Chapter 8:

Methods of
Payment
 d o w e
How
make
e n ts ?
paym
Making Payments Depends
on …
0 The type of product a consumer is purchasing
0 The price of the product
0 The methods of payment accepted by the seller
Different Methods of Payment
1. Cash
2. Cheque
3. Credit card
4. Debit card
5. Electronic transfer
6. Hire purchase and instalment
7. Stored-value card
 1. Cash
0 The most common payment method
0 Consists of banknotes and coins
0 Different countries use different currencies

Example:
A type of
SGD money used
in a country

RM
 Cash
Advantages
• Accepted worldwide
• Convenient and fast

Disadvantages
• Unsafe to carry a lot of cash due to possibility of lost or
stolen
• Coins can be bulky and heavy to carry
• Have to change currency if visited a country but exchange
rate may be unfavourable thus it is inconvenient
• Unable to use for online transactions
 2. Cheque
0 A written payment slip authorised with a signature
0 Issued cheque refers to the bank deducting money
from savings account to pay to the name listed on
the cheque
 Cheque
Advantages
• Safe and convenient
• Useful when paying for expensive products
• Can be sent via post

Disadvantages
• Signature on the cheque can be forged
• Some stores omit cheques
• Banks imposed a charge for cheque books
 3. Credit Card
0 A form of borrowing which allows consumers to buy
goods and services on credit
0 Have to sign on the sales slip when paying with credit
card
0 A bill will be sent monthly on the expenditure to the
card holder
 Credit Card

Advantages
• Convenient and easy to carry around
• Most credit cards are widely accepted in many countries
• Can be used for online payment

Disadvantages
• Interest will be charged if the card holder does not pay on time
• Consumer can be impulsive
• Signature on the card can be forged if the card gets stolen
• There is a credit limit for credit cards
 4. Debit Card
0 Issued by the bank
0 Immediate deduction from the bank during payment
 Debit Card
EMV Chip
Banking details are
stored here

Card Number
Embossed 16-digit
unique card
numbers Expiry Date
The date the card
expires
Issue Date
The date the card
was issued
Card Holder Name
The name of the
person the card
belongs to
 Debit Card
Magnetic Strip
Important data
recorded on this Card Verification
strip Value (CVV2)
A 3-digit number to
ensure that the card
is with the
consumer when
making purchases
via the phone or
Signature Panel online
Signatures are
required for
retailers to check
against a payslip
 Debit Card
Advantages
• Convenient and easy to carry around
• Can be used for online payment
• Can be used where credit cards are accepted
• Able to withdraw cash from bank account
• Can only spend with the available amount in bank account
Disadvantage
• Unable to make payment if there is insufficient money in
the bank account
 5. Electronic Transfer
0 Payment using electronic means

Example:
0 Automated Teller Machine (ATM)
0 Withdrawal of money from savings account
0 General Interbank Recurring Order (GIRO)
0 To make payment for monthly bills
0 School fees
Convenient way
0 Mobile phone bills
to pay bills to
avoid late
payment
 Electronic Transfer
Advantages
• Easy & quick to use
• Payment made with a Personal Identification
Number (PIN) when using ATM card
Disadvantages
• Unable to make payment if there is insufficient
money in the bank account
• May forget PIN and unable to make payment
 6. Hire Purchase and
Instalment
0 Payment can be made in parts or percentage over an
agreed period of time for expensive products

Example:
0 Cars
0 Electrical appliances
0 Furniture
Hire Purchase and Instalment
Hire Purchase Instalment
Ownership
Belongs to the buyer when last Belongs to the buyer
payment is made immediately
Retrieval
Seller is able to take the product Seller unable to take the product
back if the buyer fails to pay back but able to claim charges
with higher interest rate from
the buyer
Hire Purchase and Instalment
Advantages
• Need not make full payment at the time of purchase
• Allows consumer to pay a manageable amount at regular
intervals
Disadvantages
• Total cost of the product is higher than the original price due
to interest charges
• For hire purchases, product will be repossessed and charged
with extra costs; termination fee, if payment is incomplete
• For instalment, late payment charges is possible
 7. Stored-value Card
0 Can be used to make quick payment
0 Cash value is stored in the card and payment is
deducted from this value
0 Can be used for public transport, parking fees and
purchases at stores

Example:
 Stored-value Card

Advantages
• Convenient and easy to carry around
• Easy and quick to use

Disadvantages
• A lost or stolen card can be used by anyone
• Not all stores accept stored-value cards
• Have to top-up when the store value is low
 Using Credit Responsibly
r d H i r e P
i t C a a u r c h a
r e d
C 0 Common areas: n d Insta s e
l me n
0
Buy first, pay later
0
A form of borrowing that allow the consumer to buy
t
goods and services first and make payment later

Example:
0 Loans such as housing loans
0 Services such as utilities and telephone bills
 Credit
Advantages
• It is convenient
• Receives goods or services before payment
• Beneficial for emergencies
• Sales and promotions are at advantage
Disadvantages
• Additional costs; fees and interests, are possible
• Encourages overspending
• Might be unable to pay liabilities
• May lead to bankruptcy
Responsible
Use of Credit AFFORDABILITY
Use credit only
when you can
PREPARE FOR afford it
PLAN EXPENSES
EMERGENCIES
Must be
Save up and
carefully
spend by credit
planned
limit PAY BILLS
To avoid late
payment
charges
LIMIT CREDIT
CARDS KEEP TRACK
Have credit Keep track of
card when expenditures
necessary
Convenient Ways To Make
Payment
0 Payments can be made via automated self-service
kiosks

Example:
0 Self-service Automated Machine (SAM)
0 AXS Station

0 Provides a wide range of payment services for

consumers which are conveniently located in
Singapore
 Self-service Kiosks
Types of services provided:
0 Bill payment
0 Fine payment
0 Government eServices
0 Prepaid card top-up
0 Promotions
0 Ticketing
 Precautions To Consider
0 Use the latest security programme
0 Avoid disclosing personal passwords to anyone
0 Use unique passwords by combining:
0 Upper case letters
0 Lower case letters
0 Numbers
0 Symbols
0 Use websites with secure transactions