January 8, 2008
For value received, I promise to pay to the order of Martina Merchant in 30 days
$60 plus $5 interest.
(Signed) Cary Consumer
COMMERCIAL PAPER & PAYMENT SYSTEMS
Payment by Paper, Plastic and Blips
In a broad sense, this course is about one of the most basic features of economic life, the
transfer of money to pay for goods and services. The first class is designed to expose you to
several different methods of transferring value and the implications of using one method rather
than another. Subsequent classes will broaden and deepen your understanding of the issues dealt
with in this introduction.
I. The Payment Devices We Will Consider
We will consider a typical retail transaction in which Cary Consumer purchases a $60
cell phone from Martina Merchant. We will discuss, in order, Consumer’s paying for the
purchase in the following ways:
Promissory note. Consumer pays by handing to Merchant a piece of paper which
Ordinary check which has Cary Consumer’s name, telephone number, and
Atlanta address printed on it, made payable to Martina Merchant.
Bank issued Visa credit card.
Visa “Check Card.” This is one type of debit card, a plastic card which is almost
identical in appearance to the Visa credit card. It is used in the following manner.
Consumer or Merchant puts the card into a computer terminal. Some cards
require Consumer to type his personal identification number (PIN) onto the
keyboard; most do not require a PIN. Merchant types relevant information about
the transaction into the terminal. If the system is “on-line” the $60 is immediately
transferred electronically from Consumer’s bank account to Merchant’s bank
account. If off-line, the transfer occurs later but is treated as if it were transferred
GSU PantherCash. This is a stored value card (SVC). The SVC is a plastic card
which contains a computer chip or magnetic stripe. The money the Consumer has
paid the card issuer, in this case GSU, can