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Banks & Taxes in the UK

Payment Methods in the UK

Aside from credit cards, there are various payment methods frequently used in the UK, including checks and debit cards. For regular bills, direct debits and standing orders are often preferred. Read on for an introduction to the preferred payment methods in the UK and what you need to keep in mind.

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  • Checks, or “cheques” as the British would spell it, are still a quite valued payment method in the UK. They’re mostly used among the older generation and are one of the slower methods to transfer and receive money.
  • Debit cards are the UK’s most favorite payment method, especially for grocery and retail shopping.
  • For regular payments such as rent and utility bills the British prefer to use standing orders and direct debits.
  • In times of online shopping, alternative payment methods such as PayPal, Google Wallet, and Apple Pay are gaining more and more popularity.

Most expats prefer to use their credit card for various payments, as it is easy and accepted almost all over the world. In the UK, you can use your credits card for various purchases. However, not everything can be paid for that way and some companies and institutions might require you to choose a different method of payment altogether. In this article, we will introduce you to the most popular payment methods in the UK.

Still in Use: Checks

Although it may seem a little antiquated, paying by check is still quite popular in the UK, particularly among older folks. However, the use of this payment method has drastically declined since the early 1990s, due to the popularity of other methods of payment. Nonetheless, around 500 million checks were written in 2015 which shows that paying by check is still a valued payment method.

If you receive a check as payment, you can take it to your bank and ask them to pay the money into your account. However, checks are not cleared instantly and it may take a while until you receive the money. One of the bigger downsides of this payment method is that it is prone to fraud. This is why you should always be especially careful when using checks.

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The Popular Choice: Debit Cards

Card payment is probably one of the most popular types of payment, particularly for the regular grocery and retail shopping. Debit cards are particularly popular and convenient. They were introduced in the 1980s with the aim to reduce the usage of checks which are more expensive for banks. They can be used instead of cash but unlike credit cards, debit card payments are deducted from the card-owner’s account right away. The most commonly used debit cards in the UK are:

  • Maestro provides PIN-based direct cash access from your bank account in the UK as well as abroad (check with your bank for possible charges when using it overseas).
  • Debit MasterCards are a safe and convenient way to pay face-to-face, online, and by telephone. They also allow for speedy, contactless payments for transactions of 20 GBP or less.
  • Visa Debit gives the convenience of a credit card while only accessing funds in your current account. You can get cash out at ATMs in the UK as well as abroad (check with your bank for possible charges when using it overseas).
  • Visa Electron allows no overdraft since all the funds need to be available at the time of transfer. This debit card is especially suitable for young people or those with a poor credit history.

Nowadays, all debit cards have been converted to Chip and PIN in order to increase the level of security of transactions.

Regular Transactions: Direct Debit and Standing Orders

For regular payments to local authorities such as utility companies or tax offices, most people choose standing orders or direct debits to pay their bills. There is a lot of confusion as to the difference between these two payment options. Both are instructions to your financial institution to make a regular payment to a third party.

To set up a standing order, you instruct your bank to pay a certain sum of money, for instance to your utilities provider, at regular intervals. The details of the standing order, like the recipient or the sum, cannot be changed by anyone except for you. It will take up to three days for the money to be transferred.

With a direct debit, you authorize a third party to withdraw a certain amount of money directly from your account. The money will then instantly be transferred to the account of the third party, your credit card company, for instance. Because direct debits are faster and cheaper than standing orders, they have become the method of payment that many companies prefer.

A New Era: Alternative Payment Methods

The turnover of e-commerce was 110 billion GBP in 2015 and is expected to increase over the next three years to around 150 billion GBP. So in a time where making purchases over the internet is becoming more and more common, new payment methods have also developed and although many transactions are still done with credit or debit card, these new and alternative methods are on the rise. In 2015, 82% of the UK’s online payments were made through alternative methods such as PayPal, Apple Pay, and Google Wallet.

Updated on: December 06, 2018
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