Different Ways to Pay
- Created by: zainb
- Created on: 06-11-17 10:23
Cash
- Notes and coins in a wide range of denominations.
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Most widely accepted form of exchange
Physical not virtual
Consumers feel confident when using
Makes budgeting easier
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Can be lost or stolen , Cannot be used online
Threat of counterfeit
Only really appropriate on purchases up to a certain amount
Debit card
- Issued by banks with payments for goods and services being deducted directly from a current account
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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
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Short time lapse between making the transaction and the money being withdrawn may result in overspending
Not accepted or appropriate for small transactions
Credit card -
Issued by financial institutions allowing customers to delay payments for goods and services
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Allows a period of credit that is interest free, e.g. one month
widely accepted
Offers a degree of protection on purchases , Suitable for online transactions
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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, limited amount of credit allowed
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
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Low risk form of payment as the cheque can only be cashed by the named payee
Widely accepted for face-toface and postal transactions
No need to provide change as can be written for an exact amount
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The time delay between writing the cheque and it being cashed could cause a consumer to go overdrawn
Viewed as old fashioned
Easy for the consumer to make errors when writing the cheque which will create problems for both the consumer and the recipient
Electronic transfer
Payment is transferred directly from one bank account to another.
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Almost instantaneous
Provides a record of payment
No additional costs incurred
Easy to use for one-off and more frequent transactions
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Risk of loss if the transfer is incorrectly set up
Not appropriate for face-to-face transactions
Direct debit
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. pay a gas bill
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An easy way to make regular payments,
Amount paid can vary to ensure the payment matches the amount required by the vendor
Quick and easy to set up
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If the payer makes a mistake and takes too much it is the payee’s responsibility to claim back the money
The payer determines the amount paid each time
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. pay £30 for a phone contract each month
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The same amount is paid each time making it easier for the payee to plan and budget
Easy both to set up and to cancel
No need to remember to make regular, standard payments
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Payments are taken regardless of the customer’s balance which could lead to the unplanned use of an overdraft facility
Payments will continue to be made unless cancelled
Con-tactless card
Cards containing antennae allow money to be transferred when the card touches a contactless terminal
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Gaining in popularity
Secure method of making payments
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Often only accepted for relatively small transactions
Still not widely accepted as seen as new technology
Charge card
Issued by financial institutions allowing customers to delay payments for goods and services for a short period of time;
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Reduces risk of running up debts
Allows a short period of credit Avoids the need to carry cash
Often offers additional perks
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Must be paid in full each month
Often an annual fixed fee is applied
Store card
Issued by a retail outlet so that customers can delay payments for goods and services (similar to a credit card but only accepted by stores specified)
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Allows a short period of credit that is interest free, e.g. one month
Often offer loyalty schemes, discounts and special promotions or privileges
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Only accepted in issuing store or linked associations Interest is paid on outstanding balances
Can encourage overspending and result in a consumer getting into debt – particularly if they hold multiple cards
Mobile banking
The ability to carry out financial transactions using mobile devices such as phones or tablets
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Convenient as can be used at any time and place
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Secure Features are still limited and hence mobile banking does not offer all of the functionality of Internet banking
Banker’s Automated Clearing Service (BACS)
A system that allows the transfer of payments directly from one bank account to another
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Faster payment allows almost instant transfers that are guaranteed within 2 hours
Can be accessed in a number of ways. i.e in a branch
No additional costs
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Faster payment is not offered by all banks or branches and the customer not use BACs which can take three days to transfer payments
Limited amount that can be transferred in any single transaction
Clearing House Automated Payment Systems (CHAPS)
A system that allows the transfer of payments directly from one bank account to another
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Transfers can be made the same day assuming instructions are received prior to a set time, e.g. 2 pm at Barclays
There is no limit on the amount that can be transferred in a single transaction
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Normally, there is a fixed charge per transaction regardless of the amount transferred
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