INSTRUMENTS OF EXCHANGE Flashcards
What are the Instruments of Exchange?
Barter, bills of exchange, electronic transfer, tele-banking and e-commerce, cheques, money order, debit cards, credit cards, bank draft, telegraphic money transfer, bank transfers
and M-money/mobile money and mobile wallets
What is Tele-Banking?
This is a facility that allows bank customers to use a telephone to access some
services at the bank. Customers can:
- Check the balance on their accounts
- Transfer money from one account to another
- Pay bills
What is an Electronic Fund Transfer?
This is the electronic exchange or transfer of money without any paper money
changing hands. This exchange can take place within a single bank, from one
account to another, or from one bank to another. The transfer takes place using the
computer-based system.
What is a Bill Of Exchange?
This is a document usually used to settle debts in international trade. This bill of
exchange is made out by the seller. It lets the buyer know that he has to pay a sum
of money on an agreed date (usually three months), or on demand (when the seller
asks for his money). The buyer benefits because he gets time to pay the debt.
What is E-Commerce?
This is the conducting of business (buying and selling of goods and services
through an electronic medium such as the internet. Payments for such online
transactions are usually done using Electronic Fund Transfer (EFT) through the use
of debit cards, credit cards, tele-banking among others.
What is Cheques?
These are slips of paper that a bank customer fills out and signs to instruct their
bank to do something with the money in their bank account, for example pay
money to another person or company
What is Money Order?
These are documents used to make payments of specific sums of money. They are
usually obtained from a bank or post office. The person who needs a money order
must first pay the bank or post office the sum of money he/she wants on the money
order. This order can then be used to pay someone else. Money orders are
considered guaranteed forms of payment because the bank has already received the
sum of money written on the order.
What is Bank Drafs?
A bank draft is similar to a cheque, however, the bank draft is given by a bank to a
customer who has given cash for the amount on that bank draft. This means it is
written by one bank for payment at another bank. This means that payment is
guaranteed.
What is M-money?
This is an app running on a mobile device (smartphone, tablet or smartwatch) that
lets users store, send and receive money. Instead of using cash the user can pay
using their mobile device.
What is a Debit Card?
These are cards issued to customers by banks and other financial organisations.
They enable the rightful holder to make payments and purchases without having to
use cash or a cheque. The charge is debited directly to their bank account. This
means that payment is made immediately from the customers’ own bank account.
What is a Credit Card?
These cards enable the card holder to make purchases without the use of
cash or cheque and to pay the amount involved at some later time. There is also an
interest rate attached to credit card use. The bank or issuer of the credit card makes
the payment on behalf of the credit card holder, who then repays later. It acts as a
loan to the customer.
What is a Bank Transfer?
A bank transfer is when money is sent from one bank account to another.
What is a Standing Order (banker’s order)?
This is a service were a person gives his/her bank the authority to transfer from
his/her account a fixed amount of money at regular intervals on a specific date to
the account of a named person(s) or firm(s). This service is usually used to make
payments like rent, loans, salaries and other fixed payments.
