Payment instruments

Cash payments

Cash payments are essentially used in small-value transactions relating to everyday purchases. Banknotes are issued in six denominations (R$100; R$50; R$20; R$10; R$5; and R$2), and coins in five denominations (R$1; R$0.50; R$0.25; R$0.10; and R$0.05). Although they are no longer issued, R$1 bills and R$0.01 coins are still in circulation. Both banknotes and coins are legal tender in the Brazilian territory, but the acceptance of coins, as a payment instrument, is mandatory only up to 100 units of each denomination.

Non-cash payments

Non-cash payments are mostly made by means of (1) credit transfers, (2) checks, (3) payment cards, and (4) direct debits. When processed in Brazil, all non-cash payments are made in national currency only.

(1) - Credit transfers

In Brazil, interbank credit transfers include TED (Express Wire Transfer), DOC (Credit Transfer Document)1, TEC (Special Credit Transfer)2 and those related to “boletos de pagamento”3. There are also intrabank credit transfers, which are made between accounts held at the same bank.

In the case of both TED and TEC, the related funds are made available at the beneficiary's account on the same day that the payer’s account is debited. However, while in the case of TED, the order will be executed on the same day, in the case of TEC, the order will be made the day after its request by the payer.

As for DOC, funds are made available at the beneficiary's account, for withdrawal, on the following day (T+1).

When it comes to “boletos de pagamento”, while interbank settlement also occurs on T+1, the availability of funds at the beneficiary's account will depend on the agreement between the beneficiary and the financial institution.

Regarding intrabank credit transfers, typically the debit at the sender’s account and the credit at the receiver’s account occur simultaneously the moment the transfer is executed.

Credit transfers can be initiated either through a bank cashier or through an electronic access channel, such as ATM terminals, Internet banking, and, more recently, mobile devices, for example, a mobile telephone. In any case, the transfer of funds is processed electronically.

(2) – Checks

Checks are still a widely used payment instrument in Brazil, though there has been a decrease in their use in the last few years, mainly due to their substitution by electronic instruments, especially credit and debit cards. Having standardized format and features, checks have magnetic records that enable the automatic reading of key data (known as “Magnetic Ink Character Recognition” - MICR). In Brazil, sight deposit accounts are the only ones in which check transactions can occur.

Checks have to be presented for payment 30 days after being issued when issued in the same place of payment, and 60 days when issued in another place in the country or abroad.

Checks valued at R$299.99 or less cannot be blocked for more than two business days, following the date of deposit; or one business day, following the deposit date, for checks higher than this referential value.

Check interbank settlement occurs on T+1, observing different procedures depending on the check's value.

(3) - Payment cards

(3.1) - Credit cards

Launched in Brazil in 1956, credit cards achieved greater importance in the 1990s. The credit card is a payment instrument which allows the cardholder to acquire goods and services in authorized establishments, within the credit limit defined by the card’s issuer (usually a bank), as well as to make cash withdrawals in the ATM’s of the affiliated network. The issuers operate the credit cards in partnership with brand networks, such as Visa and MasterCard, which hold the largest share in the Brazilian market.

The cardholder receives a monthly bill, showing all expenditures, and allowing for full down payment, without interest, or partial payment by installments, with a determined minimum value, paying the rest with interest (rotating credit).

Regarding withdrawals, there is a fixed tariff plus daily fees, which should be paid in the monthly bill or in advance.

(3.2) - Debit cards

A debit card is a payment instrument which allows the cardholder to acquire goods and services in authorized establishments, using financial resources from a bank account, as well as to make withdrawals in ATM’s. The operation’s approval and corresponding debit in the cardholder’s account happen the moment the payment is made.

The credit to the commercial establishment is usually made one or two days following the purchase date.

The brands with the largest market share in this segment are Visa’s Visa Electron and MasterCard’s Maestro. Debit cards with microchips have been gradually replacing the ones with a magnetic band, as is the case with credit cards.

(3.3) - Retailer cards

Retailer cards, which are mainly issued by major stores, can only be used only at the shops of the same group, i.e., they are “in-store” cards. The use of this instrument implies, in fact, payment deferment (sometimes the issuer admits payment by installments, without explicit financial fees).

On the due date, the payer normally uses either cash or another payment instrument (check or debit card) to settle the obligation, having to return to the commercial establishment to do so.

(3.4) - Pre-paid cards

In Brazil, pre-paid cards are used for payment of specific services. Those related mainly to the use of telephone and public means of transportation are issued by public service concessionaires, and they can also be acquired in authorized small commercial establishments.

As for pre-paid cards used for small value purchases, such as meal cards, they are used by clients in authorized commercial establishments.

These cards can be recharged several times, and they may be subject to a charge limit.

(4) - Direct debits

Direct debits are normally used for recurrent payments, that is, those that are made on a periodic basis, mostly related to utility services (water, electricity, and telephone, for example). For such payments, the payer should pre-authorize the bank to accept funds transfers initiated by the payee, which should previously send to the payer, for his control, the correspondent invoice. The authorization is usually for an indefinite period of time, therefore valid until not cancelled.

Statistical data about these payment instruments can be consulted in other Banco Central do Brasil publications (“Report on the Brazilian Retail Payment System” and “Report on the Brazilian Payment Card Industry”) on this page ("The Brazilian Payment System" ), or in “Economy and Finance”.

1 Funds transfer order through which the issuing client, account holder or not of a particular bank, transfers funds to the account of the beneficiary customer at another bank. DOC issuance is limited to the amount of R$ 4,999.99. The issuing customer's checking account is debited on the business day preceding the interbank settlement.

2 Instrument through which the issuer, natural person or legal entity, orders a financial institution to make a set of funds transfers to numerous recipients, clients of other institutions, being each transfer limited to the amount of R$ 4,999.99. The issuing customer's checking account is debited on the same day of the interbank settlement.

3 Bar-coded standardized document that allows bills to be paid in any bank.