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The Guides for Effective Instruction in Mathematics Revised

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F1.1 Describe the advantages and disadvantages of various methods of payment that can be used to purchase goods and services.

Skill: Describing Advantages and Disadvantages of Various Methods of Payment

At the beginning of the Junior Division, students identify a variety of methods of payment they can use to purchase goods and pay for services. At the end of the Junior Division, students continue their learning by describing the advantages and disadvantages of these various methods.

By considering the advantages and disadvantages of each option in relation to the situation, students develop the ability to make informed decisions.

Advantages and Disadvantages of Various Methods of Payment

Method of Payment

Advantages

Disadvantages

Cash

A 5-dollar bill, a ten-dollar bill, a 20-dollar bill, a 50-dollar bill, a 100-dollar bill. Coins of 2 dollars, one dollar, 25 cents, dimes and 5 cents.

It is money in the form of bills or coins that is immediately available to buy goods or pay for services.
  • Cash is accepted everywhere.
  • There is no charge for using cash.
  • The use of cash allows for better management of expenses.
  • A person of any age can have cash and use it.
  • Cash can easily be lost or stolen.
  • It can be more difficult to make an expensive purchase with cash, such as buying a car.

Cheque

image A specimen check:At the top left ‘the Home address.Middle left: the address of the bank branch.At the bottom of the check: transit number, institution number and account number.Space to enter the name of the person or company to whom the check is issued.Top right: enter the date, month, and day the check is written.Under the date, enter the numerical amount of the check.In the middle of the check, the amount in words.Bottom right: enter your signature to certify the authenticity of the check.

Source: Specimen cheque from the National Bank.

It is a paper document that instructs a financial institution to pay a certain amount of money from the person who holds the bank account to the person or institution named on the cheque (payee).
  • Easier to use than carrying cash.
  • The cheque contains certain relevant information about the person issuing it as well as the name of the payee.
  • The cheque contains all the
    information of the person issuing the cheque and the name of the payee.
  • Enough money in the chequing account has to be
    available before writing a cheque.
  • A cheque is easy to lose.
  • It takes a few days before it is validated.

Debit Card

A debit card.

It is a payment card that withdraws money directly from the bank account to which it is linked.
  • Can be used for online and in-store shopping almost anywhere.
  • These cards are secured with a PIN.
  • It is possible to know exactly how much money you can spend.
  • Some banks have user fees or limit the use of a debit card.
  • If lost, a malicious person can make purchases using contactless payment.
  • Some institutions allow a spending limit to be set to
    keep your account safe should your card be lost
    or stolen.

Credit Card

A credit card.

A credit card is a card issued by a financial institution that allows you to borrow money on a short-term basis to purchase goods and services. Institutions that issue credit cards charge interest if their customers do not pay the loan by the agreed-upon deadline.
  • It is possible to make purchases even without having the necessary funds at the time of the transaction.
  • If used properly, it is possible to establish good credit.
  • Some credit cards offer rewards, such as cash back.
  • Convenient, especially for online and for large purchases.
  • High interest rates when the statement balance is not paid on time means you are paying more for your purchases and services.
  • Some credit cards have an annual fee.
  • Debt problems may arise from the inability to pay back what is owed on time.

Electronic Funds Transfer

Two cell phones and coins moving from one phone to another.

It is a banking service that allows the transfer of funds between accounts affiliated with participating financial institutions via email or online banking.
  • Electronic funds transfers are automated and therefore have low administrative costs.
  • The details of each transfer are tracked and recorded.
  • Transferring funds electronically provides added security and protection.
  • Recurring electronic funds transfers can be set up to send money on a regular basis.
  • There is no need to handle and deliver physical documents or cash.
  • Some electronic funds transfers can take up to four days to process.
  • If a transfer is returned or refused, financial institutions do not attempt to reprocess it.
  • Electronic funds transfers are subject to scams and there is limited recourse to recover losses.
  • Fees can sometimes be high.

Cryptocurrency

A computer screen, and a coin that represents virtual money.

It is virtual or digital money that is secured by cryptographic processes.
  • Cryptocurrency is a recent (2010) banking system, with fewer laws, policies and procedures to facilitate monetary transactions.
  • Direct monetary transactions between two parties means a faster and cheaper transaction.
  • Recovering funds from a fraud situation becomes difficult, given the lack of regulation of cryptocurrency.
  • Transactions can be made anonymously which also means more risk, as you could be trading with a dishonest person.
  • The price of a cryptocurrencies is volatile, as they are traded publicly without much regulation.
  • Cryptocurrency trading consumes a lot of energy, which can have a negative impact on the environment.

Gift Card

Gift card.

It is a magnetic or smart card issued by a business and holds a specific value or amount which can be used to purchase goods or services from that business.
  • Good substitute for cash or credit cards.
  • Can help control expenses.
  • Can only be used at the designated business.
  • An inactivity fee may be charged.

Barter/Trade

Two young girls presenting a dress.

Barter is when two people exchange goods or services without using money.

It is useful for a person who does not have money to be able to trade a good for another good or service, or a service for another service.
  • It may not always be possible to provide the service when the other person needs it.
  • It is sometimes difficult to reach a consensus on the terms of the barter.

Electronic Wallet

Un portefeuille. Un téléphone cellulaire. Une carte bancaire.

It is an electronic device (for example, smartphone or smartwatch) that can be attached to a bank account and allows payments to be made directly at the terminal.
  • Online payments are fast and efficient.
  • Easy to use.
  • Less risk of theft.
  • Not all businesses accept it.
  • If you lose your device, you lose your method of
    payment.

In order for students to consider the advantages and disadvantages of different methods of payment, we must first discuss why some methods of payment might be more readily available than others. The use of scenarios allows teachers to address these key concepts in a way that permits students to explore financial literacy without feeling the need to share personal and private information. Scenarios also help to address and respond to a variety of equity issues related to the diverse circumstances and experiences of students and their families.

Knowledge: Goods and Services

A set of tangible and intangible products resulting from economic activity intended to satisfy needs. A distinction is made between goods, which are tangible, and services, which are intangible and must be consumed immediately.

Example

In the context of a student athlete, a ‘good’ could refer to their sports equipment. A ‘service’ might be a massage or participating in a summer camp.