Instant payment

After you have chosen what to purchase and where to purchase a product, the next most important factor in the transaction is how to pay for it. In using instant payment methods, the amount you have limits the amount you can spend. This can be a crucial advantage for money management but may restrict what you can buy.

Cash

There are a few ways that you can pay for an item instantly. Cash is the easiest method of instant payment, involving notes and coins of an agreed value. The federal government controls the amount of cash in circulation so that it retains its value. The benefits of paying for something in cash are that it is easily exchanged and widely accepted. Vendors do not need special facilities to accept a payment by cash. The main disadvantage is that since cash is easily exchanged, when you lose it, you cannot recover the amount lost. It is also difficult and unsafe to carry around a lot of cash for larger purchases.

Direct debit

Direct debit is a form of payment, usually electronic, that transfers money from one account to another. Debit means 'to owe' so when you pay someone via direct debit, the money is deducted from your account and credited into the account of the party you wish to pay - another person, a store or a service provider. Two common methods of direct debit are EFTPOS (electronic funds transfer at point of sale), available at all major retail outlets and most other vendors, and BPAY®, which you can use to pay bills.

Direct debit occurs instantaneously, so it has most of the advantages of cash, in addition to safety features such as a PIN (personal identification number) as security to ensure that only you can access your account and approve the transaction. Disadvantages include the fact that not all vendors have the facilities to process direct debit payments, you need to remember your PIN and prevent others from learning it, and your bank may charge fees for debits to your account.

Money transfer

Delayed payments are transactions that take some time to process, although the payer intends to pay instantly. Money transfer is a type of direct debit that occurs via a money transfer service rather than a financial institution. The transfer, often called 'wiring', involves a deposit of money in cash or via direct debit, processed and sent to a specific destination (usually another branch of the transfer service) and delivered to the specified receiver. You would use this method for long distance payments and/or to pay those who do not have a bank account. Money transfers usually incur a fee and access to this service may be inconvenient depending on the location of the money transfer branch.

Cheque

A cheque is a promise bearing the details of the money-giver, given as payment to the vendor. Features of a cheque include the name of the person to be paid (payee), the amount to be paid, the date and the payer's signature, where the payer is the account holder of a personal or joint account or the approved representative for a business. The payee gives the cheque to their bank or financial institution to be processed and the bank uses the details of the payer to transfer the money from the payer's account to the payee's account. The signature verifies that the payer approves the transfer of money to the payee. The process of turning the promise into payment is known as cashing the cheque.

Although the cheque gives space for the payer to write the name of the payee, negotiable cheques allow any bearer to cash it. If you wish to ensure that only the specified payee can cash the cheque, you must mark the cheque 'not negotiable'.

A personal cheque is one that transfers money (draws) from your personal cheque account, if you have one. You may be restricted from opening a personal cheque account depending on the prerequisites of your financial institution, but for a fee, you can access bank cheques, where you give the amount you wish to pay to the bank and the receiver uses the bank cheque to withdraw the money directly from the bank's account.

You can use cheques to transfer large amounts of money and delay the withdrawal of money from your account for a few days, either directly by future dating the cheque so that the payee can only cash it from a certain date, or indirectly, via the normal processing time known as clearing. The payee does not receive money until the cheque has been cleared. If there are not enough funds in the cheque account to transfer to the payee's account the cheque bounces, which means the payee does not receive the money. For a fee, the payer may stop the cashing process during the clearance period.

For vendors, cashing the cheque takes effort to process and is time consuming and risky, so many do not accept them. A disadvantage for the consumer is that the main security feature of a cheque is the payer's signature, making this method of payment open to fraud. Like instant payments, the amount of money you can draw on a cheque is limited to the amount you have in your cheque account. If you go over this amount, the cheque bounces or the account becomes overdrawn, which generally incurs a financial penalty.

Money order

Money orders work much the same way as bank cheque, only via Australia Post rather than a bank. For a fee, Australia Post will take your money and issue a money order to the person of your choice. The person can then redeem the amount from any post office. A money order is therefore as safe as a bank cheque, but more convenient, although the amount must be $1000 or under. This might work for businesses that trade over the internet or via mail order but not the ideal way to pay a retailer who needs to make the effort to go to the post office to complete the transaction.