Small Payments for Everyday Transactions

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Small purchases made frequently can have a significant impact on your finances. It’s important to understand how these payments are processed and why you might choose one form of payment over another.소액결제 정책 현금화

Cash is the most popular form of payment, dominating transactions in low-ticket categories such as gifts and transfers between individuals; food and personal care supplies; entertainment and transportation; and medical, educational and personal services.
Credit Cards

Whether you swipe your Citi(r) Double Cash Card to earn 2% cash back on purchases or your Chase Sapphire Reserve(r) Card to rack up 3X points on travel, credit cards have a lot to offer. They can help you build your credit score, but only if you use them wisely.

Credit cards operate on a deferred payment basis, which means you can spend up to your credit limit and pay the money back later. This can be a great way to build your credit score if you consistently make payments on time, and it can also save you the hassle of having to carry around a large amount of cash for everyday transactions.

However, it’s important to remember that a credit card doesn’t function like a checking account debit card and you can’t overdraft with one. The credit card company will reduce your available credit by the amount of the transaction, and you’ll receive a statement at the end of each billing cycle showing all the purchases and any fees or interest charges that may apply. It’s recommended to set up autopay or calendar reminders for at least the minimum payment each month to avoid late payments and ensure you are paying off your entire balance before interest is charged.
Debit Cards

When you swipe a debit card at a checkout counter, the amount of money you spend is instantly withdrawn from your linked bank account. This differs from credit cards, which allow you to borrow funds for purchases that you must pay off later, with interest. Because debit cards draw directly from a bank account, they're usually more convenient than carrying around a wallet full of cash or a checkbook.

When choosing the best debit card for your needs, consider factors like the transaction limit and the fee schedule of the issuer. Some banks charge a monthly fee for their debit cards, while others offer them free of charge to their customers. Some debit cards also require a minimum balance, while others have a maximum daily purchase limit that you must maintain in order to avoid a maintenance or overdraft fee.

Regardless of the card type, most debit cards require you to enter a personal identification number (PIN) when making a purchase, which makes them more secure than paying with cash. Some cards also provide a modest level of fraud protection, but this is not universal.

If you're a consumer in Canada, you'll benefit from a voluntary code entered into by all providers of debit card services, called the Canadian Code of Practice for Debit Card Services. The code is regulated by the Financial Consumer Agency of Canada (FCAC), which investigates complaints against a financial institution that issues a debit card.

A debit card works well for purchases you would otherwise make with cash, such as groceries, gas, and convenience store items. It can also be used to make small online purchases, although you'll likely want to use a credit card for larger amounts due to the potential for increased security and fraud protections.

It's important to remember that debit cards draw directly from a bank account, so they limit your spending to the amount of money you currently have in your checking account. In addition, some debit cards come with extra fees for using them at ATMs outside your network, and overdraft and other charges if you spend more than the available balance in your account.
Checks

Checks are still in use, but they're not as common as cash or debit cards. Essentially, a personal check is an order to pay money from one bank account to another. The person or business named in the payee section of a check can deposit it, endorse it to someone else, or simply take possession of it as payment for goods or services. Whether you're paying for groceries, a utility bill or a mortgage payment, a check allows you to keep track of who you paid and how much you paid.

A personal check has several different sections, including the payer's name and address, the amount of the check in a dollar figure, the bank name that holds the depositor's checking account, and a memo line where the payer can add a note. The payer also signs the bottom right-hand corner of the check, a security feature to verify their identity and prevent fraud. If you write a blank check, it's very easy for anyone to fill in the empty spaces and spend your money.

The back of a check may have important information, including the bank ID number and account number, the payee's signature, and the date on which the check expires. You can also write your own endorsement on the back, which helps you identify yourself as the holder of the check and protects you against lost or stolen checks.

Once the payer has signed a check and endorsed it, they can bring it to their bank or credit union, either in person with a teller or using an ATM, or make a digital deposit through their mobile banking app. They'll need to provide proof of identity to be able to deposit it, which can be a drivers license or other government-issued identification card.

Unlike cash, debit and credit card payments, which show up immediately in your account balance, checks can take a while to clear. If you forget to log them in your check register, they could delay other transactions or cause you to overdraw your account. To avoid this, consider investing in a digital or paper check register.
Cash

As the Diary has previously noted, cash continues to play several key roles in consumer payments. It is the most prevalent payment instrument for low-value transactions, is especially preferred by lower-income consumers who may not have access to alternative options, and serves as a backup payment instrument in situations when other methods of paying are unavailable or unwieldy. Consumers also rely on cash as their primary form of payment for person-to-person (P2P) payments, where the value is stored in the wallet or purse of the sender and cannot be withdrawn until the money is delivered to the receiver.

Cash remains dominant for these small-value payments, but it is now a less frequent choice than in previous years. In 2020 and 2021, cash accounted for only eight of 17 small-value payments; in 2019 it accounted for more than 40 percent of these payments. This reduction in cash use is likely due to changes in everyday shopping habits. Consumers used their credit cards for more in-person purchases than in the past, which reduced their need to purchase groceries and other essentials with cash. In addition, the use of P2P payment apps and electronic transfers from bank accounts shifted some in-person purchases from cash to other forms of payment.

Many business owners maintain a separate account to pay for small expenses, such as postage stamps and office supplies. This is known as a petty cash account, and it usually has a designated employee who tracks expenditures and refills the fund. This practice helps businesses keep a close eye on spending and prevents overspending.

Some consumers who do not have sufficient funds in their bank accounts may turn to a credit card to make an advance. These advances are not loans and do not have an interest rate. Instead, they are a financing option offered by some credit card issuers in partnership with their merchant sales processing companies. These advances are typically based on a daily factor of your card sales and are intended to decline as daily sales decrease. If you find yourself relying on cash advances, drastic budgeting and spending changes may be in order.