Economy & Finance
Payment Methods in the UK
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.
Paying by Cheque
Although it may seem a little antiquated, paying by cheque 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. While about 4 billion cheques had been processed in 1990, this number dropped to only one billion in 2006.
If you receive a cheque as payment, you can take it to your bank and ask them to pay the money into your account. However, cheques 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 cheques.
Debit Cards in the UK
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 cheques 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:
- Debit MasterCard
- Visa Debit
- Visa Electron
In recent years, all debit cards have been converted to Chip and PIN in order to increase the level of security of 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 those 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.
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