advantages of disadvantages of payment methods

Question 1

what is a cheque?

Answer 1

a document requesting that a specified sum of money to be paid from one person’s/business bank account to another’s bank account

Question 2

what are the advantages to the payer using a cheque?

Answer 2

• can be sent in the post
• large amounts of cash do not need to be handled
• the drawer has a record of the payment being made

Question 3

what are the disadvantages to the payer using a cheque?

Answer 3

• often need to be countersigned which can be inconvenient and time consuming
• must be sure there are adequate funds available in the bank account

Question 4

what are the advantages to the payee using a cheque ?

Answer 4

• safer than carrying large amounts of cash

Question 5

what are the disadvantages to the payee using a cheque?

Answer 5

• must be taken and paid into the bank, which can be inconvenient
• funds take several days to clear and cannot be spent immediately
• funds may not clear at all but goods may have been sent
• errors on the document can cause delays

Question 6

what is a credit card?

Answer 6

enables an individual or business to make payment for goods/services but by borrowing money from the credit card company
the credit card company transfers the money to the payee and the payer owes that money to the credit card company
if debt is repaid when requested no interest is charged, if full amount is not paid interest is charged

Question 7

what are the advantages to the payer using a credit card?

Answer 7

• payment can be made even if there are insufficient funds in the payers bank account to pay the full amount
• there is a degree of protection from fraud
• can be used for online payments, which benefits customers and suppliers

Question 8

what are the disadvantages to the payer for using a credit card?

Answer 8

• the payer is charged interest if the full amount is not repaid when requested
• some businesses charge the payer a fee to use this form of payment

Question 9

what are the advantages to the payee using a credit card?

Answer 9

• the credit card company authorises the payment, therefore the payee knows they will receive the payment
• payments can be made online

Question 10

what are the disadvantages to the payee using a credit card?

Answer 10

• payees must pay a processing fee which reduced the amount received

Question 11

what is a debit card?

Answer 11

can be used for payment online or where there is a debit/credit card machine
funds are transferred from the payers banks account directly into the payees bank account

Question 12

what are the advantages to the payer for using a debit card?

Answer 12

• large amounts of cash do not need to be handled

- can be used for online payments

Question 13

what are the disadvantages to the payer for using a debit card?

Answer 13

• some businesses charge an additional fee to the customer if paying by debit card
• fraud is a growing issue when using debit cards
• if insufficient fund are in the payers bank account, their bank may not authorise the payment

Question 14

what are the advantages to the payee for using a debit card?

Answer 14

• once authorised via the card payment machine, the payee is guaranteed to receive the payment
• can be used for online payments

Question 15

what are the disadvantages to the payee for using a debit card?

Answer 15

• payees must pay a processing fee

- appropriate technology must be purchased to enable transactions to be processed

Question 16

what is cash?

Answer 16

money in coins or notes

Question 17

what are the advantages to the payer for using cash?

Answer 17

• no debt or interest

- instant payment

Question 18

what are the disadvantage to the payer for using cash/

Answer 18

• risk of loss or theft

Question 19

what are the advantages to the payee for using cash?

Answer 19

• guaranteed payment

- funds instantly available to use in paying bills or wages

Question 20

what are the disadvantages to the payee for using cash?

Answer 20

• payer may negotiate a discount for using this method

- risk of loss or theft

Question 21

what is online digital/mobile payments?

Answer 21

online payments via credit and debit cards
,digital payments such as paypal
mobile payments such as apple pay
- these enable customers to compete the payment process via a convenient and secure gateway

Question 22

what are the advantages to the payer for using online digital/ mobile payments?

Answer 22

• ease of use as once an account is set up they need only to log in when purchasing rather than entering card details every time

Question 23

what are the disadvantages to the payer for using online digital/mobile payments?

Answer 23

• data breeches and security risks

Question 24

what are the advantages to the payee for using online digital/mobile payments?

Answer 24

• beneficial to small businesses as they have the security of knowing that once authorised, payment will be received

Question 25

what are the disadvantages to the payee for using online digital/mobile payments?

Answer 25

• processing fees increase costs

Question 26

what are bank payments?

Answer 26

manual via paying in slip or electronic transfer

Question 27

what are the advantages to the payer for using bank payments?

Answer 27

• a standing order or direct debit are convenient and negate the need to remember to pay bills
• electronic transfers are quick, easy and convenient

Question 28

what are the disadvantages to the payer for using bank payments?

Answer 28

• paying in at the bank may not be convenient

- electronic- internet access required and associated potential reliability or security issues

Question 29

what are the advantages to the payee for using bank payments?

Answer 29

• regular payments are set up and there is no need to chase payments

Question 30

what are the disadvantages to the payee for using bank payments?

Answer 30

• systems can be costly to set up and maintain

- constant need to monitor and update security to keep pace with risks