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Difficulty: MediumMeans of Payment in Home Trade

Match each domestic payment instrument used in home trade with its corresponding operational characteristic or function.

  • Credit TransferA single banking instruction used by a debtor to pay multiple creditors concurrently.
  • Standing OrderAn instruction to a bank to make regular, fixed payments to a beneficiary on specific dates.
  • Bank DraftA cheque drawn by a bank upon its own funds, guaranteeing payment to the payee.

Answer

Credit Transfer matches with single banking instruction to pay multiple creditors; Standing Order matches with regular fixed payment instruction; Bank Draft matches with cheque drawn by a bank guaranteeing payment; Postal Order matches with prepaid instrument sold in fixed denominations.
Each instrument is correctly matched with its core defining operational feature: Credit Transfer enables single-instruction bulk creditor payments, Standing Order automates fixed recurring payments, Bank Draft provides guaranteed funds drawn on the bank itself, and Postal Order provides pre-denominated postal remittances.

Step-by-Step Solution

1
Identify the payment mechanisms used for bulk or multiple payments
Credit transfer enables a debtor to instruct their bank to distribute funds to several creditors at once.
It eliminates the need to issue individual cheques for each creditor.
2
Identify automated recurring fixed payment instructions
Standing order is an instruction to pay a set amount periodically.
It automates routine payments such as rent or club subscriptions.
3
Identify bank-guaranteed instruments
Bank draft is drawn directly by a bank on its own funds.
Because funds are debited immediately upon issuance, receiver default risk is eliminated.
4
Identify post office remittance methods
Postal orders are sold in fixed face values by the postal system.
They provide a secure method to send small amounts when banking facilities are unavailable.

Key Concept

Characteristics and functions of domestic payment instruments in home trade
Estimated Time:1m 30s
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Topics

Means of Payment in Home Trade

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