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PAYMENT 2

PAYMENT METHODS

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FOCUS 1. Read and discuss the lead-in and the letters.

LEAD-IN 1

Every transaction involving international movement of goods, services or capital also leads to international transfer of funds. As trade, industry and services become increasingly internationalised, the volume of foreign payments increases constantly. The customers are offered a variety of instruments for settling international payments, whereby a distinction is drawn between socalled «clean payment» and documentary payment.

Clean payment is used for transactions relating to goods, services and capital and provides for such methods as International Giro, International Money (payment) Orders, Cheques, International Banker’s Drafts, Bank Transfers, whereas documentary payments relate mainly to transactions involving goods and provide for such methods as Documentary Credit, Bills of Exchange, Promissory Notes, Documentary Collection.

International Giro

This is the postal cheque system. Payments can be made whether the buyer has an account or not, and to a supplier whether he has an account or not. The International Giro form is obtained from any Post Office, filled out, then handed to the Post Office which forwards the order to the Giro centre which will send the amount to a Post Office in the beneficiary’s country where a supplier will receive a postal cheque.

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In foreign trade accounts are most frequently paid by means of:

1.International Money Orders;

2.Bank Transfer/Banker’s Transfer;

3.Bill of exchange;

4.Letter of Credit.

1. INTERNATIONAL MONEY ORDERS (IMO)

The bank fills out the order for the customer, then for a small charge, hands the IMO over, and the buyer sends it to the beneficiary, i.e. the person receiving the money. IMOs can be cashed or credited to the recipient’s account.

2. BANK TRANSFER

Payment can be made by ordering a home bank to transfer money to an overseas account. If telegraphed, the transfer is known as a telegraphic transfer (TT), and if mailed it is known as a mail transfer (MT). SWIFT (The Society for Worldwide Interbank Financial Communications) offers facilities for a 24-

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hour transfer of money to a beneficiary on its computer system.

International Banker’s Draft

This is a banker’s cheque which the bank draws on itself and sells to the customer, who then sends it to his supplier as he would send an ordinary inland cheque.