Image credit voanewszimbabwe.com

Image credit voanewszimbabwe.com

ZIMSEC O Level Commerce Notes: Money and Banking: Bank Payments in Home and Internation Trade

Bank payments in Home Trade

  • Payments encountered in home trade are made via the following bank services:

Standing or stop order

  • Is a method of payment used to pay fixed amounts to creditor at specified times during the month or year e.g. Hire Purchase and DSTV subscription payments.
  • An arrangement is made between the customer and the bank.
  • The debtor and creditor must agree and complete the banker’s stop order form.
  • The system avoids the occurrence of bad debts and delayed payments.
  • It reduces paper work.
  • Saves on the cost of posting cash or sending and processing cheques.
  • It is the debtor who initiates payment.

Credit Transfer

  • Is a method of payment.
  • It is used to pay many accounts using one cheque.
  • A multiple transfer form is filled.
  • The payee must have a banking account.
  • It is ideal for making several payments at the same time.
  • Payment is made to any of the banks in that country.
  • Is the used to pay dividends or wages.

Direct debit

  • Is a method of payment initiated by the creditor.
  • Direct debit authorisation form is filled to settle bills for example water bill, contract cell phone bills, internet bills etc.
  • It is used to make payments of varying amounts.
  • Payments are prompt.
  • It minimises bad debts.
  • The creditor does not need to send reminders to customers.

Payments by banks in foreign trade

  • The following methods are used:
  • Bank overdraft.
  • Bill of Exchange.
  • Letter of credit or documentary credits.
  • Cable transfer e.g. Homelink.
  • These will be explained fully in International Trade.

To access more topics go to the Commerce Notes page.

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