A.2 Different Ways to Pay Flashcards
Name fourteen different ways to pay
- Cash
- Debit card
- Credit card
- Cheque
- Electronic transfer
- Direct debit
- Standing order
- Prepaid cards
- Contactless cards
- Charge cards
- Store cards
- Mobile banking
- BACS
- CHAPS
What is cash?
Money in the physical form of currency, such as bank notes and coins.
Give two advantages of cash
- You will purchase only items that are affordable, and covered by the cash you have on hand
- Instant exchange so it is quick and easy
Give two disadvantages of cash
- You have to carry it on your person
2. Can be stolen easily
What are credit cards?
A small plastic card issued by a bank allowing the holder to purchase goods or buy services on credit (unlimited amount)
Give two advantages of credit cards
- Saves carrying cash around as it is unlimited
2. More secure, unlikely to be stolen
Give two disadvantages of credit cards
- Can easily get into debt if used irresponsibly
2. Credit card fraud
What are debit cards?
A card allowing the holder to transfer money electronically from their bank account when making a purchase (fixed amount)
Give two advantages of debit cards
- Can’t overspend
- Less risk of debt
- No interest charges
Give two disadvantages of debit cards
- Doesn’t improve your credit score
2. Less protection than a credit card
What is a cheque?
A document, written and signed by a customer, instructing a bank or building society to debit your account and pay another person or organisation.
Give two advantages of a cheque
- Payments can be stopped if necessary
2. A cheque can be drawn up anytime
Give two disadvantages of a cheque
- Outdated
- Can take seven days to clear
- Not instantaneous
What is electronic transfer?
When money is moved from one account to another. The accounts can be at the same financial institution or two different financial institutions. The transaction is done electronically over a computerised network.
Give two advantages of electronic transfer
- Speedy and convenient
2. None or little transaction cost
Give two disadvantages of electronic transfer
- Encryption is not secure enough (vulnerable to hacking and fraud)
- Identity theft
- You don’t get the money back if you transfer money into the wrong account
What are pre paid cards?
They are not linked to a bank account and has a fixed amount of money on it.
Give two advantages of pre paid cards
- Safer than carrying cards
2. Can be topped up on an ATM, text, the web or via the phone
Give two disadvantages of pre paid cards
- Can be charged to activate the card
2. Can be charged to withdraw money from the ATM
What are contactless cards?
Paying with a credit card which does not require a PIN number.
Give two advantages of contactless cards
- Useful during the pandemic
2. Quick and easy
Give two disadvantages of contactless cards
- Not everywhere does contactless payments
2. If stolen, people can use up to three times however there is a £45 limit on each spend
What are charge cards?
Like a credit card but you have to pay off your card by the end of the month.
Give an advantage of charge cards
- Charges no interest on any money that is borrowed
Give two disadvantages of charge cards
- You have to pay an annual fee for the card
2. You have to have a good credit score
What is direct debit?
An arrangement made from the bank which allows a third party to transfer money. It takes money directly out of the bank.
Give an advantage of direct debit
- Safe and convenient for paying bills
Give two disadvantages of direct debit
- Large overpayments
2. Can forget to cancel the payments
What is a standing order?
An instruction to a bank by an account holder to make regular fixed payments to a particular person or organisation.
Give an advantage of a standing order
- It is a fixed amount so you will know how much the third party is taking out per month
Give two disadvantages of a standing order
- Less flexibility
- If you do not set yours in time, then you run the risk of missing payment date and incurring late payment fees on your account
What is a store card?
Basically a credit card you can only use with one high street chain or group.
Give two advantages of store cards
- Discount offers
2. Membership perks
Give two disadvantages of store cards
- Interest rates are higher than credit cards
- Easier to deplete your credit score
- The one-retailer limitation
What is mobile banking?
Refers to the use of a smartphone to perform online banking.
Give two advantages of mobile banking
- Very secure and convenient
2. Free
Give two disadvantages of mobile banking
- Not everyone has access to it (elderly people)
2. Not totally immune to virus
What is BACS (Bankers Automated Clearing Services)?
An electronic system to make payments directly from one bank account to another. They are mainly used for direct debit and direct credits from organisations.
Give two advantages of BACS
- Safe and secure
2. Save money on banking charges by eliminating unnecessary fees
Give two disadvantages of BACS
- Payments take three days to clear
2. Only clear on business days
What is CHAPS?
A sterling same-day system that is used to settle high-value wholesale payments as well as time-critical, lower-value payments like buying or paying a deposit on a property.
Give two advantages of CHAPS
- Large amount of money is secure
2. You receive the money the same day
Give a disadvantage of CHAPS
- Payment fees
