1 - Methods Of Payment Flashcards
What are the 4 functions of money?
- Unit of account 2. Means of exchange 3. Store of value
- Legal tender
What are the 6 roles of money?
- Personal attitudes 2. Life stages 3. Culture 4. Life events 5. External influences 6. Interest rates
How can an individuals personal attitude affect the role of money?
- More or less likely to be risk averse or incentivised by rewards.
- More or less likely to save than spend money.
[ Life stages and the role of money ]
Give one financial need and implication in childhood.
Financial need: Mainly rely on parents for sweets or toys
Financial implications: Encouraged to save. Savings account set up by guardian.
[ Life stages and the role of money ]
Give one financial need and implication in adolescence.
Financial need: To want more independence
Financial implications: May look for a part-time job
[ Life stages and the role of money ]
Give one financial need and implication as a young adult.
Financial need: To go to university or starting career
Financial implications: Student loan for university
[ Life stages and the role of money ]
Give one financial need and implication in middle age.
Financial need: To support family
Financial implications: Savings account for specific purposes
[ Life stages and the role of money ]
Give one financial need and implication in old age.
Financial need: Downsize from family to retirement home
Financial implications: Less income as reliant on pension than salary
Give two examples of how culture affects the role of money.
- Chinese people culture of saving
2. Islamic belief how money doesn’t have an intrinsic value
Give two examples of how Life events affects the role of money.
- In your control: Going to university
2. Out of your control: Illness
Give two examples of how Interest rates affects the role of money.
State of the economy affects interest rates.
Low interest rates = borrow or spend on credit.
High interest rates = save.
Give four reasons why planning expenditure important?
- Avoid debt 2. avoid bankruptcy 3. Set financial goals/targets 4. Remain Solvent
What are 2 advantages of using cash?
- Instant
2. Most accepted form of exchange widely
What are 2 disadvantages of using cash?
Can be lost or stolen
Can’t be used for online purchases
What are 2 advantages of using a debit card?
No need to carry cash
Widely accepted, a secure method of payment
What are 2 disadvantages of using a debit card?
A short time-lapse between a transaction
Isn’t appropriate for small transactions
What are 2 advantages of using a credit card?
Allows an interest-free credit period
Suitable for online transactions
What are 2 disadvantages of using a credit card?
Interest is charged on balances not paid off
Can encourage overspending
What are 2 advantages of using a cheque?
A low-risk form of payment, the cheque can only be cashed by the payee
Widely accepted for face-to-face/postal transactions
What are 2 disadvantages of using a cheque?
Viewed as old-fashioned
Easy to make errors when writing the cheque
What are 2 advantages of using electronic transfer?
Almost instantaneous
Provides a record of payment
What are 2 disadvantages of using electronic transfer?
Risk of loss if the transfer is set up incorrectly
Not appropriate for face-to-face transactions
What are 2 advantages of using direct debit?
Easy way to make regular payments
Payment varies to match the amount required
What are 2 disadvantages of using direct debit?
Payee’s responsibility to claim the money back if the payer makes a mistake
Payer determines the amount each time, making it difficult to budget
What are 2 advantages of using a standing order?
Same amount is paid each time, making it easy to budget for the payee
Easy to set up and cancel as required
