Basics around payment options from cash, online payments and buy now pay later.
There are many ways to pay for things today, including old methods like cash, and newer ways to pay like Buy Now Pay Later. Navigating these many options can be complex, and when you know how things work, can be used wisely.
Like all things in the marketplace, it is mostly up to you what options you choose to use and avoid. However, you can be pushed to use certain payment options at times, and some companies would rather you spend more money than less. In this article, we go through the various ways to pay and the factors to keep in mind should things not go to plan.
Face-to-face payments
Cash
Cash refers to the physical bills and coins we use to pay for things. While the use of cash is becoming rarer and rarer, it’s still accepted at most retailers. Be cautioned that it is legal for a retailer to refuse cash, but they must make it clear when this is the case at the point of sale (usually the register).
Cheques
Cheques are printed notes that typically come in books of 10 or more. They are most often linked to transaction accounts, and the account itself is sometimes called a ‘cheque’ account.
The cheque represents an order to the banking provider to:
- pay an amount from the account holder’s account
- to the person or business named on the cheque.
The use of cheques is becoming rarer. Given the proliferation of other cashless ways to pay, cheques will eventually be phased out in Australia.
Electronic funds transfer point of sale (EFTPOS)
EFTPOS is the most common form of in-person payment by card at a terminal. To use it, you:
- insert or swipe your card and enter your Personal Identification Number (PIN)
- or use PayPass (with Mastercard) or payWave (with Visa) for contactless pay.
PayPass and payWave
PayPass and payWave reader terminals are typically found in stores that primarily process low-value transactions – like convenience stores, cafes, service stations and discount stores.
How it works:
Transactions up to $100 can be made by holding the card to the reader terminal – no PIN or signature is needed. Sometimes, this limit can be raised, as it was during the early parts of the COVID-19 pandemic, so that people would not physically need to touch the EFTPOS machine.
Mobile wallet
A ‘mobile wallet’ is an app for making contactless purchases with your smartphone or device at point-of-sale (POS) terminals. The apps communicate with terminals through technology dubbed ‘near field communication’ (NFC), which is the same technology as PayPass and payWave.
In Australia, there are currently a few mobile wallet options available to banking customers – Apple Pay, Google Pay, Samsung Pay, Fitbit Pay and Garmin Pay.
Online payments
Automatic payments, direct debit and subscriptions
You can authorise your bank to pay someone regularly in a few different ways. It’s usually called an ‘automatic payment’, though it may go by other names.
- in your banking app or online banking, you can set up how much money you will ‘push’ to the place you are paying and by when.
- if you set up a ‘direct debit’ you need to fill out an authorisation form for the place you are paying to ‘pull’ the money from your bank account.
- a third way is to have a subscription with a place, which is an ongoing payment, for example, with TV streaming services, online services like Spotify or YouTube Premium, and many others.
Head to the Financial Rights Legal Centre for help with direct debits from savings and cheque accounts and credit cards.
What are the cons?
Automatic payments can make budgeting easier. But, you could lose track of any transactions you’ve set up and pay more than you intend if they aren’t clearly budgeted for. You might even overdraw your account and be charged fees for this and/or late payment fees by providers.
Subscription services
Online subscriptions can be easy to forget and continue paying for, even if you no longer regularly use the service. Sellers know this, and some may rather you continue to pay even if you aren’t using their service, and so they may not remind you.
Another behaviour to be aware of is that some sellers hide their ‘cancel subscription’ button in a place that’s hard to find.
Keep an eye out. Sellers are required by law to send you a receipt each time a debit is made.
Tips for paying safe
- be sure you trust the recipient/payee
- create a system for keeping track of all your automatic payments
- always have enough income to cover automatic payments
BPAY
BPAY® is an easy and secure way to pay and manage bills through mobile and online banking.
You can choose which account to pay bills from, and schedule payments on a date that works for you, so long as you have funds available in your account on the scheduled date.
Pay ID / Payto, Osko and the New Payments Platform (NPP)
New Payments Platform
The NPP is a payment infrastructure you may experience daily without even knowing you’re using it.
- gives consumers, businesses and government departments the means to make fast, versatile and data-rich payments
- enables real-time clearing and settlement for both simple and complex payment solutions
- simplifies payments through an Addressing Service called PayID as well as offering the ability to include more detailed information with payments
- becomes an added payment choice for AUD payments in Australia
PayID
With PayID payments, you can send payments without the payee’s BSB and account number.
- links recognisable identifiers such as phone number or ABN to an eligible bank account to receive payments
- provides the payer with the ability to verify the payee’s name by displaying it when making payments to a PayID and helps reduce mistaken payments
- you can temporarily lock a PayID to stop inbound payments without needing to close a bank account
- you can transfer a PayID from one institution to another without it interrupting future payments
Osko
Through the Osko by BPAY® service, you can send payments to and from eligible accounts at participating financial institutions in real time.
- available funds can be cleared in real-time (typically in less than a minute)
- allow for confidence in delivery, 24/7
- Can be made to BSB and account numbers, or PayIDs
- has prescribed service level agreements (SLAs) across all participating financial institutions to ensure a consistent customer experience
PayPal
PayPal is a secure online payment system accessed via the web, mobile app, or in person. It serves as an ‘in-between’ to keep your bank data extra secure.
Linked to your debit or credit card
To start using the service, a PayPal user adds a bank account or credit/debit card to the PayPal system. Then, when making an online payment, they can select which account to debit. These transactions are processed through PayPal, instead of your bank.
Any money received will sit in your PayPal account and can be used for online shopping, point of sale (with a PayPal card), or transferred to your bank account.
Transfers take a few days or minutes (for an extra fee). Your PayPal account balance can also be topped up with a bank account or assigned card.
Credit cards
A credit account with your bank allows you to spend money in advance. You’re then expected to pay that money back to the bank with interest. Credit accounts come with a ‘credit’ card, whereas transaction accounts come with a ‘debit’ card.
Good to know
- details – the features and mechanics may differ, like interest rates, interest-free periods and special rewards.
- fees and charges – yearly fees and other payments might be hidden, aside from in the fine print.
- limits – limits on spending, including minimum monthly spend, may apply.
When shopping
When using the ‘card’ online, you can use the details on the card to make a purchase. If you’re setting up an automatic payment like a direct debit, you can use the card number or account number.
📌 See our loans and debt and banking products pages.
Centrepay
If you receive income support, you can use Centrepay to directly pay bills from your income support payment. This service is entirely voluntary. You choose which payments the deduction comes from, how much you want to pay, and to whom you want to pay.
Buy Now Pay Later (BNPL)
With Buy Now Pay Later services, you don’t need to pay upfront for things. You can delay payment and pay in instalments over time.
What are the fees and charges?
You don’t pay interest on BNPL purchases, as you’re charged fees instead. However, the fees can stack up quickly.
- Late fees
- Monthly account-keeping fees
- Payment-processing fees
- Establishment fees
- Overdrawn fees
- Interest if you pay for your BNPL purchase with a credit card
Research reports 1 in 5 are late to pay
While buy now pay later can be convenient, research has found it can be difficult to juggle repayments with other financial commitments. In 2020, for example, BNPL research conducted by ASIC found that in order to meet repayments on time, one in five BNPL consumers:
- missed or were late paying other bills or loans
- cut back on or went without essentials such as meals.
Open to abuse
Before you sign up, remember that BNPL is a form of debt, with its own set of rules and features. BNPL schemes have also become an avenue for financial abuse – the support line for anyone impacted is 1 800 RESPECT (1 800 737 732).
Tips for paying safe
- it’s easier to overspend
- fees can add up
- it can be hard to manage
- it might affect future loan applications
- late repayments can appear on your credit report
- lay-by can be cheaper (but isn’t offered very much anymore)
- essential items and services may qualify for a No Interest Loan (NIL)
Where to find information
Moneysmart has a useful BNPL topic page, and the consumer watchdog, CHOICE, talks about how to take control of Afterpay and buy now pay later debt, and why buy now, pay later is a modern debt trap.
No interest loans
No Interest Loans (NILs) allow you to borrow money without having any of the crippling interest or high fees that come with other forms of loans.
How does it work?
NILs are typically offered for up to $2,000-$3,000 for rent or bond, essentials like fridges, washing machines, furniture, kitchenware, medical expenses, car repairs, education fees, and other goods and services you might need.
There are certain rules around who can apply for NILs. Generally, you must:
- have a Health Care Card, a Pensioner Concession Card (or an income less than $45,000 per year after tax)
- have lived at your current address for more than three months
- show that you can repay the loan.
Who provides NILs?
NILs are a service offered by community organisations. You can find providers over at the Good Shepherd website.
Troubleshooting and help
There’s a variety of services that offer support and answers for people having problems with their banking and payments.
Surcharges on card transactions
Some merchants (which means a person or company involved in trade, essentially people who sell things) charge what’s called a ‘surcharge on purchases’ made using certain types of payment methods. They do this because they incur a transaction charge with some, like EFTPOS.
You’ll often see a sign at an EFTPOS machine stating that the use of certain cards, like some credit cards, incurs a small surcharge. The law allows merchants to do this to encourage customers to use other methods that don’t cost them as much to operate in order to protect their profits, such as debit cards.
If your card attracts a surcharge
However, the law restricts merchants from charging excessive surcharges. Surcharges must not be more than the amount that it costs a merchant to accept a particular type of card for a given transaction.
How to make a complaint
You can make a complaint to the ACCC if you’re charged a surcharge you believe to be excessive.
Cancelling a direct debit
You should contact your bank if you want to cancel a direct debit and can’t do so through the online business. If you believe there has been an unauthorised transaction, be sure to act quickly.
Pre-form letters to use:
Instruct your bank to cancel a direct debit authority
Instruct a business to cancel their direct debit authority
Contacting the ombudsman or regulatory authority
If you feel you haven’t been treated fairly, and a complaint hasn’t led to a satisfactory outcome, you can contact the ombudsman in your state or territory.
Ombudsmen are independent agencies that help to resolve disputes between people and companies or government agencies. It’s a free and independent service, and while the process can be lengthy, your complaint, once submitted, will be resolved.
There are many ombudsmen organisations for various industries and government sectors, both at the federal and state or territory level.
For financial complaints relating to payment systems disputes, contact the Australian Financial Complaints Authority.
This information was last updated on 5 June 2023.
The links and resources in this article have been compiled and reviewed by the Brotherhood of St. Laurence. We aren’t responsible for what you’ll find at the links, though we do hope you find the information useful. See our disclaimer if you’d like to know more.
Want to save this article as a PDF? See how to here.
📌 See more: