A2 Different Ways To Pay Flashcards
Different ways to pay
Cash, credit card, debit card, cheque, electronic transfer, direct debit, standing order, pre paid, cards, contactless cards, charge cards , store cards, mobile banking, bankers automated clearing services ( BACS) clearing house automated payment system ( CHAPS)
Cash and advantages and disadvantages of cash
Money that you carry in your pocket
Advantages -
It’s fast
It’s secure
No interest charges
Promotes carful spending / makes it easier to budget
It is inlusive too all
Does not require bank account or transaction
Disadvantages-
Could get stolen
Loose change, where as on a card it’s all together
Inconvenient to carry around
No earned rewards
Inconvenience for large transactions
Debit card and disadvantages and advantages or debit cards
Debit card funds are taken from your current account with the money already in it
Advantages-
Widely used
Good security where you can freeze your cards
Can help you mange money
They are fast
It’s free to join
Easy to set up
Disadvantages-
Risk of being stolen
Fraud
Need to havw money in account for it to work
Can accidentally overspend and it ends in an overdraft
They don’t build up your credit score
Has a limit on spending before you need to put a pin in/ usually up too £100
Credit card- and advantages and disadvantages
Allows you to spend money on pre approved credit offered by the bank where you then have to pay that money back back by the end of the month or or monthly payments
Advantages-
Can give you a chance for a good credit rating if used well - banks can see your a responsible borrower which can allow you for better opportunities for the future
Gives you the opportunity to spend on card now and then pay it back later
Allows you to spend large payments over monthly instalments and to spread out costs
Purchase protection
Intrest free- you can borrow money without any added interest
Disadvantages-
Can end up in really bad debt if you don’t manage your payments well
Can have damaged credit if you don’t pay back payments on time / can lead debt to stack up
Temptation to overspend
Could get stolen
Cheque - advantages and disadvantages
A cheque is A cheque is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specified transactional account held in the drawer’s name with that institution.
Advantages-
No need to carry cash
Transferring through cheques makes them more secure
Errors are unlikely to happen
Disadvantages
Processing time
Limited use
Cheques aren’t really popular no days
Electronic transfer
Electronic transfer is An electronic funds transfer (EFT) is a digital transfer of cash through an online payment system.
Advantages-
Speed of transactions
Record of keeping
Can allow a large sums of money to be moved in a short time
More traditional
Disadvantages-
Cybercrime and new digital forms of money laundering
Direct debit - advantages and disadvantages
Direct Debit is an instruction from you to your bank. A Direct Debit authorizes someone to collect payments from your account when they are due - for example, an accountant collecting a regular fee from you, or even Netflix collecting your monthly subscription.
Advantages include - how it automatically takes it out so if you forgot it wouldn’t matter but this could also be a disadvantage as you may need that money and it could take you into debt if you forget too cancel it and could be charged for an overdraft for late fees which could lead to more money that you might not be able afford to pay.
Standing order - disadvantages and advantages
standing order is a regular payment of the same amount that’s paid on a specified date. It allows the bank to take money regularly from your account to pay another account. You can use a standing order for many payment types, including: Transferring money between your accounts. - this is set up to pay other people - could be used for rent to the landlord, splitting household bills, or payments to a business - Advantages inlcude that it gives you more con-troll and organise your payments disadvantages include payments are customer dependent and there can be payments delays and failures
Pre paid cards - advantages and disadvantages
A prepaid card is not linked to a bank or credit union account. Instead, you put money into the card account, sometimes called loading money onto the card, before you can spend it.
Advantages -
Safer then cash
Budgeting tool
No credit check
Fraud prevention
No bank account
No overdraft
Disadvantages-
Have too keep reloading cards
Risk of money laundering
- risk of not having enough money on card because it’s easy to spend money
Contactless card - adv and disa
A contactless card is a debit or credit card with contactless technology.
Advantages are - easy to use only have to tap the card reader so it’s quick disadvantages include of its lost or stolen it’s easy to spend money on the card, also you may after to put your pin in once in a while since it has a budget of the amount you spend before you need the pin which means you always have to know your pin or you may not have your card with you if your using contactless Apple Pay which means you won’t be able to make purchases
Charge cards - advantages and disadvantages
A charge card is similar to a credit card. But a big difference is that
a charge card’s balance has to be paid in full each month.
Advantages
Charge cards often offer generous rewards and benefits, such as purchase points, statement credits, and sometimes double or triple points
Disadvantages
Fees are applied for miss payments
Store cards - advantages and disadvantages
Store cards are a type of credit card that are issued by a retailer and can only be used to make purchases in that particular store or within their retail group. Advantages - allows you to earn rewards and get special perks at a retailer, discounts, reward points, build credit disadvantages include - they tend to carry high interest rates and offer low credit limits.
Disadvantages are Store cards usually come with high interest rates.
They can typically only be used in one store or in selected partner stores, such as Argos with Sainsbury’s.
Discounts and other perks could encourage you to spend more than you can afford to pay back.
Mobile banking - advantages, disadvantages
Mobile banking is the act of making financial transactions on a mobile device
Advantages include- 24/7 access , quick and easy access, disadvantages include dependant on internet connectivity technical issues, and only work if you have a smart phone
Bankers automated clearing services BACS - advantages and disadvantages
A BACS payment (Bankers Automated Clearing Services) is an electronic bank-to-bank transfer and is one of the most commonly used methods of electronic payment in the UK. Disadvantages of BACS include Payments need three days to clear, unlike Faster Payments, which are immediate , BACS payments will only clear during business days. Advantages include Improved cashflow management, Direct cost savings, Better payment terms. The Bacs payment service makes it a lot quicker and easier to process bulk payments.
Clearing house automated payment system CHAPS
is a same-day transfer system between banks. It is typically used for time-sensitive transfers of money between banks. CHAPS is commonly used for one-off payments of high value. Advantages and CHAPS include- They are safe and secure.
They require very little effort from businesses and their staff.
They can be processed on the same day as long as payment is received before the banking deadline.
Disadvantages of CHAPS inlcude -They are expensive.
Their cost makes them unsuitable for batch or bulk payments.
They cannot be used for international payments.
