B1 Flashcards
What is the Bank of England?
This is the UK’s central bank with the responsibility for maintaining financial stability for the uk as a whole.
What are the Bank of England advantages?
- It is responsible for protecting the financial stability for the economy as a whole.
- It lends money to banks
- It sets interest rates to control the flow of money in the economy,
What are the Bank of Englands disadvantages?
- It is not a bank that the general
public can use. - As it controls interest rates it can
make loans expensive.
What are banks?
A bank is a financial institution that handles different financial transactions and stores money on behalf of its customers.
What are the advantages of a bank?
- It provides a secure place for individuals to store their money
- It pays interest out on credit balances. For most types of accounts
What are the disadvantages of a bank?
- They only guarantee savings up to £75000 so if a bank goes bankrupt any savings above £75000 would be lost.
What is a building society?
Building societies are financial institutions that handle financial transactions and store money on behalf of their members.
What are the advantages of a building society?
- It pays interest out on credit balances. For most types of account.
- It provides a secure place for individuals to store their money.
What are the disadvantages of a building society?
- They only guarantee savings up to £75000 so if a building society goes bankrupt any savings above €75000 would be lost. - Building societies are not as business orientated as commercial banks.
What is a credit union?
There are not-for-profit organisations that handle financial transactions’ and store money on behalf of their members.
Credit unions are usually set up to support a community made up of its members.
Members are owners and have voting rights as how the union is run.
What are the advantages of a credit uni on?
- It pays interest out on credit balances. For most types of account.
- It provides a secure place for individuals to store their money.
- They often exist to help local communities get access to banking facilities.
What are the disadvantages of a credit union?
- They only guarantee savings up to £75000 so if a building society goes bankrupt any savings above £75000 would be lost. - Credit unions are not as business orientated as commercial banks.
What are national savings and investments?
- This is a government backed organisation that offers a secure saving option.
- It offers a range of services including ISAs, premium bonds, gilts and bonds.
What are the advantages of national savings and investments?
- These are backed by the governemt and therefore you savings are secure
- They offer alternative methods of saving e.g. premium bonds.
What are the disadvantages of national savings and investments?
- The rates of interest are variable,
- Its not easy to get access to your
savings because there is not high
street building - You might be required to give notice
What are insurance companies?
- These are companies that protect against the risk of losing something in return for a premium.
- They exist to make a profit.
What are the advantages of insurance companies?
- They protect you from unexpected financial losses or expenses.
- Payments are by monthly instalments and therefore financial planning is made easier
- There are a wide range of services available
What are the disadvantages of insurance companies?
Premiums are based of the assessed
risk by the company and may
disadvantage certain groups of people
e.g. travel insurance and older people
What are pension companies?
These are businesses that sell policies to individuals to allow them to save now to fund their retirement.
What are the advantages of pension companies?
- They provide people with a way as saving for their retirement
- Pension deductions can be taken directly out of pay and employers may match the contribution fully or partially.
What are the disadvantages of pension companies?
- If the investment doesn’t work out as intended then the return expected
in retirement might not be met. - You can’t get access to the money
until the agreed date in the policy.
What are pawn brokers?
- There are companies that loan money against personal assets e.g. jewellery etc.
- If the item is not brought back off the pawn broker within a specific time it will then be sold on.
What are the advantages of pawn brokers?
- This is a quick way of getting hold of cash.
- The asset given as security can be bought back within a set time period.
- Interest is not charged on the money
What are the disadvantages of pawn brokers?
- The amount of money the pawn broker will give against the asset will be lower than the value of the asset. - If the money is not repaid within the set time period the asset will be sold by the pawn broker.
What are payday loans?
- These are organisations that loan small amounts of money out for short periods of time.
- Interest rates are very high
- They may be suitable in an emergency to bridge a shortfall in cash between pay days.
What are the advantages of payday loans?
- This is a quick way of acquiring emergency cash
- Payday loans are relatively easy to get
hold of.
What are the disadvantages of a payday loan?
- The interest charged is extremely high
- If you don’t pay the money back within the set time period the loan can spiral out of control.
