Topics in Business StudiesBusiness Studies: What is Business Studies and Business? Management: Elements of Management What is Management? Importance of Management Advantages and Disadvantages of Air Transport Advantages and Disadvantages of Rail Transport Methods of Payment: Cheque - What is a Cheque? Cheque: Types of Cheque Cheque: Characteristics of Cheque Advantages and Disadvantages of Cheque Advertising and Types of Advertising Advantages and Disadvantages of Road Transport Advantages and Disadvantages of Water Transport Consumer Protection - Agencies of Consumer Protection Consumer Right and Protection Methods of Payment: Credit Cards and Debit Cards Methods of Payment: Bank Notes and Coins | Characteristics of Legal Tender Scope and Importance of Business Studies Business Structures: Sole Proprietorship, Advantages and Disadvantages Clerical Staff: Grades, Qualities and Functions of a Clerical Staff Principle of Double Entry: Characteristics, Advantages, Disadvantages
Academic Questions in Business Studies
Which of the following is not a Right of Consumer Protection?
Which of the following is NOT a government agency of consumer protection?
Define Consumer Protection.
In buying and selling, the retailer will usually operate from the stall while the wholesaler operates from the _____.
In this article, we will look at credit cards, debit cards, travellers cheque and bank drafts as methods of making payments through commercial banks. In addition, we highlight on their advantages, disadvantages, similarities and differences.
Note: In a previous article, we looked at 2 methods of making payment through commercial banks. These were:
- Bank notes and Coins
Although both cards look similar, Credit card and Debit card are NOT the same thing.
A credit card as the name implies allows the holder to purchase goods or services on credit, as the payment is immediately made by a third party on their behalf.
Note: The third party involved is the card holder's financial institution.
In simple terms, when one uses a credit card for purchases, it will mean that they are buying on credit; and their bank (issuer of the credit card) will pay on their behalf.
Note: It is the responsibility of the card holder to refund or pay back the money to their bank. To this end, the bank sends a bill of the amount paid to the credit card holder via an email or SMS or other means.
The credit card holder may pay back with interest.
The interest structure may vary or can even become non-applicable in some cases. For instance, if the credit card holder pays back within a month, interest may not be charged but when payments are delayed, interest will be charged accordingly.
Below is an image of a credit card:
Image Credit: First Bank of Nigeria
A debit card is a card that allows the holder to purchase goods and services with an immediate debit on their bank account.
The term debit means that money is immediately deducted from the owners account after the purchase is made.
The issuer of the debit card (commercial bank or financial institution) may charge some fee whenever the card is utilized in making payments.
The debit card has become very popular because it is used in Automated Teller Machines (ATMs) and Point of Sale (PoS).
The debit card is also used in the purchase of goods and services online, transfer of funds, internet banking and so on.
Below is an image of a Debit Card:
Image Credit: First Bank of Nigeria
Similarities between Credit card and Debit Card
Differences between a Credit card and a Debit Card
The table below shows the differences between a Credit Card and a Debit Card:
The holder buys on credit and the bank that issued the credit card pays on his behalf
This holder buys directly with the money in their bank account
The credit card holder does not need to have a bank account with the issuing bank
The debit card holder must have an account with the issuing bank
Interest are charged with the credit card if the holder fails to pay their credit bill within 30 days
A debit card holder may be charged immediately by the issuing bank after purchases are made
The maximum limit of withdrawal on a credit card will depend the Credit Rating
The debit card holder will continue to withdraw as long a money is present in their bank account
Credit cards may require signature for purchases
Password pins are generally required for purchases with a debit card
A credit card may not be usable where a debit card can be used. For instance, ATMs.
A debit card is usable wherever a credit card can be used
A credit card is preferred for hotel reservations and car rentals because it guarantees for damages. (The bank will pay).
A debit card is preferred if one intends to adhere to a daily financial budget
For security reasons, we must always protect the 16 digits written in the form of “XXXX XXXX XXXX XXXX” in the front of our credit and debit cards.
At the back of both cards is a 3 digit number called Card Verification Code or CVC; which must also be protected.
A lot of people pay for goods and services online through the use of debit cards. This implies that you can purchase a product from Amazon or Jumia or Konga online and pay with your debit card.
One can also pay for professional examination online via the use of a debit card.
For those who run adverts on various websites, they can pay for these adverts via their debit card also.
The use of credit and debit cards is one of the ways of fostering a cashless economy
Advantages of Debit and Credit cards
This is another method of making payment through commercial banks.
A travellers' cheque is a type of cheque issued by a bank with the aim of accrediting or permitting its various branches to pay the amount of money indicated by the bearer or holder.
Note: If the bank has a branch in another country, the traveller may receive their stipulated sum of money in foreign currencies. (That is; the country’s currency where the branch is present).
An individual travelling from one country to another is required to purchase the traveller's cheque.
The purchaser (of the travellers' cheque) will immediately sign the cheque in the presence of a personnel from the issuing bank.
Note: The purchaser is one who buys the traveller's cheque.
When the purchaser gets to their destination country, they will be required to sign a second time on the travellers’ cheque to prove their authenticity. (This second signature will be compared to the first on the traveller's cheque). Payment will be made via traveller's cheque only if both signature of the holder (purchaser) matches.
Note: Traveller's cheque are also accepted in hotels and shops as a means of payment.
Advantages of Travellers' Cheque
Disadvantages of Travellers' Cheque
A bank draft is also called a bank cheque or a cashier's cheque.
Through a bank draft, payments can be made from one bank to another.
Note: A bank draft is normally prepared by a commercial bank.
A bank draft can be defined as a written order for money to be paid by a bank.
A bank draft is a form of guarantee by the issuing bank. The holder of a bank draft is therefore guaranteed of payment.
For transactions involving a very large amount of money, cheques may be denied or bounced. In the case of bank draft, the transaction will be guaranteed and payments are more likely to be successful.
Ideally, a genuine bank draft cannot be dishonored and such money is paid at sight, provided the bank drafts are not crossed.
A bank draft is safe, fast and ideal for large transactions.
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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.
Amazing facts in Business Studies
The world's 💰💰💰100 richest people 💰💰💰 earned enough money in 2012 to end global poverty four times over
NOTABLE POINTS IN Business Studies
Consumer protection refers to the ways or methods through which consumers enjoy maximum satisfaction from the goods they buy and services rendered to them.
The agencies of consumer protection assists in protecting the consumer rights. These agencies may also be referred to as the organs of consumer protection. Basically, we have three of them, they are:
One of the responsibilities of the government of every nation is to set up agencies or organizations that will protect the interest of the consumers and invariably, the people.
Below are some of the Government Agencies of consumer protection
- National Drug Law Enforcement Agency (NDLEA)
- National Agency for Food, Drug Administration and Control (NAFDAC)
- Consumer Protection Council (CPC)
- Rent Tribunal
- Ministry of Health
- Ministry of Commerce
- Ministry of Transportation
- Ministry of Environment
- National Wages and Salaries Commission