Five Types of Payment Systems Cash Checking Transfer Credit Card Stored Value Accumulating Balance

Legal tender defined by a national authority to represent value Instantly convertible into other forms of value without a third party Normally used for small transactions Cash

Cash (continued) Positives: Portable, gives consumer instant purchasing power, and virtually free Negatives: easily stolen, limited to smaller transactions, provides no float

Checking Transfer Funds transferred directly via a signed draft or check from a consumer’s checking account to a merchant They can be used for both small and large transactions

Positives: Provide users with some float, hard to steal Negatives: they’re not anonymous and require a third party Checking Transfer (continued)

Credit Card An account that extends a line of credit to consumers and allows them to purchase items now and pay later Issuing banks issue cards and process transactions Processing centers handle verification of accounts and balances

Stored Value An account where funds are deposited and withdrawn as needed Examples: prepaid cards, gift certificates, debit cards, and smart cards

Accumulating Balance Accounts that accumulate expenditures and to which consumers make period payments Examples: phone and utilities

Most Common Payment Systems (Based on Number Of Transactions )

Most Common Payment Systems (Based on Dollar Amount)

Online Merchants’ Actual and Preferred Online Payments