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Difficulty: MediumMeans of Payment in Home Trade

In domestic commercial banking operations, a standing order is an authorization given by an account holder allowing a creditor to pull varying amounts of money from the debtor's account at flexible or irregular intervals.

Answer: Answer

Answer

The statement is False. The payment mechanism described is a direct debit, whereas a standing order involves paying fixed sums at regular, fixed dates.
The statement is false because a standing order is a customer-directed instruction to pay a fixed sum of money at fixed, regular intervals. The payment system that allows a creditor to withdraw varying sums at irregular intervals upon authorization is a direct debit.

Step-by-Step Solution

1
Examine the features of the payment instrument described in the stem.
The stem describes a payment mechanism where a creditor collects variable sums of money at irregular intervals.
Analyzing the operational characteristics of domestic payment methods is required to evaluate statement validity.
2
Compare the stem description with the standard definition of a standing order.
A standing order is a customer-initiated instruction to transfer a fixed, specified amount to a named recipient on regular recurring dates.
Distinguishing between customer-controlled fixed transfers and creditor-initiated variable transfers prevents concept confusion.
3
Identify the payment method that fits the description in the stem.
The authority granted to a creditor to draw fluctuating amounts at variable intervals is a direct debit.
Verifying the correct commercial banking terminology confirms that the statement falsely attributes direct debit features to a standing order.

Key Concept

Operational Distinction Between Standing Orders and Direct Debits in Domestic Trade
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Topics

Means of Payment in Home Trade

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