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Introduction

In the commercial world, we seldom use cash in transactions.


Different payment methods have been developed since the banking
activities become more and more important in the modern society.
Methods of Payment in
Trade and Other Transactions

1. Through Commercial Banks:


 Cheque
 Cashier order
• Autopay
 Bank draft – Standing order
 Telegraphic transfer – Direct debit
– Letter of credit
(L/C)
Methods of Payment in
Trade and Other Transactions

2. Through Post Offices:


 Postal remittance service
 PayThruPost service
Methods of Payment in
Trade and Other Transactions

3. Other Methods of Payment :


• Cash
• Credit card
• Debit card
• Smart card
 Promissory note
 Bill of exchange
Components/Features of a cheque
Payee’s Payt. Payt. Drawer’s signature
name Amt. Date

Cheng Siu Ming

Suffix/Account Type
A/C #
Bank code
Chq. chq. # Branch code
Counterfoil
Advantages of Using Cheques

 Safety
 Flexibility
 Convenience
 A proof of payment
Types of Cheques
 Bearer cheque
 Order cheque
 Uncrossed cheque / Open cheque
 Crossed cheque:
 General crossing
 Account payee only
 Not negotiable
 Not negotiable, account payee only
An open cheque

15 June 2004

Chan Siu Ming


One hundred only
100.00

 No lines are drawn across the face of the cheque.


 The payee can obtain cash from the drawer’s bank directly; in other
words, the payee may not have a bank account.
A crossed cheque

15 June 2004

Chan Siu Ming


One hundred only
100.00

 A cheque can be crossed by drawing two parallel lines “ // ” across the


front.
 Crossed cheques must be deposited in a bank account.
Counterfoil
Counterfoil is used for
reference only. The
cheque-book holder
can check the details
of payments with those
listed in the bank
statements.
TYPES OF CHEQUES
Chan Siu Ming
1. Bearer Cheque
The bearer cheque is payable to the person specified there in or to any other else
who presents it to the bank for payment. However, such cheques are risky, this is
because if such cheques are lost, the finder of the cheque can collect payment
from the bank.

Chan Siu Ming


2.Oder Cheque
By striking out “or bearer” the cheque becomes an order cheque, which means
that only the named person can cash it or endorse it.
2.Open Cheque
When a cheque is not crossed, it is known as an "Open Cheque" or an
"Uncrossed Cheque". The payment of such a cheque can be obtained at
the counter of the bank. An open cheque may be a bearer cheque or an
order one.

3.Crossed Cheque
.
Crossing of cheque means drawing two parallel lines on the face of the
cheque with or without additional words like "& CO." or "Account Payee"
or "Not Negotiable". A crossed cheque cannot be encashed at the cash
counter of a bank but it can only be credited to the payee's account
Open cheque Crossed cheque

 can obtain cash from


• can obtain money
the drawer’s bank
directly through a bank
account only
 no lines drawn
across the face of • two vertical or
the cheque parallel lines
drawn across the
face of the
cheque
1. General Crossing :-
Generally, cheques are crossed when
1.There are two transverse parallel lines, marked across its face or
2.The cheque bears an abbreviation "& Co. "between the two parallel lines or
3.The cheque bears the words "Not Negotiable" between the two parallel lines
or
4.The cheque bears the words "A/c. Payee" between the two parallel lines.
A crossed cheque can be made bearer cheque by cancelling the crossing and
writing that the crossing is cancelled and affixing the full signature of drawer.
Specimen of General Crossing ↓
2. Special or Restrictive Crossing :-
 When a particular bank's name is written in between the two parallel lines
the cheque is said to be specially crossed.
3.Cheques crossed ‘A/c.payee’?
 Often cheques are crossed with two parallel transverse lines and in
between the two parallel lines the words “a/c payee”or “a/c payee
only”are written.
 This means that the proceeds of the cheque are to be credited to the
accoumt of the payee only.
 This type of crossing is also called “restrictive crossing”.
 It serves a good protection to drawer from loos or theft.
Endorsement
 Transfer to a third party
 Types:
 Blank endorsement
 Endorsement to order
Dates of Cheque
 Post-dated cheque
 Stale cheque
 Antedated cheque
(In banking, antedated refers to
cheques which have been written
by the maker, and dated at some
point in the past.)
Reasons for
Not Honouring a Cheque
 Insufficient fund
 Stale cheque (a cheque which is issued more than 6 months ago)
 Post-dated cheque
 No signature
 Signature not matching the bank record
 Not countersigned on alteration, etc.
Services of Commercial
Banks

1. Accepting Deposits:
– Savings account
– Current account
– Time deposit account
– Foreign currency account
Services of Commercial
Banks
2. Granting Loans:
– Overdraft
– Personal loan
– Business loan
– Trade financing
Services of Commercial
Banks
3. Remittance Services:
– Bank draft / Demand draft
– Telegraphic transfer

4. Other Services:
– Automatic teller machine (ATM)
– Money exchange
– Trustee service
– Safe deposit box
– Gift cheque
– Traveller’s cheque
Standing order or banker’s orders:
These are orders to a banker to pay regularly a fixed sum
of money from one's current account in order to settle
recurring payments like mortgage repayments, hire
purchase transactions, rents, insurance premiums,
subscriptions to clubs, etc.
Direct debit:
The bank may provide direct debiting facilities for payments of varying amounts at
irregular intervals.
(a) Under this arrangement, when the supplier sends an invoice to the buyer a direct
debit form is also sent to the buyer's bank informing the latter to debit the buyer's bank
informing the latter to debit the buyer's account and to transfer the money to his
account. Such payments have to be authorized by the buyer.
(b) This saves the buyer the trouble of remembering due dates of payment and
sending off cheques.
(c) The supplier or creditor gets prompt settlement of debts.
(d) This differs from standing orders in that it is the creditor who gives payment
instructions and not the debtor. The amount and date of payment are not fixed as in
the case of standing orders.
Latest Development of
Banking Services

Investment
Telebanking consultancy
service

All-in-one Internet
monthly banking
statements services

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