy what you want immediately and pay for it later, either in full or in monthly payments. Because you are
using money you do not have, you will be charged interest for its use unless you pay the total balance back
to the credit card company before the end of the interest-free period, usually one month.
Care should be taken with your credit card. If the card is stolen, you must ring the bank immediately and
cancel the card in case someone else tries to use it to purchase goods unlawfully.
Some credit cards, including MasterCard-
branded cards, can also be debit cards.
Credit cards can be linked to systems such as
Google Pay so you can pay using your smartphone.
Advantages of Store credit:
- 1: Sign-up discount.
- 2: Regular discounts.
- 3: You can buy what you want when you want it.
Disadvantages of Store credit:
- 1: High interest rates.
- 2: They can harm your credit score.
- 3: They can be less beneficial than traditional credit cards.
What is Store Credit?
Some large stores or retail groups issue their own cards that operate like regular credit cards. These cards
usually are associated with special deals, discounts, bonuses and a rewards program. However, these cards
usually have higher interest rates and fewer interest-free days than regular credit cards.
What is PayPal?
PayPal is an intermediary whereby you end up paying for the good using your credit card, bank account or money stored in your PayPal account.
Advantages of PayPal:
- Secure transfer
- Ability to obtain a refund if a dispute about
the transaction arises - Zero Subscription Fee
- Convenient to use
- Hassle-free Subscription Services
Disadvantages of PayPal:
- Hidden fees
- Extra fees for accessing money
- Delay refunds in case of disputes
- Quick account freezing
What is Cheque?
A cheque is a written communication ordering your financial institution, called the drawee, to pay a
person a specific amount of money. The person being paid is called the payee. The person authorising the
transaction is termed the drawer. Cheques are issued in a numbered order, called a chequebook.
When writing a cheque, no blank spaces should be left before or after the amount. This prevents words or
numbers being added later.
A not negotiable cheque cannot be cashed by anyone other than the payee named on the cheque.
Advantages of Cheque:
- they are safer than carrying cash
- they can be posted safely
- only the named recipient is able to cash the cheque, again making them safer.
Disadvantages of Cheque:
- they are not accepted everywhere
- cheques take time to process and clear (more than a day)
- bank charges are involved with having a cheque book.
Advantages of Lay-by:
- Interest-free – you will pay close to double if you take the same item using store credit. Even a credit card paid in a few instalments will attract interest and fees.
- Pay more or less than agreed, but you have to finish in the contract period.
- Goods are the same price as cash – in easier instalments.
What is Lay-by?
When you buy goods using lay-by, you first pay a deposit and then the store puts aside the good for you.
You then make regular payments over a fixed period of time. Unlike cash or credit card purchases, you do
not take possession of, or own the good, until you pay off the last instalment owing.
If you cancel the lay-by before paying the full purchase price, the store must be notified in writing. The
store is required, under the Lay-By Sales Act, to provide a refund after deducting storage, handling and
depreciation costs. If you do not complete payment by the agreed date, the store can cancel the lay-by. After
receiving written notification from the store, you have seven days to decide to either pay the full amount or
receive a refund, less costs.
Lay-by is a good option when you want to secure something you desire. Because no interest is charged,
it is cheaper than other options such as using a credit card. However, lay-by is quickly being replaced as a
method of payment as consumers opt for ‘buy now, pay later’ providers such as Afterpay and Zip Pay.
