Method of Payment

Question 1

What are the different Method of Payments?

Answer 1

Cash
Debit Card
Credit Card
Cheque
Electronic Transfer 
Direct Debit 
Standing Order
Pre-paid card
Contactless Card
Charge Card
Store Card
Mobile Banking 
BACs (Bankers Automated Clearing Service)
CHAPs (Clearing House Automated Payment Systems)

Question 2

Cash - Notes and coins in a wide range of denominations

Advantages and Disadvantages of Cash

Answer 2

Most widely accepted form of exchange - Physical not virtual - Consumers feel confident when using - Makes budgeting easier
Can be lost or stolen - Threat of counterfeit - Only really appropriate on purchases up to a certain amount - Cannot be used online

Question 3

Debit Card - Issued by banks with payments for goods and services being deducted directly from a current account

Advantages and Disadvantages of Debit Card

Answer 3

No need to carry cash - Secure method of payment with low risk of theft - Widely accepted - Offers a degree of protection on purchases - Suitable for online transactions
Short time lapse between making the transaction and the money being withdrawn from the customer’s account may result in overspending - Not accepted or appropriate for small transactions

Question 4

Credit Card - Issued by financial institutions allowing customers to delay payments for goods and services.

Advantages and Disadvantages of Credit Card

Answer 4

Allows a period of credit that is interest free - Most cards are widely accepted - Loyalty schemes are often offered - Offers a degree of protection on purchases - Suitable for online transactions
Interest is charged on balances not paid off within a month - Can encourage a customer to overspend and get into debt - Interest is charged on cash withdrawals - A limit will be set on the amount of credit allowed

Question 5

Cheque - A written order to a bank to make a payment for a specific amount of money from one person’s account to another account.

Advantages and Disadvantages of Cheque

Answer 5

Low risk form of payment as the cheque can only be cashed by name payee - Widely accepted for face-to-face and postal transactions - No need to provide change as can be written for an exact amount
Expensive for the customer if the bank refuses to clear the cheque - The time delay between writing the cheque and then cashing it could cause the customer to go overdrawn - Viewed as old fashion - Easy for the customer to create errors and problems for customer and recipient