For everyday purchases, consumers have a choice of how to pay. While the choice may seem insignificant, how you pay for things reveals something about your financial style and budget. Cash plays a dominant role in small value transactions and is also the preferred payment instrument for some larger-value expenditure categories.
Credit Cards
Credit cards provide consumers with a host of benefits, including rewards and greater financial security. However, it is important to make credit card purchases responsibly to avoid going into debt and hurting your credit score.
Many credit card companies offer a variety of cards, including regular debit cards, rewards cards and secured cards. Secured cards require a cash deposit, typically equal to the credit line, which protects the card issuer in case you fail to pay your bill. This reduces the risk for the card issuer, making them more willing to offer these cards to people with bad or no credit.
Each time you use your credit card, the transaction will be pending until it posts to your account within a few days. Then you will receive a monthly statement from your card issuer that includes all of the transactions posted during the billing cycle. You must pay the total balance by your due date to avoid interest charges and keep your credit score high.
Every time you use your credit card, the merchant pays a small fee to the card company for processing the transaction. This fee is called the interchange fee and it's usually built into the overall price of goods or services. However, some merchants choose to pass along this cost to their customers by adding a surcharge on credit card transactions.휴대폰결제현금화
Using your credit card for day-to-day spending offers the greatest potential to earn rewards, particularly when you choose a rewards card that rewards the types of purchases you make most often. But it's important to be aware of the benefits and drawbacks of using credit cards, and make sure you can afford to pay off your purchases in full each month before interest charges kick in.
Debit Cards
Although it may seem like a small detail, how you pay for everyday purchases can tell a lot about your financial health. That’s why it’s important to know the pros and cons of each payment method.
Debit cards, which are linked to a checking account, allow you to use money that’s already in your account to make a purchase. This makes it easy to track spending and limit your expenditures to the amount of cash you have on hand. They are also convenient, easy to use and accepted worldwide at millions of stores, online merchants and ATMs.
Because they are linked to a bank account, debit cards typically offer more security than other credit card alternatives. They often have a chip that’s designed to protect the information it contains and require a PIN number when you use them in stores. They can also be tied to a mobile wallet, which can give you additional convenience and security when you shop online.
Unlike credit cards, debit cards don’t require a credit check and usually come with no annual fee. However, they can still entail fees, such as overdraft charges and ATM fees when you withdraw from a non-bank ATM. It’s also possible that a fraudulent transaction could put you in debt, if it’s not reported quickly enough and your bank can’t freeze the charge until it investigates.
Debit cards are a great option for people who want to budget, build savings and avoid credit card debt. But they aren’t perfect: In some cases, debit cards can lead to overspending, and they don’t offer the protections of a credit card, such as the ability to dispute unauthorized transactions. If you have a debit card, it’s important to monitor your spending and report any suspected fraud right away. In Canada, there’s a voluntary code that all debit card providers must sign up for, called the Canadian Code of Practice for Consumer Debit Card Services, which is overseen by the Financial Consumer Agency of Canada. Adherence to the code reduces your liability for unauthorized charges to $50 in most cases, and some banks waive this fee as a courtesy.
Checks
While digital payment methods are becoming increasingly popular, many people still value the security and peace of mind that checks offer. Checks allow two or more parties to perform a transaction without using physical currency, by instructing a bank to transfer funds from one account to another. There are six different types of checks, including personal checks, cashier’s checks, certified checks and payroll checks. Understanding what each type offers can help you decide which one may be best for your needs.
A personal check is a slip of paper that features your name, address, and banking information. It’s typically used to make a payment or give as a gift. A personal check also allows you to securely transfer money between two entities, as the payee is the only person who can deposit or cash it. This makes it a great option for giving large sums of money, or when you don’t want to give someone your real name.
The first section of a personal check contains the amount that you’d like to withdraw from your account, followed by the payee’s name and address. There’s a box for the date that you write in, as well as an area where you can add a memo or other details for your records. The last section of a check is the signature line, where you can sign your name. This helps to confirm that you are the account holder and it’s important to double-check that you have signed correctly.
Cashier’s checks are generally used to make payments to businesses and to individuals who cannot be reached by phone or internet. They are often used for paying utility bills or rent, and they can also be used for making gifts or transferring money between friends and family. A cashier’s check has additional security features, including an endorsement from the bank, that can make it more difficult to forge or alter.
Certified checks are similar to cashier’s checks, but they have more legal protections. This can make them more suitable for businesses that may require a higher level of security. A certified check typically contains a seal or logo from the bank, as well as a signature block that’s been verified by the bank. These types of checks can be more secure than regular personal checks, and they are commonly used to pay taxes, settle legal disputes and provide proof of income.
Cash
You might not think of cash as an important payment instrument in your everyday life, but it plays several key roles for consumers. Specifically, it dominates low-value transactions and acts as the backup payment instrument when other options are not available – especially among lower-income consumers.
According to data from the Federal Reserve’s Diary of Consumer Payment Choice, in 2019, cash accounted for 47 percent of payments under $10, and for 40 percent of payments between $10 and $25. Although Diary participants reported fewer cash payments under $10 this year than last, the share of these payments remained steady, and the number of total payments declined by just one (to 10 from 11 in 2018).
Regardless of transaction size, consumers across income groups use cash more frequently than any other payment instrument. It is the primary payment instrument for many low-value purchases, such as gifts and transfers between individuals (P2P payments); food and personal care; entertainment and transportation; and medical, educational and personal services. It also plays a major role as the backup payment instrument for most consumers when other alternatives are not available, including P2P payments and utility bill pay-by-phone.
In the future, the way consumers use cash will likely continue to evolve as new options become available. For example, digital wallets could allow consumers to make payments with a single tap of their phone. But, even with these developments, cash will probably remain a critical part of the everyday economy. In fact, some types of businesses – such as coffee shops and convenience stores – prefer to accept cash because they don’t have to pay the fees associated with accepting credit or debit cards.