Understanding different
payment methods
www.payyourway.org.uk
www.payyourway.org.uk www.payyourway.org.uk
different PAYMent MetHOdS
The range of ways in which we can make and receive payments is growing at a steady pace. Where we used to rely on just cash and cheques, we now have a wide variety of options. These include credit and debit cards, automated payments like Direct Debit, and other ways to make payments such as those using phone and internet banking.
Finding the right kind of payment method for each transaction you make can help you manage your finances. Yet knowing how to get the best out of what’s available can be difficult and isn’t always easy to understand. That’s where this leaflet can help.
Over the following pages you’ll find simple, practical advice on how and when to use each of the main types of payment that are available. You’ll also find information on the security, reliability, speed and cost of each option, so you’ll know just what to use next time you make or receive a payment. It also explains how online banking can help you manage your payments.
Although the Cheque Guarantee Card Scheme closed in June 2011 after a long-term decline in use, you can still pay by cheque and businesses can still choose to accept them.
The Payments Council is continuing to focus on developing and promoting methods of payment that are safe and effective, as well as encouraging innovation in new and existing types of payments.
This includes projects such as delivering mobile phone payments.
Compare different payment methods using the table on the following pages.
“ We are very lucky to be living in an increasingly digital age which means we can speak to loved ones on the other side of the world, do our shopping without venturing out of the house and learn all kinds of
fascinating information from the internet. But that means it is really important that everyone of every age feels comfortable with the internet so that we can all make the most of these opportunities.
“ I took my time to discover internet banking, but now I find it absolutely invaluable. It means that I can pay my bills, transfer money and deal with all my affairs quickly, easily and securely, with a permanent record of every transaction, and that of course gives me much more time to spend with my family and friends and to enjoy life.”
esther rantzen, campaigner and broadcaster, 70, London
PAYMent MetHOdS
* Unless you have been a knowing party to fraud, you can be certain
that the money is yours 6 days after paying in the cheque. ** Some credit and debit cards have now been upgraded to include contactless technology, which means that small payments (up to £15 in value) can be made by simply holding your card up to a special card reader without the need to enter your PIN number or give your signature.
for more detailed information, please visit the pay your Way website or contact your bank.
Cash Cheque debit Card** Credit Card**
Where can
i use it? Almost everywhere! Potentially for most types of transactions though many retailers have stopped accepting them.
Over a million UK businesses accept them, in shops and online; and even more at cash machines and abroad.
Over a million UK retailers take them, in shops and online, and even more abroad.
What does it
cost to use? Nothing – though a few ATMs in the UK and many abroad will charge for withdrawing cash.
Nothing, if your account is in credit. If you use a cheque casher they will charge you.
Nothing if your account is in credit, but some businesses might charge to accept cards, or set a ‘minimum spend’.
If you don’t pay your balance off in full you’ll pay interest on what you’ve spent. You will be charged if you withdraw cash. Some businesses might charge to accept cards, or set a ‘minimum spend’.
how quickly is
it processed? Immediately. Your account will be debited 3 days after the cheque is paid in or sooner if it’s paid in to an account at the same bank as yours.*
Usually the same day. Usually the same day – but you don’t pay until your receive your monthly bill.
What kind of security is provided?
If your cash is stolen, you only get it back if you have insurance that covers you.
If your cheque book is stolen, you won’t be liable – provided you tell your bank straightaway.
If you are an innocent victim
of fraud, you won’t be liable. If you are an innocent victim of fraud, you won’t be liable.
do i need a bank account to use it?
No, but you will need one to withdraw cash with a debit card or get cashback in a shop.
Yes. Yes. No – but the card company will
check your credit status before giving you a card, and having a bank account will help.
anything else
i should know? Scottish and Northern Irish notes and coins are usually accepted throughout the UK but are not legal tender.
Even if it isn’t paid in straightaway, a cheque remains legally valid for up to 6 years.
If you’re abroad, it’s usually cheaper to withdraw cash on your debit card than a credit card – but check your terms and conditions before you go. If you have trouble using PINs, speak to your card issuer about alternatives.
Some cards offer rewards, like loyalty vouchers or cashback.
Charges for using your card will be on the back of your statement.
Before going abroad, check the charges on your card. If you have trouble using PINs, speak to your card issuer about alternatives.
www.payyourway.org.uk www.payyourway.org.uk
PAYMent MetHOdS cOntinued
direct debit standing order online/phone payment Chaps prepaid card
Where can
i use it? Mainly for paying
regular bills or things like subscriptions or charitable donations. Over 20,000 UK companies are authorised to accept them.
You set these up to pay any UK bank or building society account for paying regular payments such as rent or subscriptions.
If you bank online or by phone you can make one- off or regular payments to any UK bank or building society account, at any time of the day.
Mainly used for high value payments, like buying a house, to any bank or building society account.
Visa and Mastercard retailers accept them, in stores and online, around the world.
What does it
cost to use? Nothing, if your account
is in credit. Nothing, if your account
is in credit. Nothing, if your account
is in credit. Usually £25-30
for a payment. Usually nothing to use, but it might cost to buy one and top it up. Check your terms and conditions.
how quickly is
it processed? Immediately on the due date, or the following weekday.
Immediately on the
scheduled weekday. Your account will be debited immediately and the payee receives the money either almost immediately or on the third working day.
The same day. Usually the same day.
What kind of security is provided?
The Direct Debit Guarantee provides a refund if
something goes wrong.
You will be refunded if you are the innocent victim of fraud. If you’ve given incorrect details, it may be difficult to get the money back.
You will be refunded if you are the innocent victim of fraud. If you’ve given incorrect details, it may be difficult to get the money back.
You must authorise the payment in advance, and you’ll be refunded if you are defrauded.
You can only make purchases or use an ATM with the correct PIN. Check your terms and conditions to find out what fraud protection you have.
do i need a bank account to use it?
Yes. Yes. Yes. Yes. No.
anything else
i should know? You must agree to setting up a Direct Debit – which you can do in writing, over the phone or online.
When you set one up, make sure you give the right sort code and account number.
If paying a business, Direct Debit gives you more protection so ask if you can pay that way.
Be careful to give the right account number and sort code. If speed is vital, check with your bank first whether it will be processed as a Faster Payment, or via Bacs, which takes three days.
Opt for a cheaper Faster Payment where possible, and take care to use the correct sort code and account number.
Prepaid cards are a useful way to use a card in shops or online, even without a bank account. You can never go overdrawn on a prepaid card.
as early as 2013 it may be possible to make a payment from one bank account to another using a mobile phone.
By post:
payments Council 2 thomas more square London e1W 1yn
By email:
[email protected]
october 2011
