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.