We don’t think much about the way we pay. But did you ever think of the charges incurred when using payment methods, such as cheques or cards, and how these fees may add up over time, making a dent in your savings? Pauline Tonna from the Malta Financial Services Authority explains.

Although we have seen tremendous enhancements in payment channels – including security features – which make everyday payments more convenient and efficient, cash is still the most prevalent use of payment in Malta.

Statistics published by the Central Bank of Malta on local payment habits in its 2014 annual report revealed that paper-based instruments (such as cash and cheques) are still heavily relied on locally.

Ironically, despite the fact that the use of cheques is still high in Malta, a growing number of retailers refuse to accept them because of fraud. Alternative means of payment are debit and credit cards, continuous payment authority, online payments, standing orders and direct debits. A lot of effort has been invested by the Malta Financial Services Authority (MFSA), the Central Bank of Malta and the Malta Bankers Association to promote the use of non-cash payment methods, which are more efficient and cost-effective than traditional cheque payments.

International debit and credit cards are probably the most popular forms of payment after cash and cheques, as they can be used anywhere and protect consumers against counterfeits. While a debit card will only permit the cardholder to make transactions against a sustainable balance in the account, a credit card will allow the buying of goods and services now to then pay at a later stage. When credit cards are used, cardholders are encouraged to pay extra attention to statements received each month and make the required minimum payments on time to avoid late payment fees.

The card issuer will charge a rate of interest each month on the outstanding balance when a cardholder only makes the minimum payment.

Premium credit cards (such as gold, platinum or other ‘high-benefit’ cards) are gaining momentum due to the bundle of benefits attached to them, such as higher credit limits for applicants, complimentary travel insurance, purchase protection insurance, earning of air mileage points and emergency assistance for travellers, among other benefits. Consumers must, however, weigh these benefits against the corresponding charges.

Through a continuous payment authority, you can authorise a service provider to regularly charge your debit or credit card for a service it has provided you in an automatic way. Once a payment has been made, it cannot be reversed and cancellation of this service must be made through the bank which issued the card.

A standing order can be used to set up a fixed payment from your bank account at a certain frequency. Some banks charge a fee if payment is being made to third parties.

A consumer can, however, extract the most benefits by using a direct debit. A direct debit is an agreement between you and a service provider, giving authority to the service provider to automatically collect an amount (whether fixed or variable) from your bank account.

Direct debits can be both economical for consumers – since no bank charges to set up this service and most service providers offer a discount if payment of bills is made in this way – and also provide peace of mind, as in the case of an error, the consumer may request a refund from the bank within eight weeks from the date on which the amount of the direct debit was debited to his account, without any explanation being sought by the bank.

This, however, does not free a consumer from the contractual obligations with a service provider.

Internet and mobile phone banking have definitely gained ground in the last few years as consumers find it more convenient to access their bank accounts or pay bills from the comfort of their own home.

Visit mymoneybox.mfsa.com.mt for more information about payment methods and to compare bank fees and charges in Malta.

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