Making Payments

9

Cheque: A written instruction to your bank to pay a

sum of money to another person.

9

How to complete a cheque

Cheque: (continued) There are three parties to a cheque:

◦ drawer — the account holder ◦ drawee — the bank where the account is held ◦ payee — the person being paid the money

9

A cheque contains the following additional information:

9

1. Date 2. Amount in words 3. Amount in figures

4. Drawer’s signature 5. Cheque number 6. Account number

7. Branch sort code 8. Purpose of payment 9. New balance in account

1

1

2 3

5 5 6

8

4

7

9

Crossing a cheque Crossing a cheque involves drawing two

parallel lines across the front

9

ChequeAdvantages: Disadvantages:

Plastic Cards: Banks provide a number of “plastic” cards

for their current account holders: ◦ Laser (Debit) Card◦ ATM Card ◦ Cheque Guarantee Card◦ Credit Card

People use “plastic” to pay for goods and services and to transfer money to other people without using cash.

9

Money can be transferred electronically in the following ways: Direct Debit

A direct debit can be used to make a regular payment where the amount changes each time, e.g. the electricity bill

Standing OrderA standing order can be used to make a regular payment where the amount is the same each time, e.g. a regular donation to charity

9

Transferring Money

Matching exercise answers.... A stopped cheque – A cheque which the

drawer informs the bank not to honour A postdated cheque – A cheque that has a

date on it sometime in the future A stale cheque – A cheque that is more than

6 months old A blank cheque – A cheque with some of the

details missing

Continued....

A crossed cheque – A cheque with two parallel lines on the face of it

An open cheque – A cheque which is not crossed

An endorsed cheque – a cheque which is signed on the back by the payee

Continued.... Payee – the person who receives the cheque Drawer – the person who writes the cheque

and from whose account the money will be taken

Direct Debit – A method of paying bills where the amount may change

Standing Order - A method of paying regular bills of a fixed amount

Money can be transferred electronically in the following ways: Bank Giro Credit Transfer

A bank giro credit transfer is used to make a single payment to another person through the bank, e.g. paying your TV licence

Paypath Paypath is used by employers to transfer the wages of their employees directly into their bank accounts each payday

Bank draftA bank draft is a form of a cheque which a bank draws on itself. You pay the bank and they issue a bank draft made out to the person you want to pay

9

Transferring Money (continued)

Bank Giro Credit Transfer•Workbook p54

Foreign Exchange

Foreign Exchange

An exchange rate is the quantity of a foreign currency which can be purchased for one’s

own currency (eg. One Euro)

Foreign Exchange Euro → Foreign Currency = Multiply by the

Sell Rate

Foreign Currency → Euro = Divide by the Buy Rate

Peter is going on holidays to Florida. He has saved €1,500 and wants to change this to dollars for his holiday. He goes to the bank and sees this sign:

US Dollars: Bank Sells = 1.45Banks Buys = 1.55

How many dollars can he get for his €1,500?

Remember: Euro → Foreign Currency = Multiply by the Sell Rate

€1,500 x 1.45 = $2,175

Answer: Peter can get $2,175 in exchange for €1,500

Peter is coming home from his holidays and has $100 left. Again he goes to the bank and sees this sign:

US Dollars: Bank Sells = 1.45Banks Buys = 1.55

How many Euro can Peter get for his $100?

Remember: Foreign Currency → Euro = Divide by the Buy Rate

$100 / 1.55 = €64.52

Answer: Peter can get €64.52 in exchange for $100

Methods of payment in foreign countries Foreign Cash - £ $ ¥

Travellers’ cheque

Debit Card

Credit Card