METHODS OF PURCHASING GOODS

AND SERVICES:

CASH TRANSACTIONS

Grade 11 Term 3 Week 6 Lesson 3

CASH TRANSACTIONS

Cash transactions involve a direct exchange of

money for goods.

When you make cash purchases you are entitled to

ask for a cash discount

ADVANTAGES OF CASH TRANSACTIONS

You are free to shop at any store and not only where you have an account

You think twice before making a purchase as the impact of the purchase is felt immediately

Stores that sell only for cash can charge less for their goods so you can save

You can save your credit for emergencies

DISADVANTAGES OF CASH TRANSACTIONS

Carrying large amounts of cash can be unsafe

You need to be disciplined about keeping track of all your expenses

Some shops are unwilling to refund cash for returns

You do not build up a credit record, which can be vital in emergencies

If cash is lost, it cannot be replaced

TYPES OF CASH TRANSACTIONS AND MEANS

OF PAYMENT

Notes and coins

Cheques

Postal orders

Cash with order (CWO)

Cash on delivery (COD)

Debit cards

Internet payments

NOTES AND COINS

You can use notes and coins to settle almost any

transaction.

It is impractical to pay large amounts with cash.

It is unsafe to carry large amounts of cash

CHEQUES

A cheque is a promise from a bank to pay money

from the account holder’s bank account to the

person who has been given the cheque

The person writing the cheque is called the drawer

The drawer writes the transaction details on the

cheque and signs it

WRITING CHEQUES

Many businesses do not accept cheques or they

insist on proof of identity when payment is made by

cheque

This is because of so much fraud committed using

cheques

A cheque will not be accepted if any changes are

made on it

A bank will not release cash until it has received the

money from the drawer’s bank

By crossing a cheque you can ensure that the

funds are paid directly into the account of the

payee, nobody else can cash the cheque

POSTAL ORDERS

Postal orders are purchased at a post office for a

specific amount of money

It is payable to a specific person or company and

can only be redeemed at a post office or bank

It can be posted to the receiver, but can be lost or

stolen in the post

CASH WITH ORDER (CWO)

CWO is when the money for a product or service is

paid when the order is placed

Business can plan it’s production according to the

orders received

There is a possibility that the order may not be

delivered if it is a scam

Payment is made without seeing the product so you

may not want it when it arrives

CASH ON DELIVERY (COD)

COD is when the money for the goods is paid

when they are delivered at the customer’s

door or store

Goods can be ordered by telephone or post.

This type of payment allows the seller and buyer

to reduce the risk of fraud or non-payment

DEBIT CARDS

A debit card /bank card/cheque card allows a

customer access to his/her bank funds immediately

through electronic means

The bank immediately deducts the amount from

your account and gives it to the business where you

made the payment

A debit card can also be used to draw cash from an

ATM

ADVANTAGES AND DISADVANTAGES OF DEBIT

CARDS

Business is guaranteed payment once the card has

been accepted

Debit cards can be used for mail-order or online

purchases

It is cheaper than withdrawing cash

Fraud is a problem. New cards have a chip and a

pin number to try to solve this

INTERNET PAYMENTS

If you have access to the Internet your account can

be linked so that you can make payments from the

security of your home at your leisure

The service can be used to pay accounts

Goods and services can be purchased and paid for

using electronic financial transactions (EFT’s)

ADVANTAGES AND DISADVANTAGES

Payments can be made at any time of the day or

night

Goods can be purchased over the Internet and be

delivered to your home

Disadvantage: Phishing schemes occur where

criminals use the Internet to obtain private

information that they use to commit crime