Electronic Payments

Paying bills using electronic payments is growing in popularity among consumers. There are many types of credit cards that offer rewards, including everything from trips to cash back.

Benefits of Electronic Payments

Electronic payments offer the convenience of shopping virtually anywhere, anytime. All you need to make an purchase using electronic payment is your credit or debit card. Many consumers prefer not to carry cash, resulting in credit and debit cards rapidly becoming the preferred method to make a purchase.

Debit and Credit Cards

Both debit and credit cards use electronic payments to create a transaction. Both cards, however, have their own unique features:

• When using a credit card, you are not required to have the money in your bank account. Essentially, you borrow from the company and pay them back monthly. All it takes is a signature to make the financial obligation legally binding.

• A debit card requires money to be available in the bank account to which the card is attached. A Personal Identification Number (PIN) is needed to make a purchase with a debit card. The electronic payment transaction takes money straight from your account. With a debit card, you can take cash out of your account from either an ATM machine or from the merchant accepting the card.

Using Your Credit Card Online

With the growing popularity of the internet, online merchants can process electronic payments without purchasing costly processing equipment. Having the ability to process credit cards allows businesses to take phone orders. The business is paid instantly, and your products can ship right away. Most online vendors also offer secure transactions. You can verify that the transaction is secure by looking for the padlock symbol on the bottom right corner of the browser window.

Uses in Business and Bill Payment

At one time, only retail merchants accepted credit cards. Doctor offices, daycares, grocery stores, and many other businesses are jumping on board and incorporating credit cards into their payment process, thereby adding convenience for their customers.

Another use for credit cards is to make monthly payments. Businesses keep your card number on file and make automatic payments electronically when the bill is due. Most utility companies now offer this automatic payment option.

How an Electronic Payment Works

A lot of information is kept in a card's magnetic strip. Credit card processing happens quickly. The magnetic strip holds the information which determines whether or not your card is approved. There are four parties involved every time you use your credit card:

• You, the purchaser
• The store owner
• The processing company that mediates the transaction
• The issuing bank (like Discover Card, Mastercard, American Express or your bank)

The process is quick:

• The merchant swipes the card using a secure encrypted messaging protocol (SEMP).
• The transaction is processed.
• It is then routed to the issuing bank (like Discover or Mastercard) to request verification.
• A message is then sent back to the merchant either verifying or declining the request.
• The issuing bank approves the transfer of the money.
• The bank pays the merchant.
• The transaction appears on your monthly statement.

Protection

As a credit card user, you are protected from theft. If a credit card is stolen, report it to both the credit card company and the police. Some companies will not hold you liable for charges incurred through fraud as long as a police report is on file. This is theft protecion for credit cards is an advantage over checks and cash. If cash is stolen it is untraceable. You can cancel checks, but the process can result in bounced checks if the correct check numbers are not reported to the bank.

Electronic payments offer flexibility and convenience. Treat your credit card the same as cash or checks and enjoy the benefits. Keep in mind, however, that the bill arrives at the end of the month.

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