Credit and payments Flashcards
Payment methids
Cash Cheque Debit cards Direct debit/ standing order Credit cards 365 banking Bill pay
Advantages of cash
Quick
Convenient
No extra charges
Less chance of overspending
Disadvantages of cash
Risk of loss and theft
Unsuitable for large payments eg car
Bulky
Advantages of cheque
Convenient
Good for postal
Disadvantages of cheques
Take 3 days to clear
Disadvantages of debit cards
Charges
Advantages of debit cards
Safer than cash Contactless Cashback Less chance of overspending Online shopping
What is direct debit
Variable amounts taken directly from account eg phone bill
What is a standing order
Fixed eg rent taken from account
Advantages of direct debit and standing orders
Makes sure important bills aren’t forgotten
What should be considered before buying with credits
Interest rates Hidden fees Penalties for missing a payment Use with care Only if essential
Advantages of credit
Use of good/service right away without payment
For emergencies eg dentist
Take advantage of sales at short notice
Eliminates need to carry large sum of cash
Benefits economy, more money being spent
Disadvantages of credit
Impulse buying
Leads to debt
More expensive in long run
Repossession of goods
Forms of credit
Credit cards Overdrafts Term loans Store cards Charge cards Hire purchase
What is overdraft
Agreed amount of money a person can withdraw when there’s no money left in the account
Varies from person to person
Example of term loan
Car, mortgage
Repaid in regular instalments over fixed period of time
What is a store card
Buy from a particular shop without money
Pay back over 56 days
If not, high interest rate
Charge cards are…
Credit cards without intersst rates
What is hire purchase
Consumer has use of good whilst repaying but doesn’t fully own until fully paid off
Can be repossessed
Eg furniture
Terms of hire purchase act
Cans price and hire purchase price stated
Number of instalments, amount to be paid and date to be paid stated
Cooling off period = right to withdraw within 10 days
Consumer credit act
Monitors credit advertising
Mugs not visit borrowers in their place of work
