@ Ways to Pay Flashcards
List all the methods of payment
- Cash
- Debit Card
- Credit Card
- Cheque
- Direct Debit
- Standing Order
- Electronic Transfer
- Prepaid Cards
- Charge Cards
- Mobile Banking
- CHAPS
- BACS and Faster Payments
- Store cards
- Contactless Cards
Cash
Notes and coins
Debit Card
Issued by banks with payments for goods and services being deducted directly from a current account
Credit Card
Issued by financial institutions and banks allowing holders to delay payments for goods and services
Cheque
A written order to pay a sum of money from a bank customer’s account to another person or organisation
Direct Debt
An agreement made with a bank allowing a third party to withdraw money from an account on a set day to pay for goods or services received. E.g Electricity bill
Standing Order
An agreement made with a bank to transfer a fixed sum of money to a third-party account on a set date on a regular basis. E.g fixed loan repayment
Electronic Transfer
Payment is transferred directly from one bank account to another
Prepaid Cards
Money is uploaded onto a card with transactions then being withdrawn to reduce the balance
Charge Cards
Issued by financial institutions allowing customers to delay payments for goods and services for a short period of time with the balance being paid off in full at each statement date
Mobile Banking
The ability to carry out financial transactions using mobile devices such as phones or tablets
CHAPS (Clearing House Automated Payment System)
A system that allows the transfer of payments directly from one bank account to another usually on the same day
BACS (Bankers Authorised Clearing Service) and Faster Payments
A system that allows the transfer of a payment directly from one bank account to another in 3 working days (unless faster payment is available)
Difference between CHAPS and BACS
- CHAPS has same day transfer
- BACS takes three days to transfer payment
Store Cards
Only accepted by stores that issues it
Contactless Cards
Cards with an embedded chip and antenna that enables consumers to wave their card over a reader at the point of sale for an automatic transaction
Ad of Cash
- Most widely accepted form of exchange
- Makes budgeting easier- dont overspend or evelope planning
Dis of Cash
- Can be lost or stolen
- Cannot be used for online purchases
Ad of Credit Card
- Allows a period of credit that is interest-free- usually one month
- Suitable for online transactions
Dis of Credit Card
- Interest is charged on balances not cleared at the end of the month
- Can encourage customers to overspend and get into debt
Ad of Debit Card
- Secure method- no need for cash
- Widely accepted
Dis of Debit Card
- Can be used for online purchases which may encourage overspending
- Short time lapse between making the transaction and the money being drawn from the customer’s account
Ad of Cheque
- Low risk form of payment as the cheque can only be cashed by named payee
- Widely accepted for face-to-face or postal transactions
Dis of Cheque
- Viewed as old fashioned
- Easy to make errors when writing the cheque which can cause problems for both the consumer and the recipient
Ad of Direct Debit
- An easy way to make regular payments, e.g household utility bills
- Reduces admin time- payments can automatically be taken and tracked each month so reduce time managing them
Dis of Direct Debit
- If the payer makes a mistake and takes too much, it is the payee’s responsibility to claim the money back
- The payer determines the amount to be paid each time which can make it difficult to budget
Ad of Standing Order
- The same amount is paid each time, allowing person to plan their expenditure
- Easy to set up and to cancel as required
Dis of Standing Order
- Payments are taken regardless of the customer’s balance which could lead to the unplanned use of an overdraft
- Payments will continue unless cancelled
Ad of Electronic Transfer
- Transfer is instant
- Provides a record of payment
Dis of Electronic Transfer
- Bank details of third party must be correct- transfer will not take place
- Not appropriate for face-to-face transactions
Ad of Prepaid Cards
- Can set a budget in advance to avoid overspending
- If lost or stolen the loss is limited to the remaining balance on the card
Dis of Prepaid Cards
- No protection if lost
- Sometimes requires an initial fee to purchase or set up the card. E.g Oyster travelcards
Ad of Charge Cards
- Can buy goods and services without paying for them immediately
- Allows a short period of credit
Dis of Charge Cards
- Must be paid in full each month
- Failure to repay results in very high late payment fee, usually much higher than a standard credit card
Ad of Mobile Banking
- Convenient to use as they can be accessed and at any time and in any place
- More secure and risk free than online/ internet banking
Dis of Mobile Banking
- May not be able to access the full range of banking services
- Regular use of mobile banking can lead to extra charges by the bank
Ad of CHAPS
- Guaranteed same-day transfer as long as bank instructed by a certain time
- There is no limit to the amount of money that can be sent
Dis of CHAPS
- Usually fixed charge for each transaction regardless of amount transferred
- Not a common payment method used by consumers unless it is for a large payment. E.g buying a house
Ad of BACS and Faster Payment
- Faster payment allows almost instant transfers that are guaranteed within two hours
- No fee
Dis of BACS and Faster Payment
- A limit is set on the amount that can be transferred in a single transaction
- Faster payment is not offered by all banks and branches and therefore BACS may have to be used which takes three days to clear
Ad of Store Cards
- Allows a short period of interest free credit- usually one month
- Benefit from discounts and loyalty schemes
Dis of Store Cards
- Only accepted in the store or stores specified
- Annual fee is payable- charge card companies require customers to have a certain level of annual income
Ad of Contactless Cards
- Secure method of making a payment
- Fast and efficient to make a transaction
Dis of Contactless Cards
- Can lost track of how much they are spending
- Only accepted for relatively small transactions
