A) 2. Methods Of Payment Flashcards
Cash
Notes and Coin
Debit card
Issued by banks with payments for G+s’s being deducted directly from currant account.
Credit card
Issued by banks + financial companies, allowing customers to delay payments
Cheque
A written order to a bank to make a payment for a specific amount from one person’s account to another.
Electronic transfer
Payment is transfered directly fron one bank account to another
Direct debit
An agreement made with a bank allowing a 3rd party to withdraw from an account on a set day.
Standing order
Agreement made with bank to transfer a fixed sum to a 3rd party on a set date on a regular basis
Pre-paid cards
Money is uploaded on to a card with transactions them being withdrawn to reduce balance
Contactless card
Cards containing antennae allow money to be transferred when card touches contactless terminal
Charge cards
Allow customers to delay payments for G+S’s for a short period of time
Store cards
Issued by a retail outlet so customers con delay, payments for G+S’s
Mobile banking
Online barking using mobile devices
BACS + Faster payments
electronic payment from one bank account
to another
CHAPS
electronic payment fron one bank account to another
Advantages of cash
- mostly widely accepted
- makes budgeting easier
Disadvantages of cash
- can be lost/stolen
- can’t be used online
Advantages of Debit card
- secure method of payment
- widely accepted
Disadvantages of debit card
- ## small risk of cardholder overspending
Advantages of credit cards
- Allows a free period of credit that’s interest free
- offers a degree of protection on purchases
Disadvantages of credit cards
- Interest is charged on cash withdrawals
- Can encourage customer to overspend and get into debt
Advantages of a cheque
- low risk form of payment as can only be cashed by named payee
- widely accepted for face-to-face and postal transactions
Disadvantages of a cheque
- although still widely accepted, some retailers no longer accept them
- once’s it’s been cashed, can take at least 3 days to be available
Advantages of electronic transfer
- Almost instantaneous
- Provides a record of payment
Disadvantages of electronic transfer
- Risk of loss if transfer is set up incorrectly
- Not appropriate for face-to-face transactions
Advantages of direct debit
- easy to set up and cancel
- An easy way to make regular payments
Disadvantages of direct debit
- Person paying must have sufficient funds in their bank to cover payments
- amount can vary making difficult to plan expenditure
Advantages of standing order
- Payments don’t change so can plan expenditure
- easy to set up and cancel
Disadvantages of standing order
- Payments will continue to be made unless cancelled
- Payer must have sufficient funds to cover payment
Advantages of pre-paid cards
- Can set a budget in advance to avoid overspending
- If lost or stolen, the loss is only the remaining balance
Disadvantages of pre-paid cards
- Sometimes require an initial fee to set up
- no protection if lost
Advantages of contactless card
- Fast, easy and secure
- Gaining in popularity
Disadvantages of contactless cards
- Usually for amounts for less than £30
Advantages of charge cards
- Allows a short period of credit
- Often offers additional perks
Disadvantages of charge cards
- Must be paid in full each month
- Often an annual fixed fee is applied
Advantages of store card
- Often offer offers, loyalty schemes, discounts
- Allows a short period of credit that’s interest free
Disadvantages of store cards
- Only accepted in the store it’s for
- Interest is paid on outstanding balances
Advantages of mobile banking
- Convenient as can be used at any time or place
- Secure
Disadvantages of mobile banking
- service is limited compared with internet banking
Advantages of BACS and Faster Payments
- Faster payments - transfer takes place within 2 hours
- can be accessed in a number of ways including in a branch
- No fees
Disadvantages of BACS and Faster Payments
- Faster payments is not offered by all banks so customer has to do BACS which can take 3 days to transfer payments
Advantages of CHAPS
- Guaranteed same-day transfer as long as bank is instructed by a certain time
- No limit
Disadvantages of CHAPS
- Fee is charged on every transaction
