Direct debit:

1. The bank may provide direct debiting facilities for payments of varying amounts at irregular intervals.

(a) Under this arrangement, when the supplier sends an invoice to the buyer a direct debit form is also sent to the buyer's bank informing the latter to debit the buyer's bank informing the latter to debit the buyer's account and to transfer the money to his account. Such payments have to be authorized by the buyer.

(b) This saves the buyer the trouble of remembering due dates of payment and sending off cheques.

(c)  The supplier or creditor gets prompt settlement of debts.

(d) This differs from standing orders in that it is the creditor who gives payment instructions and not the debtor. The amount and date of payment are not fixed as in the case of standing orders.

Remittance

1.Remittances are used to send money from one place to another without the actual physical movement of cash. Examples of bank remittances include bankers' cheques, bank drafts, mail transfers and telegraphic transfers:

(a)  A bankers' cheque or cashier's order is a bank's cheque drawn upon itself. It can be used for payments of any amount within the same town. It is highly acceptable since the drawer of the cheque is a bank.

(b)   A bank draft is an unconditional order in writing drawn by one bank on another                                                                                                                                                                                                                                        requesting the drawee bank to pay a third party on demand a specified sum of money.

(c)   A mail transfer is a written instructions given by a remitting bank to its branch or agent bank to pay a certain sum of money to a third party Such a remittance is sent by mail. The remitter has to pay the commission and postal charges.

(d)  A telegraphic transfer is an instruction that is cabled or telexed to a branch or agent bank by the remitting bank to pay a certain sum of money to a third party. The remitter will be charged commission and cable or telex cost.

2. All local remittances are payable in local currency while foreign remittances are payable in foreign currencies drawn on an overseas bank. For the latter, the remitter has to pay the equivalent amount in local currency

3. To the remitter, bank remittances are safe, cheap and convenient to use. To remitting bank, remittance service provides income from commission, foreign exchange and the short-term use of interest-free funds.

Documentary credits (letter of credit)

Documentary credit is a letter of undertaking issued by importer’s bank (hereafter called the issuing bank) to pay an overseas exporter against the exporter’s shipping documents such as the bill of lading, certificate of insurance, invoice, etc. which must adhere strictly to the terms and conditions of letter of credit. The exporter can receive payment for the amount due the instant he deposits the shipping documents with the agent bank (or advising bank) which is in his country.