Instruments of Payments

Introduction

The instruments that are used to a certain amount in the case of transfer of ownership of any goods or in case of service delivery are called instruments of payments. Instruments of payments plays a very vital role in the economy. These are the best way of negotiation during any deal. There are various instruments of payment in the modern economy. They are Bank note and coins, cheque, draft, letter of credit, mobile banking, internet banking, debit\credit cards,etc. Some of the instruments of payments are explained as below:

1. Bank notes and Coins:

Bank notes and coins are considered as the most traditional and trust worthy instrument of payments. People find the bank notes as the most common and easy way for the transfer of value during purchasing any goods or receiving any service.

2. Cheque:

Cheque is the most common way of transfer of value in the banking arena. Cheque is the written order issued by the account holder to the bank for the payment of the disclosed amount to the person whose name is written in the cheque. There are there parties involved in it. They are drawer, drawee and payee. Cheque is also considered as one of the most secure and convenient instrument of payment.

3. Letter of Credit:

Letter of Credit is the written agreement for the payment of the import and export of goods. The importer gets LC issued from the local bank in the name of the exporter in collaboration with the bank of the exporter's locality. Letter of Credit is very easy way of payment in case of import and export of goods and services.

4. Mobile Banking:

Mobile banking has now become one of the most convenient means of payment. In this technological era, people prefer to use the effortless means and resources. So, it has become very popular. There are many pros and cons of the Mobile Banking but the today's Youth are very much used to of making transactions with mobile banking instead of standing in a huge queue of the banks.