What are the modes of payment in banking and financial institutions?
Different modes of payments are
- Cash
- Cheque
- Draft
- SWIFT
- Fax Transfer
- Mail Transfer
- Letter of Credit
- Mobile/Online/Internet Banking
- Bills of Exchange
- Card – Debit/Credit
- Promissory Note
Cash – Cash payment is a very basic, traditional and common mode of payment. In this case, the buyer pays money in the form of notes and coins to the seller. This mode of payment only suitable for small transactions.
Cheque – a cheque is written order made by the account holder to the bank to pay a specified amount of money. A cheque is a negotiable instrument instructing a bank to pay a specific amount of a specific currency from a demand account held in the maker’s name [account holder] with that institution. Cheque book is a convenient and safer mode of payment. There are three parties involved in a cheque – Drawer, Drawee and Payee
There are three types of cheque
- Bearer Cheque
- Order Cheque
- Crossed Cheque
Bearer Cheque (बाहक चेक)
- चेक लिएर आउने जोसुकैलाई भुक्तानी हुने।
- सबै भन्दा सजिलो
- चोरी भएमा वा हराएमा बढी जोखिम हुन्छ।
- नगदमा परिवर्तन परिवर्तन गर्न सहज भएतापनि यस्ता चेकमा उच्च जोखिम रहेको हुन्छ।
Order Cheque (आदेशित चेक )
- जसलाई लेखेको हुन्छ उसैलाई मात्र भुक्तानी दिन मिल्ने।
- Bearer Cheque भन्दा कम जोखिम हुन्छ।
- आवश्यकता अनुसार हस्तान्तरण गर्न मिल्ने।
- हस्तान्तरणको लागि जसलाई लेखेको हुन्छ उसलाई मात्र आदेश दिन सक्छ।
Cross Cheque (रेखांकित चेक )
- चेकको मुख्य भागमा २ वटा धर्शा कोरिएको हुन्छ।
- धर्शाहरुको बिचमा “& Co ” लेखिएको हुन्छ।
- अरु चेक भन्दा यो बढी सुरक्षित हुन्छ।
- यो दुई प्रकारको हुन्छ। 1. Ordinary Cross Cheque 2. Special Cross Cheque
Daft – The bank draft is a payment instrument whose funds are guaranteed by the financial institution. A bank draft is a method of payment that involves a document issued by a bank guaranteeing that the amount stated in the certificate will be paid to the recipient of the document. There are three parties involved in a draft – Drawer Branch, Drawee Branch, and Payee.
Difference between Demand draft and Cheque
| Draft | Cheque |
|---|---|
| Drawer and Drawee always be bank | Drawer can be individual person |
| Draft is issued only by Bank | Cheque is issued by an individual |
| Bank charge for draft | No charge for cheque |
| Three Parties- Drawer Branch, Drawee Branch, Payee. | Three Parties - Drawer, Drawee, Payee. |
| The payment of a draft cannot be stopped ( i.e can not be dishonored). | Payment of a cheque can be stopped by the drawer of the cheque(i.e can be dishonored). |
| Draft is means of remittance | Cheque is means of payment |
| Bank account is not needed | Bank account is needed |
| Payment period is fixed for 6 Months | The validity of the cheque may vary |
| Draft is Safe | Cheque is less safer compared to bank draft |
| Demand draft is always payable to order of a certain person. | Payable either to order or to bearer. |
Fax Transfer – when the draft is transferred through fax.
Card – Card is another common means or payment system. There are mainly three types of cards: debit card, credit card, and prepaid card.
A debit card is also known as a bank card or check card is a plastic card that provides an alternative payment method to cash when making purchases. It can be used at a point of sale location online. Anyone can get this from B & FIs who has a bank account.
A credit card is a card issued by B & FIs which enables the cardholder to borrow funds. The funds may be used as payment for goods and services. It is provided to those customers who have a good history with the bank.
Unlike a debit card, a prepaid card is not linked to the bank account. Generally, when you use a prepaid card, you are spending money that you have already loaded onto the card.
Main differences between a debit card and Credit cards are
| Credit Card | Debit Card |
|---|---|
| Credit Card is issued by a bank to allow the holder of the card to purchase goods and services on credit. The payment is made by the bank on behalf of the customer. | Debit card is issued by a bank to allow its customers to purchase good and services who payment directly made through a customer's bank account. |
| The customer can pay the due amount later | The money is deducted from the account at the time of payment. |
| The max. limit of the money determined according the the credit rating of the card holder. | The max. withdraw amount < The money in the account. |
| The card holder has to pay the credit within 30 days. | The amount is deducted from the bank directly. |
| Interest is charged at the time of payment | No interest is charged |
Internet/ Online / Mobile Banking – All mobile banking and internet banking are online banking. Mobile banking refers to the use of mobile application while doing bank transaction whereas internet banking involves web-based technology while conducting a banking transaction.
Telegraphic Transfer – In this system, the payer deposits the money along with other charges in the bank which has a branch office at the payee’s place. The bank telegraphically tells the branch office to credit the amount to the payee’s account.
Promissory Note (प्रतिज्ञा पत्र)- A promissory note is an instrument in writing containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to the order of a certain person, or to the bearer of the instrument.
Traveler’s Cheque – A traveler’s cheque is a prepaid fixed amount and it operates like cash, so a purchaser can use it to buy goods and services. It can be widely used around the world and is the best choice for safely carrying and paying daily costs.
- It is safer than cash
- No expiry date
- Multi-currency
- In case of a list, no one can use it because ID card and other proof is required
Letter of Credit (LC)- It is a letter issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.
