Payment Methods

Question 1

Payment methods : Cash

Answer 1

Used everyday small transactions

Continent/ trusted method

Available on demand with access to ATM

Prior proceeds of crime legislation customers could withdraw large sums of money / no longer pre levant in well regulated jurisdictions

Question 2

Payment methods : Cheques

Answer 2

Written instruction from account holder to their bank to pay specified amount to named payee

Written on standard form provided by banks in cheque book / contains slip of pre printed info such as branch, sort code, account number & name of drawer

Customer completes by hand (write amount in words, date & sign)

Usage declined due to electronic methods / DEC 2009 payments council set date to close general cheque clearing system by OCT 2018

Used offshore as convenient/ cost effective for companies to settle invoices

Question 3

Payment methods : cheque guarantee cards

Answer 3

Historically used when paying to guarantee cheque for amounts up to £250

To be guaranteed card would have been handed over with it & rules of scheme complied with

Decline in usage/ payments council decided to close scheme on June 2011

Question 4

Payment methods; Bankers Drafts

Answer 4

Cheques drawn directly on account of bank rather than customers

Before person request bank to issue one, required to have cleared funds available in account to cover amount of draft

Customers account immediately debited & bank account credited

Funds remain on bank account until draft presented by payee & cleared

• provides comfort to payee they’ll be paid
• eliminates risk of cheque bouncing bank
• used for transactions of large sums

Question 5

Payment methods : bank cards

Answer 5

Debit cards
-plastic cards allow purchase of goods & services

• card sends instruction to cardholders bank to debit account & credit payees account
• used at ATM to withdraw cash or access other services
• Used in telephone / interest purchases
• requires pin to authorise payments

Credit cards
-similar to debit cards to purchase goods & services / cost isn’t directly debited

• card funds up to personal spending limit / varies
• cardholder chooses amount & method to repay bank each month / subject to minimum amount
• unpaid balance incurs high interest rates

Question 6

Payment methods : ATM & Internet/ Telephone

Answer 6

ATM

• machine located outside bank of shop / gain access to bank 24/7
• insert card & enter pin

Services;

• cash withdraws
• view balance
• order statement / mini statement
• pay cheques or order cheque book

Internet/ Telephone services
-processed using faster payment services or BACS

Question 7

Payment methods : automated payments

• Direct Debits
• Direct credits

Answer 7

DD
-instruction from customer to bank authorising organisation to collect varying amounts from their account/ provided notice of amount & dates

• bank allows money to be taken via BACS
• convenient method to pay bills or regular invoices of varying amounts

DC
-allows organisation to make payments by electronic transfer directly into bank account

• secure & reliable method / not lost or stolen
• used to pay wages, pensions, employee expenses, dividends, supplier payments

Question 8

Payment methods : Automated payments

• Standing Orders
• International Bank Account Numbers

Answer 8

SO
-Instruction to bank to make payments for fixed amount to same beneficiary at UK bank on regular basis

• any person with current account at U.K. Bank
• payment continues until customer cancels it or specified final payment date reached
• BACS (receipt received 3 days)
• FASTER PAYMENT (same day)

IBAN
-introduced to speed up international payments by standardising identification of bank accounts

• reduce errors& delays
• to make European cross boarder payments customers must quote IBAN & BIC
• uses country code (2 digits), two digit check number, first 4 numbers of BIC characters, sort code & account number