What payments methods are available to you

While you were growing up, most likely you only had enough allowance to buy the things you needed. It was a simple exchange between you and the store or merchant – you gave them cash and in exchange, you got an item.

As you grew older, you got exposed to other types of payments aside from cash. You learned about checks, debit cards, credit cards, and most recently, about e-wallets.

With ever increasing digital life, new and high-tech payment platforms are changing the way people and businesses use and manage money. Because of these developments in financial transactions, it’s good to know that there are a variety of payment options available to you.

• Cash. Of all these payment methods, cash may be the most familiar for you, and the one that is most widely accepted as a form of payment. Cash is primarily in the form of coins and paper money.

  The downside to using cash is that they may be cumbersome to carry around (remember seeing a fat wallet?) In particular coins can be heavy in large quantities and they can be heavy in your pocket. You may not also be able to track how much you have with you, unless you’re diligent in knowing how much you need to spend for the day.

• Debit cards. For quick cashless payment transactions done over-the-counter, but with the surety of cash, debit cards are a good choice. Beyond simply using them to withdraw cash in automated teller machines (ATM), debit cards have grown to be used for cashless payments. Debit cards are basically connected to a user’s bank savings account where cash is drawn or deducted automatically to complete a payment so it is as good as paying physical cash.

  A few problems when using debit cards is that they may not always be accepted in certain establishments, or your purchasing power is only as good as the total balance available in your savings account where the debit card draws money. In addition, they are vulnerable to fraud or theft, especially if you expose your PIN.

• Credit cards. Probably the most widely known method for cashless payment, credit cards grew in use as more people found it more convenient than carrying cash. It is essentially a type of loan by an issuing bank. The user is given a specific credit limit to be used for purchases every month. The amount used from that credit needs to be paid at a later date. Some credit card issuers offer installment payments for big ticket items.

  One major problem with credit cards is that you may risk overspending, especially if you have gotten used to it a lot. Credit cards also charge penalties if you exceed your credit limit and if you are late in your payments and even late payments incur interests, which might put you in deeper debt (remember to pay on time and in full). Credit cards can also be vulnerable to fraud; a stolen card can also be used to make purchases.

• Checks. These are paper documents that are backed by banks for payments. Their primary benefit is that it allows you to securely pay for large purchases, such as a down payment for a home or a car, without needing to carry physical cash. A certain type of check called post-dated check is accepted as a guarantee for regular payments to be made at a future time. It is mostly used for monthly rent or mortgage payments.

  Checks can also come with a few disadvantages. One of them is time-consuming clearance processes, which could take anywhere between a day and three days. There are also chances for errors in writing down details; you might miss a letter or a number, which means writing a new check and queuing up again. And despite changes in designs and security features of checks, some check fraud criminals can still find ways to fake checks or signatures.

• E-wallets. Lately, these have risen to become another option in paying for products and services. An e-wallet’s primary entry point is through an app installed in the user’s smartphones. Registration to the e-wallet service provider is also required for mobile numbers to use the e-wallet app, which also needs to be loaded with cash. The amount added can be used to pay, which is done either by scanning QR codes, sending it to another e-wallet-enabled mobile number, or by selecting from a list of billers on the app.

  E-wallets, while widely used, are not universally accepted. Many mom-and-pop shops, like sari-saris stores, still do not have e-wallets. Some areas in the Philippines still do not have strong or reliable mobile phone signals, which limits the use of e-wallets that rely on mobile service connections. And like debit and credit cards, e-wallets can still fall victim to fraud. Some scammers try to trick e-wallet users to send them money through phishing.

With the number of payment options available to you there are more ways to manage your finances. You may prefer the tactile feel of a physical cash or check, or you want the convenience of cashless payment via credit cards, debit cards, or e-wallets. Find the right fit which of these fit your spending habits and overall lifestyle. You also need to know their disadvantages and the risks of using them.