different ways to pay

Question 1

cash = notes + coins

Answer 1

advantages: widely accepted, confidence, easy to control expenditure
disadvantages: risk of loss/theft, can’t be used online, inappropriate for large items of expenditure

Question 2

debit card

Answer 2

allows purchases by card with the money taken directly from a current account.
advantages = secure method, widely accepted, can withdraw cash from various places
disadvantages = risk of cardholder overspending, card details can be hacked

Question 3

credit card

Answer 3

make purchases on credit, repayments made following the issue of a statement
advantages: widely accepted, allows you to spread payment, used in store and online
disadvantages: needs to be carefully set up to ensure transactions go to the right place, potential fees, card details can be hacked

Question 4

cheques

Answer 4

paper transaction given a bank permission to transfer payments from your account to another
advantages: secure method of payment, widely accepted, appropriate for postal transactions
disadvantages: costly if cheque isn’t honoured due to insufficient funds, seen as old-fashioned,
can take days to transfer

Question 5

electronic transfer

Answer 5

online transfer money from one account to another
advantages: quick method of payment, transfer almost instant, can be done remotely, easy to set up
disadvantages: need to be set up carefully, otherwise transaction may fail

Question 6

direct debit

Answer 6

permission given to the bank to make regular payments to a third party
advantages: ensures regular payments aren’t missed, simple way to pay regular bills
disadvantages: payee may vary amounts making panning for expenditure difficult, payee needs to have sufficient funds

Question 7

standing order

Answer 7

permission to bank to make regular/set amount to third party
advantages: payments don’t change, payer can plan expenditure, payments made automatically
disadvantages: money taken regardless of funds in account

Question 8

pre paid cards

Answer 8

a cash balance is held on a card which then reduces transaction time (oyster card)
advantages: secure method of payment, only used for specific purpose, can only spend up to amount uploaded
disadvantages: difficult to monitor balance, used by others without permission, setup/transaction fees

Question 9

charge cards

Answer 9

allows purchases to be made on credit card but total amount is paid automatically directly from a bank account at the end of the month
advantages: secure payments, avoids long term debt
disadvantages: may incur annual/monthly fees, has to be paid in full regardless of funds

Question 10

store card

Answer 10

allows a customer to buy on credit in a particular store/group of stores
advantages: cardholders may benefit from discounts, spread cost of spending
disadvantages: risk of cardholder overspending, may encourage debt

Question 11

mobile banking

Answer 11

transactions using mobile phone
advantages: convenient, popular
disadvantages: relies on customer having a phone, developing

Question 12

bankers automated cleaning service

Answer 12

transfer of money from one bank to another (can take a few days)

Question 13

faster payment services

Answer 13

transfer of money from one bank to another guaranteed within 2 hours

Question 14

cleaning house automated payment systems

Answer 14

same day transfer of funds from one bank to another
advantages: quick, avoids handling cash
disadvantages: care must be taken, may incur transaction charges