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Payment methods intro
Cash is one of the oldest and most straightforward payment methods, where consumers simply exchange physical currency for goods or services. Credit cards allow people to buy now and pay later, using a line of credit that can be paid off in installments. Other options, such as layaway, rent-to-own, and installment plans, let consumers reserve or receive an item immediately, but pay for it over time. Created by Sal Khan.
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- The problem is that not everywhere in USA accept a debit card. For example in restaurants, at the gas stations or rent a car. It was a lot of pain as an european that had a credit card electronically only (watch and phone). It is ironic since the most of those technologies support that come from USA.(13 votes)
- Yes. The USA is far behind in terms of electronic methods for accepting credit or debit card payments, One who arrives from overseas expecting things to be as up-to-date in the USA as elsewhere runs into very primitive things in the USA.(16 votes)
- If by law cash has to be accepted. Now they have cashless payments only at sports venues since COVID-19. Is there a stipulation that allows them to do this?(5 votes)
- What Sal said is actually a bit misleading. Cash (in USD) has to be legally recognized as a valid form of payment——in other words, it can't be seen as something fraudulent or otherwise illegitimate——but there's no requirement for the other party (business or otherwise) to accept that form of payment, unless state law requires it be accepted. Per the Federal Reserve: "Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise." (Source: https://www.federalreserve.gov/faqs/currency_12772.htm)(5 votes)
- Are there any quizzes in Financial Literacy?(2 votes)
- No. There are no quizzes here. You need to learn these things to be able to use them, not to be able to get a passing grade.(10 votes)
- i really thought someone was going to be like, "what is cast and a card." being sarcastic. you know?(4 votes)
- Can we use debit cards to pay off debt in credit cards, or do we just use checks to take care of that?(3 votes)
- So long as the bank that receives your payment can get the funds, it should make no difference at all whether it comes from a debit card, in the form of a check, or cash handed to a teller.(3 votes)
- what does a visa card do(3 votes)
- There are many different "brands" of payment systems. "VISA" is one of those brands. It takes care of transferring money between you and the merchants from whom you purchase things with debit and credit cards.(3 votes)
- Re cash, one positive point is we can easily give to others we don't know and who might need it - e.g.: someone short of a few dollars for the bus fare or the parking meter.
Another type of payment is bartering / trading skills.
E.g.: I will babysit for an hour if you help me with my math homework ; I will mow your lawn and you will bake a cake for my Mum's birthday.
In the UK there are Local Exchange Trading Systems or Schemes that do that. It recognises that everyone has something to contribute and creates links between people in a community.
The down side is that it does not generate taxes.(3 votes) - Another drawback of cash is forgery..(2 votes)
- Who forges cash? I'm not sure what you mean.(3 votes)
- there is another very popular payment method in Bharat(India) called upi(unified payment interface).(2 votes)
- Yes, that is a very good payment method but that is mainly just a thing in india and not really used globally.(2 votes)
- Thank you, sal <3 my question is what is the difference between the terms "VISA" & "Mastercard"(1 vote)
- VISA is one brand, and Mastercard is another.
If they were cars, one would be a Ford, and the other a Chevy.(4 votes)
Video transcript
- Hi everyone, Sal here. And in this video we're
gonna talk a little bit about how you pay for things. And you're probably
already familiar with this, but maybe we'll get into
a little bit more detail than you might have fully realized. So the most basic form of
payment is cash, like this. I'm sure that y'all are all
very familiar with this. And this has some advantages. It's accepted almost everywhere. In fact, by law it needs to be accepted. Although I have seen
a few situations where people don't wanna accept it, because you gotta carry it around, it might not be safe. Or they just might not have the change necessary to give you back whatever you need to get back in change. But that's what's useful about it. It's very simple, use it everywhere. You don't need technology. You don't need to plug into
some type of credit card system in order to verify that
someone has the funds because the cash is right there. The negatives, it's a little bit extra stuff
that you gotta carry around. It might not be so safe. And you have all of the
work of giving you cash, getting change, putting
that change in your pocket, then that change drops into your sofa and then you never see it again. And it's not the easiest to keep track of. If I withdraw a bunch of
cash from my bank account and then I use it on different things, later on when I go to my bank account I have no idea what I spent that money on. And so it's hard for doing
things like budgeting or keeping track of my finances. But cash is always
probably part of our mix. Now the next thing, and actually I'll talk about them together that you might be familiar with. When you just see what I'm
holding here, you say, oh, those are credit cards. But when you look a
little bit more closely, this one right over here is a credit card. And I covered up the important
information for good reason 'cause I don't want you to
have my credit card number. And this is a debit card. Now they look the same and
they'll oftentimes say things like Visa on it or MasterCard on it because they're plugging
into that credit card system in order for payment. But what is happening
between a credit card and a debit card is
actually quite different. A debit card, the money is coming straight
from your bank account. So you spend $50 on your debit card, then when you go back to your bank account you're gonna see that it
just took that $50 out. A credit card on the other hand, you are borrowing that money. So you spend money on your
credit card, you're borrowing it from the credit card issuer. And you need to, well, if you do pay it on time, you
won't pay any interest on it. But then if you don't pay it on time you're essentially going to
continue to borrow that money. And we talk about that in other videos. And you could pay some
interest, and in fact, you'll probably pay
significant interest on it. So both of these can be very convenient. And oftentimes you'll
see credit card issuers give you all sorts of incentives. Things like, you could see
on mine it says cash rewards. They'll give you like 1%, 2%, 3%, maybe rewards for gas or for
travel or something like that. But you always have to think,
why are they doing that? Why are they giving you
back something of value? Well, because their statisticians know that a lot of people like that, but then they end up putting
a balance on their credit card and paying very, very high interest on it. And so it might pay off
for them in the long run to give you something back so that they can charge
you large interest. So be very careful. And also on the other side, there could be some benefits here above and beyond, on the credit card side, above and beyond just the
rewards they might give. There's sometimes a safety to it. For example, if someone
uses your credit card, some of the credit card issuers say, hey, if there's any fraud
or something like that we'll insure you to a certain amount. We can reverse that transaction. So there are also sometimes
some safety benefits to it. Now a debit card is actually,
even though it looks like a credit card, in a lot
of ways, it's very similar to a checkbook of old. The checkbook of old,
and I remember sitting in the checkout line
watching my mom write a check and they check her ID, and it takes a little bit
longer than you're used to at the checkout line. That had some issues with it. It took a long time to write the check and then people had to
validate that it's really you. There's no way for, or it's
very hard for the store, whoever you're purchasing from to know that you definitely have the funds. And if you don't, you end up with things like a bounced check. So a debit card kind of
takes advantage of that. They can verify that the funds are there and it's a lot faster. It has the convenience of a
credit card associated with it. But you still see a lot of people paying with things like checks for something, for example, something like rent. A lot of people might pay directly from their bank account
and do direct transfer, but you still see a lot of
folks paying with checks. Now those aren't the only ways that you could pay for something. You might see things like rent
to own, you rent something and then that contributes
to you eventually owning it. Stores might do that
because it's an incentive for you to at least start
renting, saying hey, maybe I could eventually own this thing. There's things like store
credit, which is oftentimes like a credit card, but
it's specific to that store. They might give you a discount,
other rewards for doing it. But at the end of the day,
they're doing it usually because they want to become
your credit card issuer or they want you to
spend more at that store. You also have installment agreements. Hey, it costs $1,000,
that's a lot all at once, but you could pay in 10
installments of $100 each. Once again, they're figuring
out ways for you to pay it. And last but not least, you
have things like layaway. When I was growing up, we had a store, my mom ran a school uniform store. And a lot of people sometimes
would put school uniforms on layaway. The reason for doing layaway,
which is essentially, you put a little bit of money
and the store will lay away, will put aside that article of clothing or whatever you're trying to buy. It has two benefits. One, you kind of reserve that item even if you don't have all
the money you need necessarily to buy that item yet. And also, it's a way of putting
a little bit of discipline. Hey, I already put $5
towards that $50 item. I'm gonna use it almost
like a little place to keep, I'm gonna keep putting $5 at a time so I don't get tempted to spend that and eventually I will
get that school uniform or whatever it is. So that's just a start. We could go into a lot
more depth in all of that. But hopefully that gives
you a little bit more nuance of all of the different
types of payments you may use or see other people use. And be thoughtful about,
hey, why am I using cash now? Or why am I using a debit card? Or why am I using a credit card? And what are the positives and negatives?