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Payment Methods and Options in United Kingdom

The range of methods in which individuals and organizations are able to make and receive payments
is growing at a steady pace. Apart from cash, for a long time the other available payment method was only cheques. Currently, there are a wide variety of payment options. These include, in the United Kingdom, credit and debit cards, automated payments like Direct Debit, Bacs, Standing Orders and other methods available through internet (internet banking).

In global markets, credit card, debit card, money transfers, and recurring cash or ACH (Automated Clearing House) disbursements are all electronic payments methods. Electronic payments technologies are magnetic stripe card, smartcard, contactless card and mobile handset. Mobile handset based payments are called mobile payments.

In the United Kingdom, although, after a long-term decline in use, the Cheque Guarantee Card Scheme closed in June 2011, it is possible to continue to use them provide the businesses choose to accept them.

Payment methods: Bank Transfer

See Bank Transfer

Methods of Payment in International Trade

See Methods of Payment in International Trade

Payment Methods explained

• cash: Almost universal.
• Cheque usage is in decline in the United Kingdom but the Payments Council has pledged to keep cheques and has called off the possible closure of the cheque clearing in 2018.
• direct debit: Only authorised companies can collect Direct Debits and they are required to go through checks by their bank before being allowed to collect money in this way.
• There are over 165,000 websites in Europe that accept PayPal.

When is the money available?

• cash: Immediately
• cheque: Money will be debited from your account 3 days after the recipient has paid the cheque in. For the recipient of the cheque the 2-4-6 rule applies: by day 2 they will start to earn interest on the money; by day 4 they will be able to withdraw the money; by the end of day 6 it’s guaranteed the money is theirs.
• prepaid card: Same day usually.
• debit card: Same day usually.
• credit card: Same day usually, but you won’t pay anything until the transaction appears on your monthly statement.
• direct debit: Immediately on the due date, excluding weekends.
• standing order: It will be taken from your account on the date you are making the payment.
• online or phone payment: It will be taken from your account on the date you are making the payment. If it is processed as a Faster Payment (check your bank’s value limit) it will be processed within hours – and these payments can be made 24 hours a day, seven days a week. If the payment can’t be processed as a Faster Payment it will be processed via Bacs which takes three working days.
• CHAPS: Same day.
• PayPal: Same day.

Observations:

Scottish, Northern Irish, Channel Islands and Isle of Man notes and coins are usually accepted throughout the UK but are not legal tender.
Speed of cheqye payment depends on the payee paying in the cheque which can cause uncertainty over when the money will leave your account. Cheques that have been filled out and issued as payment may be treated as valid for 6 months after the date written on the cheque and banks can reject them after 6 months. However, legally a cheque is valid for 6 years.
Prepaid cards can either be for a fixed value or reloadable. They may help you budget your money as you cannot go overdrawn. They may also be a useful way for anyone without a bank account or with a poor credit history to use cards and make purchases over the internet. They can be more secure than carrying cash which if lost is gone forever.

For repeat purchases such as subscriptions or regular payments, it’s possible to set up recurring payments on your debit card, though this doesn’t offer the same protection you get with a Direct Debit. As a general rule for paying abroad, it is cheaper to use your debit card to withdraw cash and to use your credit card to make purchases but you should always check your terms and conditions.
As a general rule for paying abroad, it is cheaper to use your debit card to withdraw cash and to use your credit card to make purchases but you should always check your terms and conditions.
For repeat purchases such as subscriptions or regular payments, it’s possible to set up recurring payments on your credit card, though this doesn’t offer the same protection you get with a Direct Debit.
Many firms will allow you to sign up to Direct Debit agreements over the phone or email, by taking your details down. If there is no paper evidence they must be able to prove they have your explicit consent if any query is raised.
standing orderIf paying a business, it is usually best to opt for a Direct Debit where possible as it offers better consumer protection. You should always be careful when providing the sort code and account details of the destination for the payment.

Questions

Questions about:

payment methods amazon

payment methods magento

ebay payment methods

sap payment methods

See Also

Payment Terms
Payment Gateway
Payment Protection
Direct Debit
Standing Order
Faster Payments
Bacs
Accounting
Alternative Payments
APACS (The UK Payments Association)
Financial transaction

Further Reading

Schaeffer, Mary S.: New Payment World, John Wiley & Sons 2007
Schaeffer, Mary S.: Controller & CFO Guide to Accounts Payable, John Wiley & Sons 2007

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(2013, 06). Payment Methods lawi.org.uk Retrieved 01, 2021, from https://lawi.org.uk/payment-methods/

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  • Article Name: Payment Methods
  • Author: International
  • Description: Payment Methods and Options The range of methods in which individuals and organizations are able to make and receive [...]

This entry was last updated: November 4, 2020

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