Introduction In the commercial world, we seldom use cash in transactions. Different payment methods have been developed since the banking activities become more and more important in the modern society.
Methods of Payment in Trade and Other Transactions 1. Through Commercial Banks:
Cheque
Cashier order
Bank draft
Telegraphic transfer
• Autopay – Standing order – Direct debit – Letter of credit (L/C)
Methods of Payment in Trade and Other Transactions
2. Through Post Offices: Postal
remittance service
PayThruPost
service
Methods of Payment in Trade and Other Transactions 3. Other Methods of Payment : • • • •
Cash Credit card Debit card Smart card
Promissory note
Bill of exchange
Components/Features of a cheque Payee’s name
Payt. Amt.
Payt. Date
Drawer’s signature
Cheng Siu Ming
Chq. Counterfoil
A/C #
Bank code chq. #
Branch code
Suffix/Account Type
Advantages of Using Cheques Safety Flexibility Convenience A proof of payment
Types of Cheques
Bearer cheque Order cheque Uncrossed cheque / Open cheque Crossed cheque:
General crossing Account payee only Not negotiable Not negotiable, account payee only
An open cheque 15
June
2004
Chan Siu Ming One hundred only
100.00
No lines are drawn across the face of the cheque.
The payee can obtain cash from the drawer’s bank directly; in other words, the payee may not have a bank account.
A crossed cheque 15
June
2004
Chan Siu Ming One hundred only
100.00
A cheque can be crossed by drawing two parallel lines “ // ” across the front.
Crossed cheques must be deposited in a bank account.
Counterfoil Counterfoil is used for reference only. The cheque-book holder can check the details of payments with those listed in the bank statements.
TYPES OF CHEQUES Chan Siu Ming 1. Bearer Cheque The bearer cheque is payable to the person specified there in or to any other else who presents it to the bank for payment. However, such cheques are risky, this is because if such cheques are lost, the finder of the cheque can collect payment from the bank.
Chan Siu Ming 2.Oder Cheque By striking out “or bearer” the cheque becomes an order cheque, which means that only the named person can cash it or endorse it.
2.Open Cheque When a cheque is not crossed, it is known as an "Open Cheque" or an "Uncrossed Cheque". The payment of such a cheque can be obtained at the counter of the bank. An open cheque may be a bearer cheque or an order one.
3.Crossed Cheque
.
Crossing of cheque means drawing two parallel lines on the face of the cheque with or without additional words like "& CO." or "Account Payee" or "Not Negotiable". A crossed cheque cannot be encashed at the cash counter of a bank but it can only be credited to the payee's account
Open cheque
can obtain cash from the drawer’s bank directly
no lines drawn across the face of the cheque
Crossed cheque • can obtain money through a bank account only • two vertical or parallel lines drawn across the face of the cheque
1. General Crossing :Generally, cheques are crossed when 1.There are two transverse parallel lines, marked across its face or 2.The cheque bears an abbreviation "& Co. "between the two parallel lines or 3.The cheque bears the words "Not Negotiable" between the two parallel lines or 4.The cheque bears the words "A/c. Payee" between the two parallel lines. A crossed cheque can be made bearer cheque by cancelling the crossing and writing that the crossing is cancelled and affixing the full signature of drawer.
Specimen of General Crossing ↓
2. Special or Restrictive Crossing :
When a particular bank's name is written in between the two parallel lines the cheque is said to be specially crossed.
3.Cheques crossed ‘A/c.payee’?
Often cheques are crossed with two parallel transverse lines and in between the two parallel lines the words “a/c payee”or “a/c payee only”are written.
This means that the proceeds of the cheque are to be credited to the accoumt of the payee only.
This type of crossing is also called “restrictive crossing”.
It serves a good protection to drawer from loos or theft.
Endorsement
Transfer to a third party Types:
Blank endorsement Endorsement to order
Dates of Cheque Post-dated cheque Stale cheque Antedated cheque (In banking, antedated refers to cheques which have been written by the maker, and dated at some point in the past.)
Reasons for Not Honouring a Cheque
Insufficient fund Stale cheque (a cheque which is issued more than 6 months ago) Post-dated cheque No signature Signature not matching the bank record Not countersigned on alteration, etc.
Services of Commercial Banks
1. Accepting Deposits: – – – –
Savings account Current account Time deposit account Foreign currency account
Services of Commercial Banks 2. Granting Loans: – – – –
Overdraft Personal loan Business loan Trade financing
Services of Commercial Banks 3. Remittance Services: – Bank draft / Demand draft – Telegraphic transfer
4. Other Services: – – – – – –
Automatic teller machine (ATM) Money exchange Trustee service Safe deposit box Gift cheque Traveller’s cheque
Standing order or banker’s orders: These are orders to a banker to pay regularly a fixed sum
of money from one's current account in order to settle recurring payments like mortgage repayments, hire purchase
transactions,
subscriptions to clubs, etc.
rents,
insurance
premiums,
Direct debit: The bank may provide direct debiting facilities for payments of varying amounts at irregular intervals.
(a) Under this arrangement, when the supplier sends an invoice to the buyer a direct debit form is also sent to the buyer's bank informing the latter to debit the buyer's bank informing the latter to debit the buyer's account and to transfer the money to his account. Such payments have to be authorized by the buyer.
(b) This saves the buyer the trouble of remembering due dates of payment and sending off cheques. (c) The supplier or creditor gets prompt settlement of debts.
(d) This differs from standing orders in that it is the creditor who gives payment instructions and not the debtor. The amount and date of payment are not fixed as in the case of standing orders.
Latest Development of Banking Services Telebanking
All-in-one monthly statements
Investment consultancy service Internet banking services