Payments and agreements

Reliable payment instruments and methods are a fundamental prerequisite to a functioning economy. Payment instruments include for example banknotes and coins, payment cards, personal online banking PIN codes and, in some situations, also mobile phones. Payment methods have changed over the past few decades as information technology and the means of payment have evolved. Development is constant. More and more payments are transmitted electronically, but cash will remain a means of payment for a long time. How do you pay?

Cash

Finland's currency is the euro. Euro banknotes and coins were introduced on 1 January 2002, and presently they are being used on a daily basis by 347 million people in 20 countries belonging to the European Union. There are seven different euro banknotes and eight euro coins of different denominations. In Finland, these are issued by the Bank of Finland.

There are many advantages to cash payment. Using cash is convenient especially for small payments. Using cash is often faster than paying with a card, and cash makes it easier to manage one's personal finances. Using cash is easy for people of all ages, and cash is a tangible way to become familiar with the monetary economy. Travelling abroad often requires cash.

Payment cards

A payment card is also a common means of paying. A payment card is a generic description covering various bank, credit, charge and combination cards designed for payments and cash withdrawals. There is a wide selection of payment cards on the market, varying from bank to bank. Bank cards suitable for cash payment include for example online debit cards, such as Visa Electron, offline debit cards, such as MasterCard Debit, and various so-called prepaid cards. When you pay with a bank card, you need to have a sufficient balance in your account for the payments. The balance in the account cannot be overdrawn using a Visa Electron card, since a reservation equal to the funds needed to cover a purchase made using the card is made immediately on the customer's account in connection with purchases and withdrawals. With other cards, where an overdraft may occur, the bank may charge an overdraft fee. Payment cards may also include a capacity for credit.

Whatever the type of payment card, the cardholder must take due care when using the card and keep it safe. For example, absolutely never give your PIN to anyone else. The PIN is always personal, as is the payment card itself. Do not give your payment card to another person to use. If you do, the bank will no longer be responsible for the card, instead you will be personally liable for any purchases made with your card.

Do you know what to do if you notice your card has been lost? If you notice your payment card has been lost, act fast, because there is always the possibility that someone else is misusing your card. If you have noticed the card has been lost, call the card blocking service, or card enquiries, as soon as possible, to prevent further usage of the card. This is important because your responsibility ceases at the moment you report your card lost. If someone uses your card, you will not lose your money. Your bank will provide you with the telephone number and it is advisable to save this number in your mobile phone, for instance. The blocking service will prevent the use of a lost card, and the card will cease to work at the moment you report it lost. If, later, you happen to find a card you reported lost, do not use it. You will receive a new card, typically about a week after reporting the loss.

Online banking

In addition to cash and payment cards, common means of payment include online banking using online banking IDs. When opening an account, you can also receive online banking IDs which enable you to pay bills or check your account status in the online service. Minors may also get online banking IDs, with their guardians' consent.

However, as in the case of other means of payment, online banking IDs must also be used with care. For instance, it is important to store online banking IDs securely. Do not keep all of your IDs in the same place. Your user ID or codes must never be given to another person. It is important to remember that the bank or police never contact customers to inquire about their user IDs, by email or telephone. If this happens, you can report the email to your bank and delete the message. Never click the links in these kinds of phishing emails. If an outsider gets hold of your user IDs, your account may be emptied. The bank will not necessarily compensate for the money you have lost, if you have not stored your IDs with care, as instructed by the bank.

When ending your online banking session, remember to log out of the service and make sure the connection is disconnected. This is particularly important if you are using online banking with a public computer, for example in a library. In order to ensure that the next user has no chance to access your data, you can also clear the cache of the web browser. 

Account agreement and investing

Opening an account

Opening your own bank account typically becomes necessary, at the very latest, when you take your first summer job, because in Finland wages are only paid into bank accounts. A 15-year old may independently open an account to deposit such funds earned by their own work or received as a present, for example, from their parents. A minor may also use their own account, but the guardian has the right to obtain information about a minor's account. However, the finances of a minor (a person under 18 years of age) are primarily governed by their guardian.

When you open an account, you are entering into an account agreement with your bank. When opening an account, you receive a copy of the signed account agreement, a copy of the general terms and conditions of the account and a service price list, amongst other things. An account agreement also provides for the use of the account, determination of interest and notice period for terminating the account agreement. Separate agreements are made if a payment card and online banking IDs are connected with the account.

There are various kinds of accounts and different accounts often have different purposes. For example, it is normal that someone uses both a current account and a fixed-term deposit account, concurrently. Fixed-term accounts enable the customer to make fixed-term deposits, which often generate a higher return on the capital than a current account. Money is better saved in fixed-term deposits, because they are not as frequently required or as readily available, as a deposit on a fixed-term account cannot usually be withdrawn within the agreed deposit period. The agreement terms indicate whether the money can be withdrawn before the agreed maturity date. As a rule, however, the money cannot be withdrawn until the end of the deposit period. If the terms and conditions allow for money to be withdrawn before the maturity date, it may have an impact on the interest paid. It is also possible that no interest is paid at all. There may also be other costs associated with an early withdrawal of a deposit. More specific withdrawal restrictions and costs can be found in the account agreement you have made.

Investing

Besides saving, surplus funds can also be invested. One possibility is fund investing, which can be started even with a small amount.  Minors however need their guardians’ approval to make a fund investment. In mutual fund investments, the investors give their funds to the fund management company by buying fund units. The fund management company invests the assets thus collected in equities and bonds for example, which make up the mutual fund. The management company does not own the mutual fund, but it is owned by the investors who have subscribed to the fund units. In making fund investments, you may wonder when you can have your investment back. There is no minimum investment period in fund investing. However, you may have to wait a few days to receive the money on your account after deciding to redeem it. It is also worth remembering that there is usually a fee charged for subscription and redemption.  In addition, the customer pays management and custody fees and, possibly, brokerage fees paid to securities intermediaries. When you want to quit fund investing, you may be liable to pay a redemption fee.

There are many kind of funds. Mutual funds are often categorised by investment type. Mutual funds can be divided into equity, fixed-income and balanced funds. Equity funds invest, as the name implies, mainly in equity shares, and they are generally riskier than fixed-income funds. Fixed-income funds comprise short-term, medium-term and long-term bond funds. At the same time, balanced funds invest both in equities and interest-bearing instruments, such as bonds. In addition, there are so-called funds of funds and non-UCITS funds, (UCITS stands for Undertakings for Collective Investments in Transferrable Securities).

Even when investing in a fund, keep in mind the risks related to investments. The value of an investment may rise or fall, and the previous performance of a fund is not a guarantee of future results. Before making an investment decision, you should study the prospectuses and fund rules carefully. Special attention should be paid to the investment policy, risks and expense structure of the fund. In buying a share in a fund, you should consider how long your investment period is and how much risk you are willing to take. The investment should be picked according to your own preferences, keeping in mind that in fund investment it is possible to lose the entire amount invested.

When entering into an agreement, it is vitally important to read through the agreement before signing it. A signed agreement is always binding, and therefore it is important to find out what you are committing to. If there is anything in the agreement that you do not understand, do not hesitate to ask your bank for more information. It is in the interests of both parties that issues are clear before entering into an agreement.