U5 part 2 Flashcards
What is money?
Money is used to fulfill payment obligations and discharge debts, with different currencies used in various countries.
What is fiat currency?
The official state currency of a country, used as legal tender (e.g., South Africa’s rand).
How has the concept of payment evolved?
Cash is less popular, with internet-based and mobile payments becoming the norm.
List factors influencing payment method choice.
Amount owed, relationship, distance, online transaction, convenience, security, and trust level.
What are traditional payment methods?
Cash and document-based instruments like bills of exchange and promissory notes.
Define a bill of exchange.
A written instruction of payment, regulated by the Bills of Exchange Act 34 of 1964.
What is a promissory note?
A written promise to pay, also regulated by the Bills of Exchange Act.
What is a documentary letter of credit?
An international payment document regulated by international banking rules.
Why are electronic payment methods popular?
They are fast, easy, and cost-effective.
How do debit cards function?
They debit funds from the customer’s bank account immediately, with no credit provided.
What regulates credit cards in South Africa?
The National Credit Act 34 of 2005 and the Electronic Communications and Transactions Act 25 of 2002 (ECTA).
List advantages of credit cards.
No need for cash, convenient for online purchases, and encourages spending.
What are two-party credit cards?
Issued by large stores, allowing purchases on credit, regulated by the National Credit Act.
Describe three-party credit cards.
Issued by banks, allowing purchases within a credit limit and guaranteed payment to suppliers.
What is an Electronic Fund Transfer (EFT)?
A payment instruction to transfer funds electronically between accounts.
