Credit transfers

1  A current account holder can instruct his bank to pay directly into the bank account of the payee. The bank will debit his account and credit the account of the payee.

2. Credit transfer system can be used to make single or multiple payments. Single credit transfers are frequently used by debtors to pay bills.

3. This facility is useful to the businessman who has to make a large number of payments at one time to those with bank accounts. Credit transfers can be used to pay salaries, rents, hire purchase instalments, etc. In the payment of salaries, for example, the employer has only to make out one cheque for the total amount together with a list of the employees' names and account numbers and the amount of salary to be credited.

4.  This method of payment is advantageous because it is:

(a) convenient - both to payer and payee as the former is spared the trouble of writing and posting several cheques, and the latter need not go to the bank to cash the cheque.

(b) economical - the payer pays the stamp duty for only one cheque and he also saves on postage.

(c) safe - there is no risk of cheques getting lost or being dishonoured.

Standing order or banker’s orders:

1 These are orders to a banker to pay regularly a fixed sum of money from one's current account in order to settle recurring payments like mortgage repayments, hire purchase transactions, rents, insurance premiums, subscriptions to clubs, etc.

Advantages

1.    Regular commitments are met punctually

2.    Debtors need not remember due dates for payments.

3.    Creditors need not send reminders to debtors to pay up their debts.

Disadvantages

1. The current account holder using the facility is informed of the payment made by the bank on his behalf only when he receives the monthly bank statement, so it is possible that he may inadvertently overdraw his account if he has only a small balance in it.

2. It is restricted to only payments of a specific amount and where payments are of an irregular sum or have increased in amounts, new instructions have to be made to the bank. To overcome this problem, direct debiting facilities are provided to the customer.