What Do We Need to Know About Payment Methods?

Transferable skills

You will solve meaningful and complex real-life problems by taking concrete steps – identifying and analysing the problem, creating a plan, prioritizing actions to be taken, and acting on the plan – as you address issues and design and manage projects.

You will learn to think about your own thinking and learning (metacognition) and to believe in your ability to learn and grow (growth mindset). You will develop your ability to set goals, stay motivated, and work independently.

You will manage your digital footprint by engaging in social media and online communities respectfully, inclusively, safely, legally, and ethically. You will understand your rights with respect to personal data and know how to protect your privacy and security and respect the privacy and security of others.

Curriculum expectations

F. Financial Literacy

F1.1 identify various methods of payment that can be used to purchase goods and services

F. Financial Literacy

F1.1 describe the advantages and disadvantages of various methods of payment that can be used to purchase goods and services

Introduction

We live in a world where many of the goods and services we need have a cost attached, and there are many ways to make a payment. Is one type of payment better than the others?

Before we can decide on anything, we first need to learn about the different methods of payment that are available to us today.

Recording information

When we explore new information, we can take notes to help us remember different facts and ideas.

  • We can take notes to help us record new information.
  • We can use words, drawings, or short sentences when we take notes.
  • We should try and use our own words while taking notes.
  • We can record questions in our notes.

Methods of payment

Teacher Chiara says “Let’s explore methods of payment and determine the pros and cons of each one. Take note of any interesting information”

Physical payment

Physical payment means exchanging money you can hold, like cash or a cheque, for something you want to buy. This payment method doesn't require any technology or internet access.

Press the following tabs to learn more about cash and cheques.

One of the simplest ways to pay for purchases is by using cash. Cash can come in the form of bills and coins. Most countries have their own forms of currency (e.g., dollars, euros, and yen). Canadian currency is split into coins and bills. Cash. Canadian bills and coins.
Pros Cons
  • Using cash can be helpful to allow people to stay within their budget and avoid overspending.
  • Some stores and services do not take cash in exchange for goods.
  • Cash can be easily lost or misplaced.

Cheques are attached to a chequing account and come in a cheque book for the bank account holder to keep track of. Cheques contain different fields of information that the bank account holder needs to fill out. They also contain different numbers (e.g., cheque number, transit number, bank number, and account number) that help track the transfer of funds. A blank cheque with empty fields for date, payee name, amount, memo, and signature. It also has cheque, transit, bank, and account numbers
Pros Cons
  • Paying with a cheque can help you to avoid paying fees that can come from using a debit card (e.g., fees for going over the transaction limit) or a credit card (e.g., interest charges if the money is not paid back according to the rules set by the company).
  • When you pay with a cheque, the money doesn’t leave your account right away. Therefore, it is important that you keep enough money in your account until the cheque is processed. If you don't, you might have to pay extra fees.

Before we continue, let’s pause to consider some vocabulary terms connected to our learning.

Vocabulary terms

Press the following terms for their definitions.

A budget is an estimate on how to manage income and expenses over a set period. It is also a way to prioritize spending habits. Some people create weekly or monthly budgets by recording their income, expenses, and savings to meet their financial goals. It is important to consider what type of budget to create, such as a personal, family, household, school or community budget.

A chequing account is an account held at a financial institution that allows for many deposits and withdrawals. The money in a chequing account can be accessed using cheques, automated bank machines (ABM), or a debit card and can be used for bill payments and money transfers. It usually pays little or no interest and sometimes includes withdrawal fees after a certain number of withdrawals.

Electronic payment

Electronic payment methods are ways to pay for things without using cash or a cheque. Instead, you can use a card, a smartphone, or a computer to make payments. Press the following tabs to learn more.

A debit card is a plastic card used to deposit and withdraw money from a bank account. Each debit card is assigned a personal identification number (PIN) for security. Only the person who is assigned the bank card knows the PIN, and they use this to access money in their bank account. A chequing and savings account can be attached to a debit card.

To deposit and withdraw money using a debit card, you can go to a financial institution and speak with a teller, however many people use automated banking machines (ABMs) or online banking and banking apps to complete transactions on their own.

Check out the following image to review the types of information typically displayed on a debit card.

A debit card with the following items labelled:

  • name of institution
  • microchip
  • the word “debit”
  • cardholder’s name
  • account number
  • expiry date
  • magnetic stripe
  • signature
  • security number
Pros Cons
  • Most businesses and services take debit cards as payments.
  • You can check your balance and account information online or in person after making payments.
  • Some debit accounts have a limit on how many withdrawals or transactions you can make. If you go over the limit, you are charged a fee.
  • Some online shopping websites do not accept debit cards.

A credit card is a plastic card that allows the person holding the card to get money which they can use to pay for goods and services. The difference between a debit and credit card is that a debit card accesses money you already have in your bank account, while the funds available on a credit card are borrowed from a credit card company. This money must be paid back plus interest, if it is not paid back according to the rules set by the company.

Check out the following image to review the types of information typically displayed on a credit card.

A credit card with the following items labelled:

  • name of institution
  • microchip
  • cardholder’s name
  • account number
  • expiry date
  • magnetic stripe
  • signature
  • security number
Pros Cons
  • You can use credit cards to make automatic payments if you cannot go in person or you are concerned that you will forget to make the payments.
  • You must pay back the money that you borrowed on time according to set conditions, otherwise you may need to pay interest or additional fees.

Another way to make a payment is through electronic funds transfer (EFT or e-transfer). With this method of payment, you can use a banking app or online banking website to send money from your own bank account to pay people or businesses.

Two people using a banking app on their smart phones – one is e-transferring money, and the other is accepting the transfer.
Pros Cons
  • E-transfers are a faster option then sending cash or cheques in the mail.
  • They are easy to use and have limited fees attached.
  • There is a potential for security risks.
  • Some banks have a limit on how much money can be sent in an e-transfer.
  • There may be additional fees for international transfers.

An electronic wallet (e-wallet) is an app that allows people to pay for items using their smartphones. They can take a picture of their credit card or debit card and store it on their e-wallet. This means that instead of taking out a credit card to tap or insert into the payment device, the payment device identifies the scanned information of the credit card or bank number.

A smart phone displaying a banking app is next to a physical wallet. Money is shown moving between the phone and the wallet.
Pros Cons
  • E-wallets are convenient, easy to use, and are accepted at most stores
  • Most e-wallets require an internet connection, and in some stores or areas there may be little or no internet connection.

Before we continue, let’s pause to consider some vocabulary terms connected to our learning.

Vocabulary terms

Press on the following words to explore their definitions.

An app is a piece of software on a phone or computer that a user can download through the internet. An app can be used for many reasons such as playing games, getting directions, ordering groceries and accessing banking.

Interest is the cost of borrowing money, or the money earned from an investment. When an individual borrows money, interest will often be charged in addition to the amount borrowed.

A savings account is an account held at a financial institution that allows customers to save their money for short-term and long-term financial goals. It is an account that pays the customer interest based on the amount of money added to the account.

Let’s review!

Pause and reflect

  • What are some of the main differences between the different methods you explored
  • What are some of the pros and cons of each method of payment?
  • Which methods of payment do you think you need to be more careful with to protect your privacy?

Record your thoughts, and share with a partner, if possible.

Self check

Next, check your understanding with the following true/false questions. Select the correct answer, then press Check Answer to see how you did.

Payments and privacy

Learner Sam says: Just like it's important to be safe in real life, it's also important to be safe online! One way to be safe is to protect your privacy online. That means that you never share your private information like your home address, phone number, or full name.

Many types of payment methods require us to be careful with our information. Always double check any websites used for purchasing items, and requests to save information on different websites.

Here are a few tips to remember:

DO DON'T
  • Choose a password that is hard to guess and make sure nobody is observing you when you enter a password.
  • Use different passwords for different accounts or cards.
  • Monitor your accounts on a regular basis and contact your financial institution immediately if something seems off.
  • Never share your password with anyone.
  • Do not use public WIFI when doing any banking online or anything else where you are entering private information.
  • Do not click on suspicious links or trust unfamiliar websites and companies when entering transactions.

Online safety

Explore the following scenario. What do you think Teacher Chiara should do?

Scenario

Teacher Chiara with her laptop getting an email from the bank

Teacher Chiara gets an email that appears to be from her bank. It says they need her banking information, or she will lose access to her account. They ask for her bank account number and passcode. What should she do?

Press Option 1 if you think she should send her banking information.

The email is a scam. A bank will never email their customers for personal information. If Teacher Chiara replies with her bank account number and passcode, somebody else will have access to all of her information and could use her credit card to make purchases. If she chose this option, she should call the bank to cancel her card and change her passwords.

A smart phone displaying the words “Cancel Card?”. A finger is hovering over the word “Confirm.”

Press Option 2 if you think she should call the bank.

Good job! You did not fall for the scam. Any bank will tell you not to give out personal banking information and to report emails like this to prevent others from being impacted.

Teacher Chiara holding her credit card and talking on the phone with a person from the bank.

Press Option 3 if you think she should ignore the email.

A laptop displaying the words “Delete email?”. An arrow is hovering over the word “Yes.”

If she ignores the email, her account is still safe. Nobody will have her information and or be able to spend her money. However, this scam is still taking place, and many people could be affected. Calling the bank will help protect her own privacy and potentially save other people from being victims of this scam.

Reflection

What are some of your key takeaways about methods of payment and privacy?

Which methods of payment do you think you need to be more careful with to protect your privacy?

Record your thoughts, and share with a partner, if possible.