Different ways to pay Flashcards
Advantages of using cash as a payment method
Confidence due to familiarity with the payment system
Widely accepted
Easy to control expenditure
Better understanding of how much you are spending as it is physical
Disadvantages of using cash as a payment method
Limited to the amount you have on you
Risk of loss/theft
Physical transactions only
Inappropriate for large expenditure
What is a debit card
Payment method provided by banks so customers can withdraw money from their current account or make purchases from the current account
Advantages of a debit card as a payment method
Widely accepted Withdraw cash Convenient Contactless payments Pin number for security
Disadvantages of using a debit card as a payment method
Risk of fraud
Constant need to monitor spending/balance
Can’t withhold purchase in the case of a dispute with merchant
What is a credit card
Payment method that allows customers to make purchases and pay the balance at a later date
Advantages of using a credit card as a payment method
Allows you to spread payment
Contactless payments
Accepted in various different places
Purchase protection for goods bought
Disadvantages of using a credit card as a payment method
Easy to end up in debt
Interest charges can build up
Can encourage overspending
Risk of fraud due to contactless payment
What is a cheque
Paper transaction giving a bank permission to transfer payment from your account to another
Advantages of using a cheque as a payment method
Reduces need for physical payment methods(e.g cash)
Appropriate for large expenditure
High security as it can only be cashed in by the named payee
Appropriate for postal transaction
Disadvantages of using a cheque as a payment method
Businesses may take long to accept cheques
May be charged for each cheque processed
Payment may not be received if the person has insufficient funds
What is an electronic transfer
Payment made from one persons bank account to another
Advantages of using electronic transfer as a payment method
Quick
Immediate confirmation of money sent
Safer than physical transactions
Can be done remotely(e.g mobile app)
Disadvantages of using electronic transfer as a payment method
Difficult to reverse
Needs to be carefully set up
May not be possible if bank website/app goes down
What is direct debit
Permission given to the bank to make regular payments to a third party(provider) upon request
Advantages of using direct debit as a payment method
Prevents missing regular payments
Varied amounts can be taken out each time(due to fluctuations)
Providers can offer discounts for using the payment method
Disadvantages of using direct debit as a payment method
May not have enough money in your account
Budgeting is difficult due to varying amounts taken each time
Has to be reset if bank details are changed
What is a standing order
Permission given to the bank to make regular payments of a set amount to a third party upon request
Advantages of using a standing order as a payment method
Bills paid automatically
Can be cancelled at anytime
Secure payment method
Ensures payments aren’t missed
Disadvantages of using a standing order as a payment method
Money taken regardless of balance
Must be reset or cancelled if anything changes
What is a pre paid card
Cash balance held on a card which reduces each time its used(e.g oyster card)
Advantages of using a pre paid card as a payment method
Allows budgeting
Can be cancelled
Useful for child money management
Can only be used for specific purposes
Disadvantages of using a pre paid card as a payment method
Difficult to monitor balance
Money is lost if the card is lost
Can be used by others if lost
May involve a fee to purchase the card the first time
What is a contactless card
Method that allows users to pay for goods up to a value of £30 without entering a pin
Advantages of using a contactless card as a payment method
Quick
Avoids physical transactions
Disadvantages of using a contactless card as a payment method
Can only be used for goods up to a value of £30
Card can briefly be used if lost
What is a charge card
Purchases paid on credit but total amount is paid from a bank account monthly
Advantages of using a charge card as a payment method
Short term source of credit
Prevents large amounts of debt
Secure
Disadvantages of using a charge card as a payment method
User must pay balance in full regardless of funds
May incur annual monthly fees
What is a store card
Allows customers to buy on credit from a particular store. Minimum payment required each month
Advantages of using a store card as a payment method
Frequent shoppers can earn discounts/benefits
Spreads cost of spending over time
Short term source of credit
Disadvantages of using a store card as a payment method
Only accepted by specific stores
May encourage debt
May encourage overspending to get special offers
What is mobile banking
Allows users to complete banking on their phones or other devices
Advantages of using mobile banking as a payment method
Quick and easy
Popular
Secure since its pin protected
Convenient
Disadvantages of using mobile banking as a payment method
Relies on customer having a mobile device
Doesnt have the same amount of features as internet banking e.g setting up direct debit
What is Bankers Automated Clearing Services(BACS)
Allows the transfer of payments from one bank directly to another
What is Faster Payment Services
Direct transfer guaranteed within 2 hours or quicker(similar to BACS)
Advantages of using BACS/FPS as a payment method
Transfers normally completed within 2 hours
Transactions can be completed via phone, branch or online bank account
Convenient
Disadvantages of using BACS/FPS as a payment method
Service isnt offered by all banks so payment transfers may take longer
May incur charges per transaction
Must make sure details are correct
Limit on the transferable amount
What is Clearing House Automated Payment System(CHAPS)
Same day transfer of funds(any amount) from one bank account to another
Advantages of using CHAPS as a payment method
No limit on transferable amount
Time limit for when transactions must be completed by
Disadvantages of using CHAPS as a payment method
Some banks charge to use this service
