Business Studies

Methods of payment through Commercial Banks

Biola Emmanuel - Sat, 15th June, 2019 @ 16:17: PM

Topics in Business Studies

Agencies of Consumer Protection Consumer Right and Protection Methods of payment through commercial Banks, Part 2 Methods of payment through Commercial Banks Meaning, Scope and Importance of Business Studies Meaning and Types of Business Structure Clerical Staff, their Qualities and Functions Principle of Double Entry Disadvantages of Money Scope of Business and Management Studies

Academic Questions in Business Studies

QUESTION: In buying and selling, the retailer will usually operate from the stall while the wholesaler operates from the _____.

  1. chain store
  2. hyper market
  3. hypo market
  4. warehouse
  5. mobile shop
  6. supermarket

ANSWER is: Warehouse

A warehouse is a building where large quantities of goods are stored. They are usually managed and operated by the wholesaler.

Business Studies

Methods of payment through commercial Banks:

As students or workers, we may have carried out one or more transactions through commercial banks. Some of these transactions may include:

  • Payment of school fees
  • Purchasing items from an online store
  • Transfer of money into another’s account
  • Payment of examination fee and so on.

Note: These above transactions will be achieved either physically or online.

An online transaction is done over the internet and as a result, we do not have to be physically present.

With regards to an online transaction; During the registration and payment procedures for an examination, let’s say JAMB for instance, we don’t necessarily need to go to a bank or a JAMB agent or to the JAMB office itself. All we need do is to connect to the internet where we can register, make payments and select our examination center (on JAMB's website). As a matter of fact, we live in a digital world where things are done online.


Below are some of the methods of making payments through commercial banks:

  • Bank note and coins

This is the most widely used form of payment in developing countries since it involves the direct exchange of currency (money). It’s also frequently used in developed nations although the cashless policy is encouraged for various reasons including security. Bank notes are coins are generally accepted as legal tenders.

A legal tender is a recognized and valid medium of payment according to the legal and financial systems of a country.

Note: A legal tender is used as a valid method of meeting financial obligations.

Different countries have got their specific currency in circulation. The table below shows some of these circulating currencies within a country and their symbols:


Currency value





 Unites States of America



 United Kingdom






 France, Spain, Italy, Estonia and Latvia


In Nigeria, the currency denominations are N1,000, N500, N200, N100, N50, N20, N10 and N5. Please read on the Nigerian National Symbol here.

Note: Coins are no longer in circulation within Nigeria.


  • Cheques

A cheque is a written order to a bank to pay a specific sum of money to another person through the drawer's account. A cheque owner will usually be given a cheque book by his or her bank. Whenever the cheque owner (drawer) needs to make a payment, it is required that they tear out a cheque slip from the cheque book. They will be required to write the name of the payee in the cheque book along side the amount to be paid, the signature of the cheque owner (drawer) and date.

A drawer is a person who writes a cheque.

A payee is a person to whom a cheque is made payable. He is the person that cashes out the cheque.

The payee will be able to cash the cheque as indicated in the cheque slip. The payee will also need a valid identity card as a means of identification before they can cash the cheque.

Note: The amount to be paid on the cheque slip is entered twice. The first entry is made in words while the second entry is made in figures.

We have various TYPES of cheques. These are:
  1. Open Cheque or Uncrossed Cheque
  2. Crossed Cheque
  3. Bearer Cheque
  4. Order Cheque
  5. Stale Cheque
  6. Anti-Dated Cheque
  7. Post-Dated Cheque


Advantages of using a cheque for payment
  1. Cheque is a relatively safe method for payment since the recipient will need to present a valid identity card which must match the name written on the cheque.
  2. It is a simple method of cash transfer since it’s just a single slip.
  3. Payments can be stopped if needed (for security reasons).
  4. Since one does not need to count cash, there are little risks of making counting mistakes.
  5. It prevents the direct loss of a large amount of cash.
  6. A cheque can be post-dated which may be good for business.
  7. The risk of fraud is limited in business by the use of cheque.
  8. In case of fraud, the payee can still be discovered when cross cheque is used. Crossed cheques are traceable.
  9. Use of cheques automatically create proof of payment. As a result, no receipt is necessary.
  10. Constant use of cheque in an economy can reduce black money in the system.

For now, consider black money to be money earned through illegal activity.


Disdvantages of using a cheque for payment
  1. They are not legal tender and as such, creditors may choose not to accept them.
  2. Cheques may not be ideal for small amounts.
  3. They become deceitful and valueless when the drawer has no money in his or her account.
  4. Banks levy the drawee for cheque books.

Read on Debit Card, Credit Card, Travellers' Cheque and Bank Draft as methods of making payments through commercial bank.

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