Methods of payments
Cash
Coins or notes
Advantages
Physical not virtual
Makes budgeting easier
Consumers feel confident when using
Disadvantages
Can easily be lost or stolen
Threat of counterfeit
Cannot be used as an online payment
Debit card
Electric form of banking of your own money. You need money in their ti use your card and will have a pin included.
Advantages
Secure method of payment with low risk of theft
No need to carry cash around
Disadvantages
Not accepted or suitable for small transactions
Short time lapse between making the transaction and the money being withdrawn from the customer's account may result in overspending
Suitable for online transactions
Credit card
Issued by financial institutions allowing customers to delay payments for goods and services.
Advantages
Offers a degree of protection purchases
Suitable for online transactions
Most cards are accepted
Allows a period of credit that is interest free
Disadvantages
Interest is charged on balances not paid off within a month
Can encourage a customer to overspend and may get into debt
A limit will be set on the amount of credit allowed
Cheque
A written order to a bank with a payment for a specific amount and signed to go from one persons account to another account.
Advantages
Accepted for face to face transactions
No need to provide change as it can be written for an exact amount
Low risk form of payment as the cheque can only be cashed in by the named payee
Disadvantages
Viewed as old fashioned
Easy for the consumer to make errors when writing the cheque
A consumer could go overdrawn as the time delay from writing the cheque and handing it in
Electronic transfer
Payment is transferred directly from one bank account to another.
Advantages
Easy to use for one off an more frequent transactions
Provides a record of payments
No additional costs incurred
Disadvantages
Risk of loss if the transfer is incorrectly set up
Not appropriate for face to face transactions
Direct debit
Allows money to be transferred automatically
Advantages
Reduces administration and management costs
Safe and convenient
Disadvantages
An easy way to make regular payments
No credit allowed
All transactions and withdrawals are limited to the balance in your account
Additional fees on ATM withdrawals
Standing order
Standing order is an electric payment. This is set up like a direct debit however this can only be used instruct to the set amount.
Advantages
Easy and quick to set up
Useful for making recurring payments between private individuals
Usually free of charge for both payer and payee
Disadvantages
No payment notifications
If you want to change the date or amount you must cancel or instate a new one.
Prepaid card
This is like a credit/debit card however you cannot borrow money. The user will prepay money onto the card before being able to spend.
Advantages
More secure
Ideal for when travelling overseas
Direct deposit
Disadvantages
Have to have the money available to load onto the card in the first place
No credit involved, the bank does not lend you money, they just hold you money until you spend it
Contactless Payment
This is a card which is contactless and transfers money when it reaches a contactless terminal. You do not need to use your pin.
Advantages
Fast and efficient way of paying
Don't need to type chip or pin in
Disadvantages
Can be lost or stolen and used(security and theft)
Some people o not allow contactless
Can only be used for £45 or less
Charge card
A charge card is a type of electronic payment allowing customers to delay payments for goods and services for a short period of time; the balance must be paid off in a full when statement is issued.
Advantages
Can be use for large purchases typically due to no limits
Used for online or mail transactions
Provides the cardholder with increases protection
Disadvantages
You have to pay your balance off each month
Expensive fees if payment in full is not made on the due date
Store card
A store card is basically a credit card you can only use with one high street chain or group. Like with a store card to buy things on credit and pay them off at the end of the month.
Advantages
Lower credit limit
Increased level of consumer protection
High interest rates
Disadvantages
High interest rates
Only accepted and use in the store of issue
Usage is limited
Mobile banking
Mobile banking is made on any mobile apps, which are popular
Disadvantages
Advantages
More flexible payment method that can be used in groups
Easy to track
Quick and easy payment, safer than using cash
Mobile banking becomes limited if you don't own a mobile
Doesn't offer all of thecfunctionality of interest banking
Banker's Automated Clearing Service(BACS) Faster Payment
A system in the uk allowing payments directly from one account to another
Advantages
Trust service
No limits on the transaction size that can be sent
Same day payments
Disadvantages
Very expensive
Needs to be instructed before 2pm on a working day
Clearing house automate payment system(CHAPS)
A system that allows the transfer of payments directly from the one bank account to another
Advantages
There is no limit on the amount that can be transferred in a single transaction
Transfer can be made the same day assuming instructions are received prior to a set time, e.g 2pm at Barclays
Disadvantages
Normally, there is a fixed charge per transaction regardless of the amount transferred